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

ITA/56/2000HC UttarakhandUKHC01025111200301 July 2004Author: OTHER4 pages
AI SummaryAllowed

What were the facts?

The assessee is M/s Continental Lab, Canada, a non-resident foreign company, for whom ONGC, Dehradun, was assessed as an agent. The assessment year is 1990-91. The appeal by the Revenue (Commissioner of Income Tax, Meerut) is against the judgment and order dated 12.8.1999 passed by the Income Tax Appellate Tribunal, New Delhi. The dispute concerns whether income determined on a notional basis under Section 44BB of the Income Tax Act, 1961, was liable to be grossed up under Section 195A of the Act. ONGC had entered into a tax-protected contract with the respondent.

What did the High Court hold?

The High Court held that the learned Income Tax Appellate Tribunal was legally correct 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 under Section 195A of the Act. The Court reasoned that Section 44BB is a complete code by itself for the computation of deemed profits of non-resident contractors from oil exploration and is a charging section for such income. In contrast, Section 195A falls under Chapter XVII (Collection and Recovery of Tax), whereas Section 44BB falls under Chapter IV (Computation of Business Income). Therefore, Section 195A cannot be used to apply the concept of multiple-stage grossing up to profits falling under Section 44BB. The Court further clarified that Section 195A is primarily for tax deduction at source (TDS) and does not make a receipt chargeable to tax if it is otherwise not so chargeable. The mechanism for recovery of tax under Section 195A does not extend to making a receipt taxable. The appeal was disposed of in favour of the assessee.

What were the issues?

1. Whether, in the facts and circumstances of the case, the learned Income Tax Appellate Tribunal was legally correct 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 under Section 195A of the Income Tax Act? (Question of law) Assessee's Contention: The judgment does not record any specific contentions made by the assessee regarding this issue, other than implicitly agreeing with the Tribunal's decision. Revenue's Contention: The Revenue argued that in cases of tax-protected contracts, Section 195A was attracted, and therefore, the Department was entitled to compute the deemed profits derived by the non-resident contractor (NRC) by applying the method of multiple-stage grossing up of income.

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 1990-91 IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL I.T.A. No. 46 of 2001 OLD NO. 56 OF 2000 The Commissioner of Income Tax, Meerut & another

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

Versus

O.N.G.C., Dehradun As agent of M/s Continental Lab., Canada.

.......... Respondent

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

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 12.8.1999 passed by the Income Tax Appellate Tribunal, New Delhi in I.T.A. No. 7790/D/92. 2. M/s Continental Lab, Canada, respondent is a non-resident foreign company. The assessment was made on ONGC as agent of the respondent. The ONGC had entered into a tax protected contract with the respondent.

3.

The question raised before us is as follows:

"Whether in the facts and circumstances of the case the learned Income Tax Appellate Tribunal was legally correct 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 u/s 195-A of the I.T. Ac

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 44BB

All 385 judgments and leading authorities on Section 44BB →

Recent GST High Court judgments

Search GST case law →