J.K. Verma, Accountant Member - (1.) ALL these appeals involve one common point and hence they are being decided by a common order for the sake of convenience.
(2.) The undisputed facts of the case are that M/s Compagnie General-de-Geophysique is a Non-resident Company and is covered by the provisions of Section 44BB of the Income-tax Act. M/s Oil India Limited, a wholly Government of India-owned Corporation entered into a contract with that company for exploration, production and transportation of crude oil and natural gas. Amongst the terms of contract, the corporate taxes of that Company (here-in-after referred to as CGG for the sake of convenience) shall be borne by Oil India Ltd. As per those terms the Oil India paid the contracted sums for the job done by CGG and also paid the corporate taxes on behalf of that Company as an Indian agent of that Company within the meaning of Section 163 of the Income-tax Act and also filed returns on behalf of that Company. The payments for contract amounts and taxes paid were as under: JUDGEMENT_6247_TLIT0_19930.htm The Assessing Officer computed income of that Company under the provisions of Section 44BB by estimating the profits at 10 per cent of the amounts mentioned in Sub-section (2) of Section 44BB. However, it treated the entire amount of corporate taxes paid on that income as perquisite within the meaning of Section 28(iv) and added that amount separately to the income of the assessee computed under Section 44BB for each of the four years mentioned above. In the appeals filed by the assessee the learned CIT (Appeals) took the view that since the entire income of the assessee had to be computed according to the special provisions of Section 44BB, the amount of corporate taxes could not be added separately as income of the assessee. However, he took the view that the amount of corporate taxes was also an amount covered within the provisions of Sub-section (2) of Section 44BB of the Income-tax Act and, therefore, he directed that 10 per cent of that amount may also be treated as income of the assessee. The revenue has felt aggrieved against those orders of the CIT (Appeals) and is in appeal before us.
(3.) WE have carefully considered the submissions on behalf of both the sides and have perused the material on record. WE are in full agreement with the decisions of the learned CIT (Appeals) for all the four years. The learned D.R. vehemently argued that Section 44BB excluded only those parts of Sections 28 to 43A of the Income-tax Act which were contrary to provisions of Section 44BB. According to the learned D/R, the provisions of Section 28(iv) were not contrary to the provisions of Section 44BB but were separate provisions and hence the corporate taxes were rightly considered to be perquisites within the meaning of Section 28(iv) by the ld. Assessing Officer and were rightly treated as income of the assessee besides the profits and gains of business or profession computed under the provisions of Section 44BB. WE, however, are unable to agree with his submissions because the provisions of Section 44BB can be read to the following effect for the purposes of the case before us: Notwithstanding anything to the contrary contained in Sections 28 to 41 and Sections 43 and 43A, in the case of an assessee, being a nonresident...a sum equal to ten per cent of the aggregate of the amounts specified in Sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head 'Profits and gains of business or profession'. Further, Section 28 reads as under: Section 28. The following income shall be chargeable to income-tax under the head 'Profits and gains of business or profession': (i) (ii) (iii) (iiia) (iiib) (iiic) (iv) the value of any perquisite, whether convertible into money or not, arising from business or the exercise of a profession;. A plain reading of those provisions makes it clear that under Section 28 the income which shall be charged under the head "Profits and gains of business or profession" would include perquisites. Even if we do not go into the controversy as to whether the payment of corporate taxes on behalf of the non-resident company could be treated as a perquisite in its hands or not, it would mean that the profits and gains of business or profession of that company would be inclusive of any benefit or perquisites. When we read Section 44BB as mentioned above, we find that according to that section, notwithstanding anything to the contrary contained in Section 28, the profits and gains of a non-resident assessee engaged in the specified business from such business will be deemed to be only a sum equal to ten per cent of the aggregate of amounts specified in Sub-section (2). This will mean that the items of income or deemed income mentioned in clauses (i) to (v) of Section 28 of the Income-tax Act are not in conformity with the deemed income under Section 44BB(1) and hence all such items of income or deemed income; have to be ignored when computing income under the special provisions for computing profits and gains under Section 44BB of the Income-tax Act. This would mean that 10 per cent of the sums received by the CGG, which would also incl ude. the amount of corporate taxes which are deemed to be received in India by the non resident company shall be included according to provisions of Sub-section (2) of Section 44BB and irrespective of the logic whether any profits in be derived from such payments of taxes, by virtue of the deeming provisions of Section 44BB(1), shall be deemed to be profits and gains of the assessee.;