Back
2026 Supreme(Online)(ITAT) 9451
INCOME TAX APPELLATE TRIBUNAL (DEHRADUN BENCH)
Satbeer Singh Godara, Judicial Member, Manish Agarwal, Accountant Member
DCIT – Appellant
Versus
Gaffney Cline & Associates Dehradun Ltd. – Respondent
ITA No.197/DDN/2025
For the Appellants/Petitioners: Amit Arora, CA, Vishal Mishra, CA
For the Respondents: Mohan Lal Joshi, Sr. DR
Consultancy services inextricably linked to mineral oil prospecting, extraction, or production excluded from fees for technical services; taxable @10% under section 44BB, not under section 44DA.
Headnote:(A) Income-tax Act, 1961 - Sections 9(1)(vii), 44BB, 44DA - Fees for technical services vis-à-vis special provisions for mineral oil exploration - Revenue from consultancy services for reservoir management, enhanced oil recovery, reserves estimation, and field audits inextricably linked with prospecting, extraction, or production of mineral oils - Such receipts excluded from fees for technical services under Explanation 2 to section 9(1)(vii) being consideration for mining or like projects - Taxable under section 44BB @ 10% of aggregate amount and not under section 44DA. (Paras 2, 4)
(B) Income-tax Act, 1961 - Judicial consistency - Tribunal bound by its own prior decision in assessee’s case settling identical issue against department; lower appellate authority’s detailed analysis of factual matrix and judicial precedents upheld. (Para 3)
Facts of the case:
Revenue’s appeal against CIT(A)’s order holding assessee’s total revenue of Rs.23,42,14,139/- from services linked to oil and gas exploration not taxable as fees for technical services under section 9(1)(vii) r.w.s. 44DA but under section 44BB. AO had rejected section 44BB applicability and applied 25% profit rate under section 44DA.
Findings of Court:
CIT(A)’s order confirmed; services inextricably connected with prospecting/extraction/production of mineral oils; taxable under section 44BB. Revenue’s appeal dismissed.
Issues: Whether receipts from specified consultancy services constitute fees for technical services taxable under section 44DA or fall under section 44BB.
Ratio Decidendi: Where pith and substance of services is inextricably connected with prospecting, extraction or production of mineral oils, receipts excluded from fees for technical services and taxable under section 44BB; judicial precedents including assessee’s prior case binding.
Result: Revenue’s appeal dismissed.
| Table of Content |
|---|
| 1. appeal against cit(a) order on section 44bb applicability. (Para 1 , 2) |
| 2. assessee's grounds challenging fts classification and 44da application. (Para 3 , 4) |
| 3. assessee's submissions on contracts linked to oil exploration under 44bb. (Para 5) |
ORDER
PER SATBEER SINGH GODARA, JM:
This Revenue’s appeal for assessment year 2021-22, arises against the Commissioner of Income Tax (Appeals) [in short, the “CIT(A)”], Noida’s-2 order dated 29.08.2025 having DIN and order no. ITBA/APL/S/250/2025-26/1080180775(1), involving proceedings under section 143(3) r.w.s. 144C of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Heard both the parties. Case file perused.
2. Coming to the Revenue’s sole substantive ground raised in the instant appeal, we note at the outset that the Assessing Officer’s assessment order dated 27.01.2023 herein had not only treated the assessee’s total revenue of Rs.23,42,14,139/- as fee for technical services under section 9(1)(vii) thereby rejecting its stand invoking section 44BB of the Act but also applying section 44BA in the facts of the case which stands reversed in the CIT(A)’s lower appellate discussion, reading as under:
“3. Grounds of Appeal:
As per electronically filed Form No.35, the Grounds of appeal raised are as under:
“Ground - 1 - Revenues in respect of certain services held to be in the nature of Fees for Technical Services.
On the facts and circumstances of the case the Ld. AO erred in holding that the total revenue amounting to INR 234,214,139 be in the nature of fees for technical services under section 9(1)(vii) of the Act without appreciating that the activities are inextricably linked with oil and gas exploration and production activities and should be taxable in terms of Section 44BB of the Act.
Ground - 2 - Determination of Income at an arbitrary rate of twenty- five per cent.
On the facts and circumstances of the case the Ld. AO has erred in law in holding that the income of the Appellant to be chargeable to tax under section 44DA of the Act applying an arbitrary profit rate of twenty-five per cent without any factual or legal basis. In doing so, Ld. AO has failed to appreciate that the estimation of income should be done at ten percent of gross contractual revenues as it is the effective safe harbor estimation rate prescribed by the Income-tax Act for the oil and gas exploration and production service providers.
Ground - 3 - Receipts on account of GST incorrectly held chargeable to tax.
On the facts and circumstances of the case, the Ld. AO has erred in holding that the receipts on account of GST amounting to INR12,862,998 are includible in the gross receipts for the purpose of determination of income under section 9(1)(vii) of the Act as opposed to the claim of the appellant that the same being a statutory levy is not chargeable to tax. In doing so the Ld. AO has ignored the decision of the Honorable High Court of Uttarakhand in the case of Schlumberger Asia Services Ltd vs. Director of Income-tax International Taxation([2019] 104 taxmann.com 353 (Uttarakhand)).
Ground – 4 Interest on Income-tax held chargeable to tax at Maximum Marginal Rate of 40 per cent.
On the facts and circumstances of the case, the Ld. AO erred in holding that the receipts aggregating to INR 81,072 on account of interest on Income-tax refund be taxed at Maximum Marginal Rate of 40 per cent as opposed to the claim of appellant that the same be taxable at the rate of15 per cent in terms of Article 11 of India-UK Double Taxation Avoidance Agreement.
Ground – 5 - Incorrect levy of interest On the facts and circumstances of the case the Ld. AO has erred in levying interest totalling INR1,62,940 without mentioning the section under which the said interest is levied.
Ground – 6 - Initiation of penalty proceedings under section 270A of the Act.
On the facts and circumstances of the case, the Ld. AO erred in initiating penalty proceedings under section 270A and of the Act.”
4. Submission of the appellant:
Dur
