COMMISSIONER OF INCOME TAX MEERUT and ANOTHER vs. OIL AND NATURAL GAS COMMISSION

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ITA/97/1999HC UttarakhandUKHC01025128200321 May 2004Bench: OTHER1 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that income determined on a notional basis in accordance with Section 44BB of the Income Tax Act, 1961, is not liable to be grossed up under Section 195A of the Income Tax Act. This decision was based on the reasoning provided in a previous judgment by the same court in Income Tax Appeal No. 470 of 2001, dated September 30, 2003. The principle established is that the specific provisions of Section 44BB, which deem income at a prescribed percentage, are not subject to the grossing-up mechanism intended for situations where tax is to be paid by the payer on behalf of the payee under Section 195A. The appeal was answered in the affirmative, favoring the assessee and against the Department. No specific operative directions beyond this finding were recorded, and no issues were left undecided.

What were the facts?

The appeal concerns Assessment Year 1989-90 and was filed by the Commissioner of Income Tax, Meerut, and another against O.N.G.C., Dehradun, acting as agent for M/s Dowell Schlumberger (W) SA. The core of the dispute revolves around whether income determined on a notional basis under Section 44BB of the Income Tax Act, 1961, should be grossed up under Section 195A of the Act. The High Court was considering the correctness of the Income Tax Appellate Tribunal's decision on this matter. The present appeal was disposed of by the High Court on May 21, 2004.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was legally correct in holding that 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? The assessee (O.N.G.C. as agent for M/s Dowell Schlumberger (W) SA) contended that income determined notionally under Section 44BB is not subject to grossing up under Section 195A. The revenue (Commissioner of Income Tax) argued that such notional income should be grossed up. The High Court's decision was based on its prior ruling in a similar case, ITA No. 470 of 2001.

Which sections of the Income-tax Act were involved?

Section 44BB,Section 195A

AI-generated summary — verify with the full judgment below

Assessment Year 1989-90

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

I.T.A No. 278 of 2001 Old No. 97/1999

The Commissioner of Income Tax Meerut & another

……… Appellants

Versus

O.N.G.C, Dehradun As agent of M/s Dowell Schlumberger (W) SA………..Respondent

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

Hon. P.C. Verma, A.C.J. Hon. Rajesh Tandon, J.

The matter is squarely covered by our decision dated 30th September, 2003 in Income Tax Appeal No. 470 of 2001; The Commissioner of Income Tax, Meerut & another Vs O.N.G.C., Dehradun.

The question raised before us is as follows: “Whether on the facts and in the circumstances of the case, learned Income Tax Appellate Tribunal was legally correct in holding that the income determined on notional basis in accordance with Section 44 BB of Income Tax Act, 1961 was not liable to be grossed up under Section 195 A of the Income Tax?”

For the reasons recorded in the above judgment in Income Tax Appeal No. 470 of 2001 dated 30th September, 2003, we answer this question in the affirmative i.e. in favour of the assessee and against the Department.

Appeal is disposed of accordingly. No order as to costs.

(Rajesh Tandon, J.) (P.C. Verma, A.C.J.)

Dt. 21.05.2004.

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