BEFORE THE AUTHORITY FOR ADVANCE RULINGS NEW DELHI

Transcription

1 BEFORE THE AUTHORITY FOR ADVANCE RULINGS NEW DELHI 28th Day of March, 2018 A.A.R. No 1295 of 2012 PRESENT Mr. R.S. Shukla, In-charge Chairman Mr. Ashutosh Chandra, Member (Revenue) Name & address of the applicant : SeaBird Exploration FZ LLC 35 th Floor, AI Shatha Tower, P.O. Box , Dubai Media City United Arab Emirates Present for the applicant : Mr. Deepak Chopra, Advocate Mr.Harpreet Singh Ajmani, Adv. Mr. Ramandeep Singh, CA Mr. RohanKhare, Advocate Present for the Department : Ms. Kavita Pandey, CIT (DR), AAR Mr. S.K. Chatterjee, JCIT (IT) RULING (By Ashutosh Chandra) (the Applicant)filed the present application under section 245Q of the Income tax Act,1961, and the same was admitted on The Applicant is a company incorporated under the laws of UAE, and is its tax resident. It is engaged in the business of rendering geophysical services to the oil and gas exploration industry. Its core business activity involves 4C-3D seismic data acquisition and processing, which are aimed at increasing the exploration success of its oil and gas clients and maximizing their production. In India, it is providing 1

2 these services to Oil and Natural Gas Corporation Ltd ( ONGC ) and other oil companies operating in India. It had entered into a contract with ONGC on vide contract No for 4C-3D seismic data acquisition, processing and interpretation in the Mumbai High Field. 2. The Applicant has sought a Ruling from this Authority for the determination of its tax liability in respect of the revenue received under the above said contract with ONGC, on the following questions: 1. Whether on the facts and in law, can the consideration, for services provided by the Applicant to Oil and Natural Gas Corporation Ltd ( ONGC ) be construed to be in the nature of Fees for Technical Services ( FTS ) under section 9(1)(vii) of the Act? 2. Whether on the facts and in law, can the consideration for services provided by the Applicant be construed to be in the nature of Royalty under section 9(1)(vi) of the Act and/ or under Article 12 of the Double Taxation Avoidance Agreement between India and UAE ( Tax Treaty )? 3. Whether on the facts and in law, can the Applicant be considered as having a Permanent Establishment ( PE ) in India under Article 5 of the Tax Treaty in respect of its contract with ONGC? 4. If the answer to question 1, 2 and 3 is not in the affirmative, can it be said that the Applicant is not taxable in India on income earned from its contract with ONGC? 5. If answer to question 1, 2 or 3 is in the affirmative, whether on the facts and in law, can the income derived by the Applicant in respect of the contract with ONGC be computed in accordance with provisions of section 44BB of the Act? 3. The Applicant has submitted that itsincome earned from the transaction is neither in the nature of Fees for Technical Services (FTS) or 2

3 Royalty nor is the income taxable as business income, as there is no permanent establishment of the Applicant in India. Ld. Counsel for the Applicant submitted that for undertaking the operations for 4C-3D seismic data acquisition, processing and interpretation in Mumbai High Field, resources including vessels were mobilized to India. The said vessels entered the Indian Territory on 20 October 2011 and left the Indian territorial waters on 9 February 2012.Thus, its presence in India in respect of the ONGC s contract was only for 113 days in the FY and in terms of the provision of Article 5(2)(i) of the Double Taxation Avoidance Agreement between India and UAE ( DTAA )it did not have a PE in India, and hence it would not be taxable in India. Without prejudice, it is submitted that the income derived by the Applicant in respect of the contract with ONGC be computed in accordance with provisions of section 44BB of the Act. 4. In its report dated and during the course of these proceedings, with reference to Questions No. (i), (ii) and (v) the Revenue accepts that considering the nature of activities carried out by the Applicant and decision of Hon ble Supreme Court in Oil & Natural Gas Corporation Ltd. vs CIT [2015] 376 ITR 306 (SC), the revenue from such activitywould not be taxable as Fees for Technical Services within the meaning of section 9(1)(vii) of the Income Tax Act, Further, since ONGC does not use or obtain the right to use the vessel/equipment of the Applicant, receipts from ONGC would not be taxable as Royalty, both under IndiaUAE DTAA and the provisions of the Act. It is also accepted by the Revenue that the activities of the Applicant come within the purview of the term in connection with exploration of mineral oils, as stipulated undersection 44BB of the Act. 3

4 4.1 As far as Questions No. (iii) and (iv) are concerned, the Revenue strongly contendedthat the Applicant hasa permanent establishment in India in the form of the vessels,and revenue from the said contract with ONGC is liable to be taxed in India. The Revenue argued that the seismic vessel itself constitutes the Fixed Place Permanent Establishment within the meaning of Article5(1) of IndiaUAE DTAA, as for the purpose of this contract the vessel performs its activities within India and the place is also at the disposal of the enterprise. No length of period is provided under Article 5(1) of the IndiaUAE DTAA forconstituting a fixed placed permanent establishment. 4.2 As against the Applicant s arguments that its case is covered by Article 5 (2)(i) of the DTAA as it provides services,it is submitted by the Revenue that as per Article 5(1), there has to be a fixed place of business to fall within the ambit of PE, and which is there in this case. As per normal understanding, there has to be a link between the place of business and a specific geographical point but this does not mean that the equipment constituting the place of business has to be actually fixed to the soil on which it stands. The words 'through which' are also open to wide interpretation so as to apply to any situation where business activities are carried out from a particular location that is at the disposal of the enterprise for that purpose.in the case of the Applicant, the seismic survey vessel, which is at its disposal, performs its activities within a specific geographical location. That the vessel moved from one point to another is on account of the nature of business contract and the movement is an integrated one having commercial and geographical coherence. Hence the seismic vessel itself constitutes the Fixed Place Permanent Establishment within the meaning of Article-5(1) of India-UAE DTAA. 4

5 4.3. The Revenue has taken support from the case of M/s Poompuhar Shipping Corp. Ltd. Vs. ITO(IT) [2014] 360 ITR 257 (Madras). In this case the Hon ble High Court, while adjudicating the issue of existence of PE in the shape of a moving ship within the territory of Indian waters, held that the moving ship has a place of business where the ship is docked and the fact that the ship moved from one point to another is the result of the nature of business contract and the movement is an integrated one having business and geographical coherence which leads to the inference that the foreign enterprise has a permanent establishment in this Country. It was held in this case that in the context of the various business activities, in the case of equipment, a fixed place can be found to exist even though the equipment by the nature of business may be relocated from one site to another for a single customer under one integrated contract. A movable place of business is thus treated as fixed place of business and most of the equipment is used at fixed points within a proximate area on a repetitive continuous basis for sufficient period of time as required by the business. 4.4 The Revenue has also cited the case of Fugro Engineers B.V. vs. Assistant Commissioner of Income-tax [2009] 122 TTJ 655 (Delhi), where against the argument of number of days, it was held that the vessel and the rig constituted the fixed place PE within the meaning of Article-5(1) of India-Netherland DTAA. Reference in this decision was made to the Commentary on OECD Model Tax Convention, to say that there has to be a link between the place of business and a geographical point, and it is immaterial how long an enterprise operates in other Contracting State, and it does not mean that the equipment constituting the place of business has to be actually fixed to the soil. 5

6 5. The Applicant disputes the above position to clarify that indisputably the activities carried out by the Applicant fall under Article 5(2)(i) of the India-UAE DTAA, being a service contract,which reads as the furnishing of services including consultancy services by an enterprise of a Contracting State through employees or other personnel in the other Contracting State, provided that such activities continue for the same project or connected project for a period or periods aggregating more than 9 months within any twelve-month period.it isargued that for constituting a service PE, the duration of nine months within any twelve months period provided under Article 5(2)(i)has to be read in Article 5(1) of the India-UAE DTAA. It was submitted that the special provision has always to prevail over or to be given preference and priority as against a general provision as expressed in the legal maxim that "generaliaspecialibus non derogant". Hence, the contract being a service contract, Article 5(2)(i) of the DTAA would apply, since the work was completed within 113 days in the Financial Year , which was less than the threshold for creating a Service PE. 5.1 The Applicant further submitted that the provisions of Article 5(1) of the DTAA refer to a permanency test for the creation of a fixed place of business. However, this permanency test has to be considered while considering the provisions of Article 5(2)(i) of the DTAA in terms of the period stated therein. The Applicant has relied upon the decision of Hon ble Delhi High Court in National Petroleum Construction Company vsdit [2016] 383 ITR 648. The applicant drew our attention to the following portion of judgment of the Delhi High Court: 15. In order to determine whether an enterprise has a PE within the meaning of Article 5 of the DTAA, it would be necessary to consider the scheme of Article 5. Paragraph 1 of Article 5 provides an overarching 6

7 general definition of the expression 'Permanent Establishment' (PE) Paragraph 2 of Article 5 of the DTAA provides for an inclusive definition of the term "Permanent Establishment" and specifically lists out places of business that fall within the meaning of that expression. The use of the word 'especially' underscores the intention of the authors of the treaty to remove any doubts that the places listed in subparas (a) to (i) fall within the definition of the term 'Permanent Establishment'..Read in the context of the other provisions of Article 5, paragraph 2 clearly indicates that it has been used as an explanatory provision to specifically include the species of places of business that would constitute a PE of an enterprise. In this view, paragraph 1 and 2 of Article 5 of the DTAA complement each other. Thus, all classes of PEs as specified in various sub-paras of paragraph 2 of Article 5 of the DTAA would be construed as a PE subject to the essential conditions of paragraph 1 of Article 5 being met. Insofar as sub-paras (h) and (i) of paragraph 2 of Article 5 are concerned, the test of permanence as required under paragraph 1 of Article 5 is substituted by a specified minimum period of nine months. Thus, places of business as specified under sub-paras (h) and (i) of paragraph 2 ofarticle 5, cannot be construed as a PE of an enterprise unless they exist for a period of at least nine months. 5.2 Reliance was also placed by the Applicant on the decision of this Authority in Cal Dive Marine Construction (Mauritius) Ltd. vs. DIT [2009] 315 ITR 334 (AAR), wherein similar view regarding interpretation of Article 5(1)read with Article 5(2)of the DTAA was given. It was held at para 5.1 that: Having given a broad definition of PE in the first para, the instances of PE are enumerated in para 2 by means of an inclusive clause. Broadly speaking, para 2 of Article 5 is complementary to the general concept of PE embodied in the opening paragraph of Article 5. At para 5.2 reference was made to another Ruling of this Authority in P. No. 24 of 1996, In re (1999) 237 ITR 798, where, in the context of the India Netherlands DTAA it was explained that: 7

8 "... In order to decide whether a foreign enterprise has a permanent establishment or not, the paragraphs of Article 5 which define that expression have to be read together.. Paragraph 1 sets out a general definition; paragraph 2 gives an inclusive definition; paragraph 3 prescribes a limitation; paragraph 4 outlines a number of exclusions and paragraphs 5 to 7 deal with special cases where the foreign enterprise functions not directly but through some other agency in the relevant territory..confining one's attention to paragraphs 1 to 3, one notices that, while the general definition and clauses (a) to (h) of the inclusive definition make no reference to any minimum period for which the permanent establishment should be in existence within the State, clause (i) of paragraph 2 does. A qualification with reference to time is also found in paragraph 3...., Para 3 of the India Netherlands DTAA reads as under: 3. A building site or construction or installation project, or an installation or drilling rig or ship used for the exploration or exploitation of natural resources, constitutes a permanent establishment only if it lasts more than twelve months'." (p. 806). At para 5.3 of the decision in Cal Dive Marine it was mentioned that the case corresponds to clause (i) of Article 5(2) of the India Mauritius Treaty, and further quotes from this Ruling as under: 6.1 Once clause (i) is attracted, the minimum period test will have to be necessarily applied..clause (i) being a specific provision dealing with construction or assembly project, that provision prevails over the other clauses of para 2 of Article 5 which are general in nature If the opening para of Article 5 is to be read on standalone basis, then clause (i) of para 2 will be rendered ineffectual and perhaps otiose Thus clause (i) ofarticle 5(2) ought to be treated as a provision complementary to para 1 of Article 5. 8

9 5.3 The Applicant further submitted that reliance placed by the Revenue on the decisions in the case of M/s PoompuharShipping Corp. Ltd. (Supra) and Fugro Engineers B.V. (Supra) is misplaced. It was submitted that decision of Delhi Tribunal in Fugro Engineers (supra) is distinguishable on facts, as the issue before Delhi Tribunal was regarding interpretation of Article 5(2)(i) of the India-Netherlands DTAA which read as follows an installation or structure used for the exploration of natural resources provided that the activities continue for more than 183 days. The decision of Hon blehigh Court of Madras in Poompuhar Shipping Corp. Ltd. (supra) is distinguishable as the larger issue before the Madras High Court was whether the payment made for taking a ship on time charter basis would constitute royalty and the duration test vis-à-vis existence of a PEwith respect to interpretation of Article 5(1) read with Article 5(2)(i) of the DTAA was not a subject matter of interpretation. 5.4 The Applicant submitted that it is well settled that a decision is an authority for what it decides and not what can logically be deduced therefrom. It is also well settled that the ratio of a case must be understood having regard to the fact situation obtaining therein. Various cases have been cited in support. 5.5 It was thus contended that in view of the service contract not exceeding the period prescribed in Article 5(2)(i) of the DTAA, the Applicant could not be said to have a PE in India and hence, taxability was not triggered. Accordingly, it prays that Question No. (iii) and (iv) of the application should be decided in favour of the Applicant. 6. We have considered the questions raised before us seeking a Ruling, the interpretation and contentions of the Applicant, and the 9

10 arguments of the Revenue. The Applicant is engaged in the business of rendering geophysical services to the oil and gas exploration industry. Its core business activity involves 4C-3D seismic data acquisition and processing, which are aimed at increasing the exploration success of its oil and gas clients and maximizing their production. In India, it is providing these services to ONGC and other oil companies. It is in this connection that it had entered into a contract with ONGC for 4C-3D seismic data acquisition, processing and interpretation in Mumbai High Field. Its activities are therefore intrinsically connected with oil and mineral exploration, and which ultimately go to assist in oil and mineral extraction, and the same are carried out through its survey and seismic vessels. As per para B of Appendix A of Annexure II of the Agreement it may offer any number of 4C-3D vessels equipped for undertaking the survey and other utility vessels for the purpose of evaluation. The subsequent paras C to I give details of the various other equipments and instruments provided with the vessels for the purpose of the surveys, such as Gun control system, seismic nodes, recording instruments, DGPS etc. 6.1 At this point it may be mentioned that the applicant had been carrying on these activities earlier also, using different but similarly capable and equipped vessels, under similar contracts. It was before this Authority in 2009,(AAR 815 of 2009) when it had entered into an agreement with ONGC for 2D seismic, gravity and magnetic data acquisition and on-board seismic data processing offshore India, during the field seasons and in different survey areas of Western and Eastern Indian Offshore. It took an admitted position that its services of seismic data acquisition and processing were in connection with oil and mineral exploration, and on account of which it was eligible for computing its 10

11 business income u/s 44BB of the IT Act 1961, which was a special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils. The activities at that time were the same as at present, yet in that application, the Applicant had not taken the position that it did not have a PE in India, or that it was covered by any of the provisions in para 2 of Article 5 of the DTAA. This Authority had agreed with the Applicant s contention. 6.2 Coming to the issues raised before us, as far as question nos. 1 and 2are concerned, that is whether the consideration received by the Applicant from ONGC can be categorized as Fees for Technical Services or Royalty respectively, the Revenue accepts that considering the nature of activities and decision of Hon ble Supreme Court in Oil & Natural Gas Corporation Ltd. (Supra), the consideration cannot be considered to be Fees for Technical Services within the meaning of section 9(1)(vii) of the Act. Further, since ONGC does not use or obtain the right to use the vessels/equipment of the Applicant, receipts from ONGC cannot be termed as Royalty either. We agree with this view. We would not delve deep into this issue as both the Applicant as well the Revenue agree on this position. Looking into the nature of activities, the consideration is neither in the nature of Fees for Technical Services, as analysed and held on identical facts in our Ruling in AAR/815/2009 in the Applicant s own case referred to earlier; nor Royalty, since ONGC has not paid the consideration for any rights of survey or exploration transferred to it by the Applicant. Hence, the consideration received cannot be brought to tax under these heads. 11

12 6.3 We now come to the main issueas contained in questions 3 and 4, namely whether the Applicant could be said to have a PE in India,and if so, whether its income would be taxable in India Irrespective of the facts of the case before this Authority in the FugroEngineers (supra) case or that of Poompuhar Shipping Corp. Ltd. (supra) before the Hon ble High Court of Madras, as cited by the Revenue, the criterion laid down therein for judging whether there was a PE or not, are applicable and of assistance in the instant case as well. The same are reinforced by the recent detailed findings on the issue in the case of Formula One World ChampionshipsLimited (2017) 80 taxman.com 347, decided by the Hon ble Supreme Court, which actually seals the issue as to the requirements for constituting a PE when considered in the backdrop of Article 5(1) of the DTAAs, depending of course on the facts of each case. When viewed in the light of these decisions, it is clear that the vessels used by the Applicant on the Mumbai High Seas pass all the 3 tests for constituting a PE, namely that there is permanence of duration to the extent that is required by the business, and not meaning forever;there is a fixed place which are the vessels in the High Seas in a definite and composite geographical area, and from which its business of survey in connection with exploration is carried out; and lastly this place is at the disposal of the Applicant. Thus, if Article 5(1) of the India UAE Treaty alone is considered, there is PE in this case The Applicant, however contends that in spite of the above it cannot be considered as having a PE since it is covered by the specific clause as contained in para (2)(i) of Article 5 of the India UAE DTAA requiring its period of operation to be more than 9 months to qualify it as a PE, and that a specific or special clause, as in Article 5(2)(i) will take precedence over a 12

13 general provision as in Article 5(1). In the cases cited by it, it was finally held that in so far as sub-paras (h) and (i) of para 2 of Article 5 of the DTAA are concerned, the test of permanence as required under para 1 of Article 5 is substituted by a specific minimum period of nine months However, the applicability of the above dictum would depend on the facts of the case, as also submitted by the Applicant, that the ratio of a case must be understood having regard to the fact situation obtaining therein.in National Petroleum case, a case was made out that the activities of the appellant were covered by the provisions of Article 5(2)(h) of the India UAE DTAA, being a building site or construction or assembly project, as the appellant was engaged in installation of petroleum platforms. The issue was decided in favour of the appellant as it was found that its activities indeed fell within this sub para of the DTAA. Similarly in the case of Cal Dive Marine Construction (Mauritius) Ltd. (AAR), which analysed the provisions of the India Mauritius DTAA, and also drew parallel between different paras of the India Mauritius and India Netherlands DTAAs, laying of pipelines and constructing the structures inclusive of pre-commissioning of the pipelines were found to be covered by Article 5 (2)(i) of the India Mauritius DTAA, which talks of a building site or construction or assembly or supervisory activities in connection therewith, where such site, project or supervisory activity continues for a period of more than nine months. Thus in both the cases, the nature of activities referred to in the different paras and sub paras of Article 5 were found to be similar to those of the Applicant / Appellant in those cases. It wasonly thereafter that the findings were given that these specific provisions and durations mentioned in paras 5(2)(h) and (i) would be read into Article 5(1). 13

14 6.3.4 Thus we have to first see whether the facts of the Applicant s case fit into the sub para under which it is seeking shelter, namely sub para (i) of para 2 of Article 5 of the India UAE DTAA, which reads as under: 2. The term "permanent establishment" includes especially:.. (i) the furnishing of services including consultancy services by an enterprise of a Contracting State through employees or other personnel in the other Contracting State, provided that such activities continue for the same project or connected project for a period or periods aggregating more than 9 months within any twelve-month period It is clear that the services envisaged under this sub paraare such as are furnished through employees or personnel and may include services such as of supervision, managerial, consultancy, or general nature, which are employee or personnel oriented, and connected with some works contract or project whose term aggregates to more than nine months. In contrast to this, in the Applicant s case, the services of seismic surveys are conducted on the High seas through the seismic vessels which are equipped with various equipments for collection and interpretation of data, while operating in the geographical area and in connection with exploration and extraction of mineral oils. They are not carried on mainly by employees/personnel but primarily by the vessels and equipments mounted thereon and deployed in the ocean. Such are not the services contemplated under para 5(2)(i) of the India UAE DTAA If the States signing the Treaty intended to include in Article 5(2)(i) the activities in connection with exploration, exploitation or extraction of mineral oil etc., the sub para would have said so. DTAAs are not to be interpreted like laws passed by Parliament that encompass a wide range of 14

15 situations, and require one to examine and debate the legislative intent, as against the literal interpretation. DTAAs are entered into between executives of two States after consciously considering the business reality specific to the two States Klaus Vogel in his Commentary on Double Taxation Conventions, Third Edition(para 44, pg 294)states with regard to Article 5(2),while referring to exploration of natural resources as mentioned at subparagraph (f), that since this sub para does not include exploration and only refers to extraction of natural resources, and since it has not been possible to arrive at a common view on the basic questions of attribution of taxation rights and of the qualification of the income from exploration activities, the contracting States may agree upon the insertion of specific provisions. They may agree, for instance, that an enterprise of a contracting State, as regards activities of exploration of natural resources: (a) shall be deemed not to have a permanent establishment in that State; or (b) shall be deemed to carry on such activities through a permanent establishment in that other state; or (c) shall be deemed to carry on such activities through a permanent establishment in that other State if such activities last longer than a specified period of time Thus it is clear that whenever two States wanted clarity with regard to taxability of income arising from activities in connection with exploration of mineral oil, subject to a duration clause,would incorporate a specific clause to that effect. For example in the India Singapore DTAA, at subpara(j) of para2 of Article 5, it is mentioned that a PE would be constituted if an installation or structure is used for the exploration or exploitation of natural resources but only if so used for a period of more 15

16 than 120 days in any fiscal year. This is in addition to sub para(f) where mention is made of a mine, and oil or gas well, a quarry or any other place of extraction of natural resources. This treaty goes further and prescribes at para (5) of Article 5, as follows: Notwithstanding the provisions of paragraphs 3 & 4, an enterprise shall be deemed to have a permanent establishment in a contracting state and to carry on business through that permanent establishment, if it provides services or facilities in that contracting state for a period of more than 183 days in any fiscal year in connection with the exploration, exploitation or extraction of mineral oils in that contracting state. (Emphasis added) Other examples of States that have specifically mentioned exploration of natural resources for determining the taxability of income arising there from, are the India USA DTAA, Article5(2)(j): An installation or structure used for the exploration or exploitation of natural resources, but only if so used for a period of more than 120 days in any twelve month period ; India Netherlands DTAA, Article-5(2)(i): An installation or structure used for the exploration of natural resources provided that the activities continue for more than 183 days ; and India Japan DTAA, Article-5(2)(j): An installation or structure used for the exploration of natural resources, but only if so used for a period of more than six months, India UK DTAA, Article 5(2)(i), which mentions An installation or structure used for the exploration or extraction of natural resources;and so on In contrast to the above provisions in different DTAAs, in the case of the India UAE DTAA, which concerns us in this case, no such mention has been made with regard to activities in connection with exploration or connected activities. It is therefore clear that as far as the services and activities of the applicant are concerned, there is no specific provision in 16

17 paragraph 2 of Article 5 of the India UAE DTAA, either mentioned or intended, that could cover the services carried out by the Applicant in connection with exploration of mineral oil on the high seas, as in para (5) of Article 5 of the India Singapore DTAA cited above. Hence, we get no assistance from the cases cited by the Applicant as the facts and the impacted provisions in the instant case are either different or are absent in the India UAE DTAA. In these circumstances, we do not find any scope for getting into the debate of interplay between paras 1 and 2 of Article 5 of the India UAE DTAA, or to resolve any conflict therein, as made out by the Applicant, since the services rendered by the Applicant are not covered by any of the sub paras of para 2 of Article 5or any other para. If at all, and if a broad view is taken, namely that the activities undertaken by the Applicant are considered as being in connection with extraction of mineral oil, then the closest provision in the India UAE DTAA would be Article 5(2)(f), wherein there is no mention of any duration, and hence does not come to the help of the Applicant In this view of the matter, we have no option but to go back to paragraph 1 of Article 5, which provides an overarching definition of permanent establishment. As we have seen above, in this para all the ingredients necessary to constitute a permanent establishment find place in the nature ofservices undertaken by the applicant through its vessels and equipments under its agreement with ONGC, with no qualification of duration. 6.4 We conclude therefore that the Applicant has a fixed place PE in India, as per para 1 of Article 5, in the form of its vessels engaged in seismic surveys on the High seas, in connection with the exploration of mineral oil/ natural resources under agreement with the ONGC, through 17

18 which it carries on its business. It is immaterial that the period of their operation was only 113 days, as conveyed by the Applicant, as a permanent establishment need not be permanent or for all times, as explained in the cases cited by the Revenue and also held in the case of Formula One World Championships (supra). Hence, the income arising from the PE shall be subject to tax in India as business income of the Applicant. 7. This brings us to question no. 5. Since the answer to questions no. 3and 4 is in the affirmative,we have to examine whether the income derived by the Applicant from its PE would be computed in accordance with provisions of section 44BB of the Act. The answer is yes. Since we have examined and found that the activities of the Applicant are in connection with exploration of mineral oils, the special provisions of section 44BB apply, and the income of the Applicant would be computed as laid out therein. This is in line with our Ruling in AAR 815 of 2009, in the Applicant s own case, where for similar activities we had said that section 44BB would apply. 8. The questions raised in the Application are answered as under: 1. The consideration for services provided by the Applicant to ONGC will not be construed to be in the nature of Fees for Technical Services under section 9(1)(vii) of the Act. 2. The consideration for services provided by the Applicant will not be construed to be in the nature of Royalty under section 9(1)(vi) of the Act and/ or under Article 12 of the India UAE DTAA. 18

19 3. The Applicant has a Permanent Establishment in India under Article 5 of the India UAE DTAA, in respect of its contract with ONGC. 4. The income of the Applicant earned from its contract with ONGC would be taxable in India as business income. 5. The income derived by the Applicant in respect of the contract with ONGC will be computed in accordance with provisions of section 44BB of the Income tax Act, This Ruling is accordingly given and pronounced on this 28th day of March, Sd/- (AshutoshChandra) Member(Revenue) Sd/- (R.S.Shukla) In-charge Chairman 19