Legal Provisions Involved: Sections 44BB, 44DA, 197, 9(1)(vi), 9(1)(vii), 115A of the Income Tax Act, 1961
Judgement by: High Court of Delhi
Judge/Bench: Hon’ble Mr. Justice V. Kameswar Rao and Hon’ble Mr. Justice Vinod Kumar
Facts
The petitioner contracted with ONGC for 2D and 3D broadband seismic data acquisition in Eastern Offshore India. For FY 2024-25, the Revenue issued a Section 197 certificate at 3.5% withholding tax and for FY 2025-26, under the same contract, the Revenue issued a certificate at 7%, characterising receipts as Royalty/FTS taxable under Section 44DA.
Key Legal Provisions
Sections 44BB, 44DA, 197, 9(1)(vi), 9(1)(vii), 115A of the Income Tax Act, 1961
Issues raised
- Whether seismic data acquisition services constitute FTS/Royalty under Section 44DA or fall under Section 44BB.
- Whether the Revenue could depart from the prior year’s position without change in facts.
Arguments of the case
The Appellant argued that receipts are taxable under Section 44BB as seismic services are integral to mineral oil exploration and the Revenue violated consistency principles by increasing the withholding rate without change in facts. The Respondent on the other hand argued that seismic surveys involve no construction, mining, or assembly, thus not falling under the FTS exclusion.
Judgement
The Court set aside the impugned order and remanded the matter to the AO, holding that the characterisation as FTS cannot be sustained.
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