R.V. Easwar, Vice President. - This is an appeal by the revenue and it relates to the assessment year 2003-04. The following grounds have been taken by the revenue :—

"1. That the Ld. CIT(A) has erred in law and on facts in holding that the revenues in respect of contract No. 2001/GENL/E-1-GG-L-033-MAC with ONGC Ltd. are not taxable in India as the services in respect of this contract were entered outside India, i.e., in Australia, whereas the basic ingredient of the scope of work is the sites at which the data was utilised was in India and some were offered and shown as taxable in India by the assessee NRC in its original as well as revised returns.

2. That the Ld. CIT(A) has erred in law and on facts in holding that the revenues in respect of contract No. 2001/GENL/E-1-GG-L-033-MAC with ONGC Ltd. are for the services in connection with the exploration and extraction of mineral oils and hence are taxable under section 44BB whereas the receipts are taxable as fees for technical services, which the assessee NRC itself offered in its original return of income and also in view of Article 13 of DTAA between India & Australia, the same were taxable as fees for technical services."

2. The assessee is a non-resident company incorporated in Australia. It entered into a contract with Reliance Industries Limited (hereinafter referred to as RIL) under contract No. 2001-GENL-El-GG-L-033-MAC. Under this contract, the assessee was to undertake the 2D and 3D seismic data processing based on the data collected by the RIL. The volume of data to be processed for 2D was 7,000 LKM and the volume of data to be processed for 3D was 3,050 sq. km. According to the contract, a copy of which is placed at pages 18 to 27 of the paperbook, the entire processing was to be carried out by the assessee at their processing centre located in the city of Perth, Australia. We shall examine the terms of the contract in some detail later. The gross receipts of the assessee from RIL under the contract amounted to Rs. 5,27,91,557 during the year. In the return filed, the assessee offered the aforesaid amount to tax under section 44BB of the Income-tax Act, under which a sum equal to 10 per cent of the receipts shall be deemed to be profits & gains of the business chargeable to tax under the head "Profits & gains of business". It may be noted that this section applies to a non-resident assessee. However, in the course of the assessment proceedings, the assessee took the stand that since it had no "permanent establishment" (PE) in India within the meaning of Article V of the agreement for avoidance of double taxation between India and Australia, the profits arising to it under the contract with RIL were not assessable in India as stipulated in Article VII of the double tax treaty. In accordance with this stand, it appears to have been contended before the Assessing Officer by letter dated Nil (pages 12-17 of the paperbook) written in response to the notice issued under section 143(2), that the assessee was resiling from its earlier position that the revenues were taxable under section 44BB and that the stand taken in the return was erroneous. It was pointed out that the assessee did not have a PE in India and, therefore, the revenues were not taxable as business profits in India. It was further pointed out that even under the contract the data was to be processed by the assessee at their location in the city of Perth in Australia, that none of the employees of the assessee-company came to India and no part of the processing activity was carried out by the assessee in India. Reliance was also placed on the following authorities in support of the contention that since no part of the processing activity took place in India, the revenues were not taxable under the Income-tax Act :

(i)Carborandum Co. v. CIT [1977] 108 ITR 335 (SC);

(ii)CIT v. Tata Chemicals Ltd. [1974] 94 ITR 85 (Bom.);

(iii)CIT v. Energomach Exports [1998] 232 ITR 448¹ (Kar.);

(iv)CIT v. Usha Martin Blac