DIRECTOR OF INCOME TAX AND ANR vs. M/S ENRON GLOBLE EXPLORATION AND PRODUCTION LTD

ITA/18/2009HC UttarakhandUKHC01007883200919 June 2013Author: HON'BLE MR. JUSTICE PRAFULLA C. PANT4 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s Enron Global Exploration & Production Ltd., a US-incorporated company, earned revenue from a contract with M/s Enron Oil & Gas India Ltd. (EOGIL) for oil and gas exploration. The assessee claimed 'NIL' income after expenses, stating services were rendered on a cost-to-cost basis and payments were reimbursements. The Assessing Officer treated the income as taxable under Section 44BB, deeming 10% of the aggregate amount as profit. The CIT(A) deleted this addition. The Revenue appealed to the ITAT, which dismissed the appeal, holding that no tax was payable due to the Double Taxation Avoidance Agreement (DTAA) between India and the USA, as the assessee had no permanent establishment (PE) in India. The High Court is hearing the Revenue's appeal against the ITAT's order for Assessment Year 2000-2001.

What did the High Court hold?

The High Court held that the ITAT had committed no error of law in finding that the income received by the assessee for services rendered to EOGIL was not taxable under Section 44BB of the Income Tax Act, 1961. This was primarily because the Production Sharing Contract (PSC) between EOGIL and the Indian concern was approved under Section 42 of the Act, and the Double Taxation Avoidance Agreement (DTAA) between India and the United States of America was applicable. The Court noted that there was little evidence to suggest the assessee company had a Permanent Establishment (PE) in India, as it likely worked for less than ninety days during the relevant year. Consequently, as there was no PE in India, no tax was payable by the assessee in India under the DTAA. The Court also referred to its prior judgment in CIT Vs. M/s Enron Oil & Gas Expat Service Inc., Dehradun, dated 26.11.2012, which addressed a similar issue in favour of the assessee.

What were the issues?

1. Whether the income earned by the assessee from its contract with EOGIL is taxable in India under Section 44BB of the Income Tax Act, 1961, considering the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and the USA. Assessee's Contention: The assessee argued that it rendered services on a cost-to-cost basis and received reimbursement of expenses, and that the transaction was covered under a Production Sharing Contract (PSC) approved under Section 42 of the Act. The ITAT held that due to the DTAA and the absence of a Permanent Establishment (PE) in India, no tax was payable. Revenue's Contention: The Revenue contended that the income accrued to the assessee was covered under Section 9(1)(i) and was taxable under Section 44BB, assessing 10% as deemed profits. The Revenue appealed the ITAT's decision to the High Court.

Which sections of the Income-tax Act were involved?

Section 260A,Section 44BB,Section 9(1)(i),Section 42

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL

Income Tax Appeal No. 18 of 2009

1.

Director of Income Tax, International Taxation, Delhi- II, New Delhi.

2.

ACIT, Range-I, Dehradun.

….….. Appellants.

Versus

M/s Enron Global Exploration & Production Ltd. C/o Nangia & Co. 7/7 Rajpur Road, Dehradun (PIN-248001)

…….. Respondent

Mr. Hari Mohan Bhatia, Advocate, present for the appellants. Mr. S.K. Posti, Advocate, present for the respondent.

Hon’ble Prafulla C. Pant, J. Hon’ble V.K. Bist, J.

Oral : Prafulla C. Pant, J.

This appeal, preferred under Section 260A of the Income Tax Act, 1961, is directed against order dated 24.10.2008, passed by the Income Tax Appellate Tribunal, Delhi Bench “G” New Delhi in ITA No. 861/Del/2005 (Assessment Year 2000-2001), whereby said court has dismissed the appeal of the Revenue.

2)

Heard learned counsel for the parties, and perused the impugned order challenged before this Court.

2 3)

Brief facts of the case are that the assessee Company iss incorporated in United States of America. During the Assessment Year 2000-2001, the assessee earned revenue u

The order continues below.

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