COMMISSIONER INCOME TAX AND ANOTHER vs. ONGC

ITA/112/2007HC UttarakhandUKHC01006573200708 April 2008Author: HON'BLE MR. JUSTICE PRAFULLA C. PANT6 pages
AI SummaryAllowed

What were the facts?

The appeal was filed by the Commissioner of Income Tax and Dy. CIT, Dehradun, against ONGC Ltd., representing a non-resident company (NRC) that provided services to ONGC for exploration, extraction, and production of mineral oils. For assessment year 2001-02, NRC rendered services including retrofitting/upgradation of instrumentation on offshore platforms, zero-hour overhaul of gas turbines, and commissioning/inspection of engines. The core dispute was whether the income was taxable under Section 44BB or Section 115A read with Section 44D of the Income Tax Act, 1961. The Assessing Officer passed an assessment order under Section 143(3), which was set aside by the CIT (Appeals) and affirmed by the ITAT. The High Court is hearing the appeal against the ITAT's order.

What did the High Court hold?

The High Court disagreed with the views taken by the CIT (Appeals) and the ITAT. The Court held that the services rendered by the assessee respondent relate to the upgradation of plant and machineries for oil exploration. However, it was not the case of the respondent assessee that the plants and machineries were supplied by it during the Assessment Year. Therefore, the services rendered by the NRC assessee were considered technical services rendered in the work of oil exploration for which a fee was charged. Consequently, the Court upheld the view of the Assessing Officer, directing the assessee to pay tax at the rate of 15% under Section 44D read with Section 115A of the Income Tax Act, 1961, instead of the 10% chargeable under Section 44BB of the Act. The operative direction was to set aside the impugned orders passed by the ITAT and CIT (Appeals).

What were the issues?

1. Whether, in respect of receipts for services rendered by the non-resident company (NRC) for retrofitting/upgradation of instrumentation, zero-hour overhaul of gas turbines, and commissioning/inspection of engines, tax is chargeable under Section 44BB of the Income Tax Act, 1961, or under Section 115A read with Section 44D of the Act? (Question of law) Assessee's Contention (as per the judgment, though the appeal is by the revenue): The assessee's case is that tax is to be charged on its income under Section 44BB of the Income Tax Act, 1961. Revenue's Contention: The revenue's case is that the assessee has rendered technical services for which it has been paid a fee, and therefore, its case is covered under Section 115A read with Section 44D of the Act. The revenue argued that since the assessee only rendered technical services for which it was paid a fee, its case is covered under Section 115A read with Section 44D of the Income Tax Act, 1961. The revenue also pointed out that Section 44BB(1) contains a proviso stating it shall not apply where the provisions of Section 42, 44D, 115A, or 293A apply.

Which sections of the Income-tax Act were involved?

Section 260A,Section 143(3),Section 44BB,Section 115A,Section 44D,Section 42,Section 293A,Section 9

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL Chapter VIII, Rule 32(2) (b) Description of case

Date of decision: 08.04.2008 A.F.R. (Approved for Reporting) Not Approved for Reporting

(Initial of Judge)

Date 08.04.2008

Note: Bench Reader will attach this at the top of first page of the judgment when it is put up before the judge for signature.

IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL (1) Commissioner Income Tax, Dehradun. (2) Dy. CIT Cirle, I, Dehradun.

…………………….Appellants.

Versus

ONGC Ltd. Rep. Of M/s Solar Turbine International Coy. Singapore, ONGC Income Tax Section, Tel Bhawan, Dehradun.

………………….Respondent.

Sri Arvind Vashistha, learned counsel for the appellants. Sri Udyog Shukla, learned counsel for the respondent.

Hon’ble Prafulla C. Pant, J. Hon’ble Dharam Veer, J.

[Oral- Prafulla C. Pant, J.]

This appeal, preferred under Section 260A of the Income Tax Act, 1961, is directed against the judgment and order dated 16.10.2006, passed by the Income Tax Appellate

The order continues below.

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