TaxTMI 
TaxTMI 
TaxTMI 
2009 (9) TMI 565
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....ed, by the Income-tax Appellate Tribunal, New Delhi. 2. Appeals Nos. 89 of 2007 and 130 of 2007, for the respective assessment year, have been preferred by the Revenue for setting aside the order passed by the Income-tax Appellate Tribunal dated February 9, 2007 and March 9, 2007 respectively as well as the order passed by the Commissioner of Income-tax (Appeals) (for short "the CIT (A)") and to restore the order of the Assessing Officer in each case. 3. Appeals Nos. 2 of 2009, 5 of 2009, 6 of 2009 and 7 of 2009, for the respective assessment year, have been preferred by the assessees with the prayer to allow the appeals and for setting aside the consolidated order passed by the Income-tax Appellate Tribunal in I. T. A. No. 380(Del)/2005, 381 (Del)/2005, I. T. A. No. 394 (Del)/2005 and 382 (Del)/2005, by which Appeal No. 380 (Del)/2005, 381 (Del)/2005 and 382 (Del)/2005 were partly allowed and Appeal No. 394 (Del)/2005 was dismissed. 4. Since the common issue in all these appeals relates to taxability of amounts received by the aforesaid assessees from the consortium between the Government of India, Oil and Natural Gas Commission Ltd. (ONGC), 5. Reliance Industries Limited and ....
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....ncome-tax Appellate Tribunal was legally correct in upholding the decision of the Commissioner of Income-tax (Appeals) that principle of res judicata is not applicable to the income-tax proceedings when the Assessing Officer had taken cognizance of the facts existing in the assessee's own case in earlier assessment years whereas this court while deciding the appeal of the Department in CIT v. ONGC as agent of Foramer France in I. T. A. No. 239 of 2001 had also taken due cognizance of the preceding assessment year ?" 7. In I. T. A. Nos. 2 of 2009, 5 of 2009, 6 of 2009 and 7 of 2009 filed by the assessees, the following question of law was framed : "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal erred in law in holding that the income in question was taxable in India, without appreciating that in terms of article 7(1) of the Indo-US Double Taxation Avoidance Agreement, only profits attributable to the permanent establishment of the appellant could be subjected to tax in India ?" 8. Sri Arvind Vashisth, learned counsel for the Revenue, has contended that the provisions of section 42 of the Act have no application in the case of a....
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....t-to-cost basis to EOGIL in terms of the production sharing contract (PSC) entered into by EOGIL with Indian concerns duly approved by the Government of India and payments received through debit notes are only reimbursement of actual expenses. It is also contended that the income of the assessee-company is not taxable in India in view of article 7(3) of the Double Taxation Avoidance Agreement with the USA. It is further contended that the payments made to the assessee-company are in respect of scientific or technical personnel and are governed by clause 2.4.2.1 of the production sharing contract, which reads as : "cost of scientific or technical personnel services provided by any affiliate of operator for the direct benefit of petroleum operations, which cost shall be charged on a cost of service's basis without any element of profit. Charges, therefore, shall not exceed charges for comparable services currently provided by outside technical service organizations of comparable qualifications. Unless the work to be done by such personnel is covered by an approved budget and work programme, operator shall not authorize work by personnel without approval of the management committee.....
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.... has, therefore, to be determined in terms of the provisions of the production sharing contract read with the said section, notwithstanding contrary provisions in the Act. Another Division Bench of this court in the case of CIT v. Enron Oil and Gas India Ltd. reported in [2008] 305 ITR 68 has laid down the aforesaid proposition of law. The observations made by the Division Bench in its judgment at page 74 are reproduced hereunder : "Section 42 of the Income-tax Act, 1961, quoted above, contains a special provision whereby the expenditure incurred by the assessee-NRC in commercial production of mineral oil is to be depreciated in terms of the agreement mentioned therein. It is not the case of the parties that the agreement between the parties is not covered or it does not fulfil the requirements under section 42 of the aforesaid Act. It is clear from article 1.6.1 of the accounting procedure, quoted above, set out in appendix C to the production sharing contract (PSC) that expenditure incurred in foreign exchange by the coventurer during any particular calendar month has to be converted into Indian rupee at the rate which has to be determined at the end of the calendar ....
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....and undisputed position that the aforesaid assessees/ entities are affiliates of EOGIL. In terms of the provisions of the PSC, more specifically section 3.1.4(b), the assessees/entities are obligated to provide services to EOGIL, which is one of the members and operators of the PSC, on cost-to-cost basis. In other words, the aforesaid entities cannot expect to receive any element of profit from provision of such services, nor can EOGIL compensate the aforesaid entities on cost-plus basis. Accordingly, the aforesaid entities received an amount equal to the cost incurred in pro-viding such services to EOGIL. 19. The learned counsel for the assessees further submitted that the liability of tax in India of a non-resident is determined by the provisions of the Act or the relevant Double Taxation Avoidance Agreement between India and the country of residence of the non-resident, whichever is more beneficial to the non-resident under section 90(2) of the Act. The provision of section 90(2) of the Act reads as under : "90. Agreement with foreign countries.- . . . (2) Where the Central Government has entered into an agreement with the Government of any country outside India under su....
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....prise of which it is a permanent establishment and other enterprises controlling/controlled by or subject to the same common control as that enterprise. In any case where the correct amount of profits attributable to a permanent establishment is incapable of determination or the determination thereof presents exceptional difficulties, the profits, attributable to the permanent establishment may be estimated on a reasonable basis. The estimate adopted shall, however, be such that the result shall be in accordance with the principles contained in this article. (3) In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment, including a reasonable allocation of executive and general administrative expenses, research and development expenses, interest, and other expenses incurred for the purposes of the enterprise as a whole (or the part thereof which includes the permanent establishment), whether incurred in the State in which the permanent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limitations of t....
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....thorities on the basis of estoppel. The Tribunal also referred to the judgment passed by the Delhi High Court in CIT v. Bharat General Reinsurance Co. Ltd. [1971] 81 ITR 303, in which the Delhi High Court has held that there is no estoppel in the Income-tax Act and if the assessee includes a particular income in the return, but later puts forth the claim that it is not taxable, it must be taken that the assessee had resiled from the position which it had wrongly taken while filing the return. It was further held that quite apart from it, it is incumbent on the Income-tax Department to find out whether a particular income was assessable in the year or not and, merely because the assessee wrongly included the income in the return for a year, it cannot confer jurisdiction on the Department to tax that income in that year even though legally the income did not pertain to that year. On the basis of the ratio of the aforesaid judgment, the learned Tribunal has not committed any error in holding that the principle of res judicata shall not operate. Thus, the fact that in some of the earlier years, the assessee had offered to pay tax under section 44BB cannot operate as estoppel against it....