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Foreign companies to pay tax at 4.22% on all revenue from seismic data contracts
May, 18th 2011

Foreign firms operating in the country will have to pay tax at the existing rate of 4.223 per cent on revenue earned under seismic data acquisition and processing contracts, says a tribunal.

In a ruling, the Authority of Advanced Rulings (AAR) held that foreign firms would not enjoy any leeway even if their income falls under the label of royalties or is considered as fees for technical services .

"The entire mobilisation or demobilisation revenues received by the applicant with respect to seismic data acquisition and/or processing contracts would be taxable in India at the effective rate of 4.223 per cent," the AAR said.

Mobilisation and demobilisation revenues are the fees levied by a contractor for transporting the seismic equipment or vessel and personnel to and from a project site, as well as costs linked to establishment of site offices and other facilities.

The AAR's ruling came in response an application filed by UK-based firm OHM Ltd , which provides geophysical services to oil and gas exploration industry.

OHM had sought to know whether revenues earned by it under seismic data acquisition and processing contracts in India are taxable under the Income Tax Act.

"Even if part of the income falls under 'Royalties' or 'Fees for Technical Services', there is no scope to assess such receipts under these heads, once it is held that the income is from its oil exploration and production activities as envisaged under section 44BB," the AAR said.

Section 44BB of the Income Tax Act deals with computing profits and gains in connection with the business of exploration, including mineral oils.

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