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

ITA/140/1999HC UttarakhandUKHC01025168200313 May 2004Author: OTHER4 pages
AI SummaryDismissed

What were the facts?

The Revenue (Commissioner of Income Tax, Meerut) filed an appeal under Section 260A of the Income Tax Act, 1961, against the order dated 29.12.1998 passed by the Income Tax Appellate Tribunal (ITAT). The assessee, Mr. Grodenko Alexandre, a non-resident foreign technician, was assessed through ONGC as his agent for the assessment year 1990-91. The dispute centered on the method of grossing up tax perquisites paid by ONGC on behalf of the assessee. The Assessing Officer applied multiple-stage grossing up, while the ITAT directed the application of single-stage grossing up.

What did the High Court hold?

The High Court held in favour of the assessee and against the Revenue. The Court found no merit in the Revenue's argument that Section 195A of the Income Tax Act, 1961, supported the application of multiple-stage grossing up. The Court reasoned that Section 44BB, which deals with the computation of deemed profits for non-resident operators in oil exploration, is a complete code by itself and a charging section for such income. Section 195A, conversely, falls under Chapter XVII (collection and recovery of tax) and deals with tax deduction at source, not the computation of business income under Chapter IV. Therefore, Section 195A cannot be used to apply multiple-stage grossing up to profits falling under Section 44BB. The Court clarified that Section 44BB contemplates a 10% deemed profit on aggregate receipts, and the dispute was only about the valuation of the benefit received by the assessee due to ONGC paying tax on its behalf. The Court concluded that the mechanism for recovery of tax under Section 195A does not make a receipt chargeable to tax and is confined to TDS purposes. The appeal was dismissed.

What were the issues?

1. Whether, in the facts and circumstances of the case, the learned Income Tax Appellate Tribunal was justified in directing to apply single-stage grossing up of tax perquisites paid by ONGC on behalf of the assessee instead of multiple-stage grossing up, applied by the Assessing Officer under Section 195A of the I.T. Act, 1961? Assessee's Contention: The judgment does not explicitly record the assessee's arguments, but it implies their position was in favour of single-stage grossing up and against the applicability of multiple-stage grossing up. Revenue's Contention: The Revenue argued that in cases of tax-protected contracts, Section 195A was attracted, entitling the Department to compute deemed profits by applying the method of multiple-stage grossing up of income.

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. 333 of 2001 Old No. 140/1999

The Commissioner of Income Tax, Meerut & another

…….. Appellants

Versus

O.N.G.C., Dehradun As agent of Mr. Grodenko Alexandre

…….. Respondent

Mr. S.K. Posti, learned Advocate 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 29.12.1998 passed by the Income Tax Appellate Tribunal, New Delhi in I.T.A. No. 7842/D/92. 2. Mr. Grodenko Alexandre, respondent is a non-resident foreign technician of M/s V.V. Machino Import, formerly known as VO Techno Export. The assessment was made on ONGC as agent of 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 justified in directing to apply single stage grossing up of the Tax perquisites paid by ONGC on behalf of the assessee instead of multiple stage grossing up, appli

The order continues below.

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