COMMISSIONER INCOME TAX vs. O.N.G.C.

ITA/49/2000HC UttarakhandUKHC01025107200308 July 2004Author: OTHER4 pages
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What were the facts?

The Revenue, Commissioner of Income Tax, Meerut, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT). The assessee, Mr. Mowtsouraev Tarko, a non-resident technician employed by M/s V.V. O. Machino Import, USSR, had his income tax perquisites paid by ONGC, Dehradun, acting as his agent. The dispute centered on the method of grossing up the tax paid by ONGC on behalf of the assessee. The Assessing Officer applied a multi-stage grossing up, while the ITAT directed the application of single-stage grossing up. The assessment year in question is 1990-91.

What did the High Court hold?

The High Court held in favour of the assessee. It ruled that Section 44BB of the Income Tax Act, which deals with the computation of deemed profits for non-resident contractors engaged in oil exploration, is a complete code by itself and a charging section for such income. The Court found no merit in the Revenue's argument that Section 195A, which falls under Chapter XVII (collection and recovery of tax), could be used to apply the concept of multi-stage grossing up to profits computed under Section 44BB (Chapter IV - computation of business income). The Court emphasized that Section 195A is primarily for Tax Deducted at Source (TDS) and does not make a receipt chargeable to tax if it otherwise isn't. The dispute was only regarding the value of the benefit received by the assessee from ONGC paying tax on its behalf, and the Court found the single-stage grossing up method appropriate for determining this benefit under Section 44BB. The appeal was disposed of accordingly.

What were the issues?

1. Whether, on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal was justified in directing to apply single-stage grossing up of the tax perquisites paid by ONGC on behalf of the assessee instead of multi-stage grossing up, applied by the Assessing Officer under Section 195A of the Income Tax Act, 1961? (Question of law and mixed fact and law, concerning Section 195A and Section 44BB of the Income Tax Act, 1961). Assessee's contentions: Not explicitly recorded, but implied to support single-stage grossing up. Revenue's contentions: Argued that Section 195A was attracted in tax-protected contracts, entitling the Department to compute deemed profits by applying multi-stage grossing up of income. Relied on Section 195A.

Which sections of the Income-tax Act were involved?

Section 260A,Section 195A,Section 44BB

AI-generated summary — verify with the full judgment below

Assessment Year 1990-91 IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL I.T.A. No. 43 of 2001 OLD NO. 49 OF 2000 The Commissioner of Income Tax, Meerut & another

........... Appellants

Versus

O.N.G.C., Dehradun As agent of Mr. Mowtsouraev Tarko

.......... Respondent

Mr. S.K. Posti, learned counsel for Income Tax Department. Mr. J.P. Joshi, learned counsel for the respondent.

Hon. P.C. Verma, A.C. J. Hon. P.C. Pant, J.

1.

This is an appeal under Section 260A of the Income Tax, 1961 filed by the Revenue against the judgment and order dated 30.06.1998 passed by the Income Tax Appellate Tribunal, New Delhi in I.T.A. No. 4859/Del/92. 2. Mr. Mowtsouraev Tarko, respondent is a non-resident technician of M/s V.V. O. Machino Import, USSR.

3.

The question raised before us is as follows:

"Whether on the facts and circumstances of the case the learned Income Tax Appellate Tribunal was justified in directing to apply single stage grossing up of the Tax perquisites paid by ONGC on behalf of assessee instead of multi stage grossing up, applied by the Assessing Officer under Section 195-A of the Income Tax Act, 1961?

4.

Heard learned co

The order continues below.

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