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

ITA/30/2001HC UttarakhandUKHC01006231200301 July 2004Author: OTHER4 pages
AI SummaryAllowed

What were the facts?

The appeal was filed by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 1991-92. The assessee, M/s General Electric Co., a non-resident foreign company, was assessed through its agent, ONGC, Dehradun. The dispute centered on whether income determined on a notional basis under Section 44BB of the Income Tax Act, 1961, was liable for multiple-stage grossing up under Section 195A of the Act. The ITAT had ruled in favor of the assessee, holding that multiple-stage grossing up was not applicable. The High Court was considering the legality of the ITAT's decision.

What did the High Court hold?

The High Court held that the Income Tax Appellate Tribunal was legally justified in holding that the income determined on a notional basis under Section 44BB of the Income Tax Act, 1961, was not liable to be grossed up (multiple stage) under Section 195A of the Act. The Court reasoned that Section 44BB is a complete code by itself, dealing with the computation of deemed profits from oil exploration, and is a charging section for such income. In contrast, Section 195A falls under Chapter XVII, dealing with the collection and recovery of tax, specifically tax deduction at source (TDS). The Court found no merit in the Revenue's argument that Section 195A could be used to apply multiple-stage grossing up to profits falling under Section 44BB. The Court emphasized that Section 195A is for the purpose of TDS and does not make a receipt chargeable to tax if it otherwise is not. The benefit of tax borne by ONGC on behalf of the assessee was a matter of valuing that benefit, not of making it chargeable to tax through multiple grossing up. The Court concluded that Section 195A has no application in this context and is confined to incomes falling under Chapter XVII for TDS purposes. The appeal was answered in favor of the assessee.

What were the issues?

1. Whether, on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal was legally justified in holding that the income determined on a notional basis in accordance with Section 44BB of the Income Tax Act, 1961, was not liable to be grossed up (multiple stage) under Section 195A of the Income Tax Act? (Question of law) Assessee's Contentions: Not recorded in the judgment. Revenue's Contentions: The Revenue argued that in cases of Tax Protected Contracts, Section 195A was attracted, entitling the Department to compute the deemed profits of the non-resident contractor (NRC) by applying the method of multiple-stage grossing up of income. They relied on Section 195A and the concept of tax-protected contracts.

Which sections of the Income-tax Act were involved?

Section 44BB,Section 195A,Section 260A

AI-generated summary — verify with the full judgment below

Assessment Year 1991-92

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

I.T.A. No. 30 of 2001

The Commissioner of Income Tax, Meerut and another

……… Appellants

Versus

O.N.G.C., Dehradun As agent of M/s General Electric Co.

……… Respondent

Mr. S.K. Posti, learned Advocate for Income Tax Department.

Hon’ble P.C. Verma, A.C. J. Hon’ble 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 06.06.2000 passed by the Income Tax Appellate Tribunal, New Delhi in I.T.A.T. No. 2536/D/94. 2. M/s General Electric Co., respondent is a non-resident foreign company. The assessment was made on ONGC as agent of the respondent.

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 legally justified in holding that the income determined on notional basis in accordance with section 44BB of I.T. Act, 1961, was not liable to be grossed up (multiple stage) u/s 195-A of the I.T. Act?

4.

Heard learned counsel for the parties and perused the record.

5.

As this Court has

The order continues below.

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