Commissioner Of Income Tax v. Ongc

IN THE HIGH COURT OF UTTARAKHAND AT NAINITALIncome Tax Reference No. 1 of 2011(Old No. 17AL/2001) Commissioner of Income Tax. ………. Applicant Versus ONGC. ..………. Respondent Mr. H.M. Bhatia, Standing Counsel (Income Tax) for the applicant. Mr. Udyog Shukla, Advocate for the respondent. JUDGMENT Coram: Hon’ble Barin Ghosh, C.J. Hon’ble U.C. Dhyani, J. BARIN GHOSH, C. J. (Oral) Oil and Natural Gas Corporation Limited (hereinafter referred to as ‘ONGC Ltd.’) entered into many a contracts with many a foreign companies, whereby and under, foreign companies became obliged, amongst others, to provide technical people to ONGC Ltd. to assist ONGC Ltd. in installing, running and maintaining plants and machinery installed, situate or in the process of being installed within India. Those technicians were employees of the foreign companies with whom ONGC Ltd. had entered into contracts and they were not employees of ONGC Ltd. Under the agreements, thus entered, ONGC Ltd. became obliged to pay certain amount of money, as and by way of salary, to those technicians, which was to be received by those technicians tax-free. Inasmuch as those technicians were not employees of ONGC Ltd. at any point of time, though remunerations paid to them were described as ‘salaries’, but those were treated as income received by those technicians while working within India and, accordingly, became obliged to pay tax. Since ONGC Ltd. was obliged under the contracts entered by it with foreign companies, ONGC Ltd. paid tax on such income of those technicians and, thereupon, filed Returns for and on behalf of those technicians as their agents. In the Returns, it was shown what was the income of those technicians and what was the tax liability of ONGC Ltd. in that regard. While computing the tax liability, however, ONGC Ltd. deducted the amount of the tax leviable on the income and claimed exemption under Section 10(6)(viia) of The Income Tax Act, 1961. The Assessing Authority, while assessing those Returns, after issuing notices under Sections 143(2) and 142(1) of the Act, refused to give exemption to ONGC Ltd. under Section 10(6)(viia). The Assessing Officer, accordingly, added to the actual income made by the foreign technicians, also the amount of tax payable thereon by ONGC Ltd., to arrive at the total amount of income upon which tax was to be paid. On that premise, the taxable income of those technicians was determined. 2. The order of the Assessing Officer was interfered with by the Commissioner of Income Tax (Appeals). The matter, thus, reached the Tribunal. When the matter reached the Tribunal, Tribunal interfered with the order of the Commissioner of Income Tax (Appeals) and restored the order of the Assessing Officer. While doing so, it directed that the tax has to be on single-stage basis. At this juncture, it must be kept in mind that the Assessing Officer did not hold that tax has to be on multi-stage basis. The direction of the Tribunal to that effect was, therefore, something, which was not an issue before the Tribunal. Because the Tribunal directed that tax has to be on single-stage basis, i.e. tax will be collected on the income plus tax payable thereon, and not income plus tax payable thereon and the amount of tax paid to discharge the tax liability and also further tax to be paid on the amount of such tax paid and so on and so forth; the Department approached the Tribunal for forwarding to the Court the following question for its opinion under Section 256(1) of the Act:- “Whether on the facts and circumstances of the case, the Tribunal was correct in deciding the issue of multi grossing of tax paid by ONGC Ltd. on behalf of the assessee by following the decision of the Apex Court rendered in the case of Emil Webber vs. Commissioner of Income Tax, 200 ITR 483 (SC)?” “Whether on the facts and circumstances of the case, the Tribunal was correct in deciding the issue of multi grossing of tax paid by ONGC Ltd. on behalf of the assessee by following the decision of the Apex Court rendered in the case of Emil Webber vs. Commissioner of Income Tax, 200 ITR 483 (SC)?” 3. First of all, no question was raised in Emil Webber vs. Commissioner of Income Tax (supra) in relation to multi / single grossing of tax. Secondly, in the instant case too, also no question was specifically raised by any of the parties at any stage pertaining to multi / single grossing of the tax. The Assessing Officer having directed that the taxable income of the technicians being income made by the technicians plus tax payable thereon and directing payment of tax on the total income thus arrived, held out in clear terms that the liability is of single grossing. Subsequent thereto, the Assessing Officer did not make any assessment saying that the tax assessed by him and paid by ONGC Ltd. will also form income requiring payment of tax thereon. There was no question of the Department asking the Tribunal to refer the dispute, as mentioned above, to this Court for its opinion. 4. We, accordingly, dismiss the Reference. G (U.C. Dhyani, J.) (Barin Ghosh, C. J.) 05.07.2012 05.07.2012