Income derived by the applicant non-resident operator of model support vessels for the global oil and gas service industry under the consortium agreement, as recognised by ONGC, is liable to be taxed under s 44BB of the Income-tax Act, 1961 upto 1 January 2010 and is liable to be taxed in India in terms of Art 23 of the DTAA between India and Norway, as held by AAR in Siem Offshore Inc, In re; AAR No 875 of 2010.
Decided on: 25 July 2011.
As per the DTAA, the service tax said to be included in the consideration received by the applicant from ONGC must also go into the computation while calculating the consideration for the service or facility provided by the applicant under s 44BB of the Income-tax Act or Art 23(4) of the India–Norway DTAA.
The applicant was mainly engaged in the transportation of cargo, material and personnel required at the rig in addition to ensuring marine logistics support in the event of any operational exigency. It is not possible to understand the responsibilities resting on the applicant in terms of the contract involving the providing of any technical service. Obviously, the applicant is engaged in the business of providing services or facilities in connection with the extraction or production of oil, a mining activity. It could also be said to be supplying plant and machinery for hire to be used in the prospecting of oil. Thus, the income derived by the applicant from the activities undertaken by it under the consortium agreement, as recognised by ONGC the explorer, takes it out of s 9(1)(vii) of the Act and brings that income within s 44BB of the Act.
The applicant is a company incorporated in the Cayman Islands. The applicant wanted to be listed on the Oslo Stock Exchange. As per the laws of Norway, it acquired the requisite qualifications by shifting the managerial control of the company to Norway. This was done in January, 2010. Upon the shares of the applicant being listed in the Oslo’s stock exchange, in view of the managerial control of the applicant-company being shifted to Norway, the India–Norwegian Treaty is attracted with effect from January 2010 and the provisions of the Treaty should be looked into for the purpose of assessments subsequent to January 2010. No dispute is raised by the revenue regarding the claim of the applicant that, though the company was registered in the Cayman Islands, the managerial control was shifted to Norway when the applicant was listed on the Oslo Stock Exchange. The Tax Residency certificate relied on by the applicant is also not questioned. Hence, the DTAA relied on has to be considered.
Section 68 of the Finance Act, 1994 shows that the liability to pay the service tax is on the service provider. No provision in that Act is brought to our notice which provides that the service provider need not pay the tax if the service receiver does not pay it to the service provider. Section 73A of the Act and r 6, relied on regarding the depositing of tax with the Government, cannot be taken to water down the obligation of the service provider or relieve him/her from being assessed to tax. The liability remains that of the service provider.
The income of the applicant is liable to be taxed under s 44BB of the Income-tax Act upto 1 January 2010, is liable to be taxed in India in terms of Art 23 of the DTAA between India and Norway and, thereafter, the service tax said to be included in the consideration received by the applicant from ONGC must also go into the computation while calculating the consideration for the service or facility provided by the applicant under s 44BB of the Income-tax Act or Art 23(4) of the India–Norway DTAA.
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