M.G. Mukherji, Actg. C.J. - (1.) D.B. Income-tax Reference Application No. 15 of 1995 under Section 256(2) of the Income-tax Act, 1961, is directed against an order dated July 21, 1993, passed by the Income-tax Appellate Tribunal in R. A. Nos. 15, 16 and 17/JP of 1992 arising out of I. T. A. Nos. 420, 421 and 422/JP of 1988, for the assessment year 1985-86.
(2.) D. B. Income-tax Reference Application No. 19 of 1995 is also directed against the self-same order passed by the Income-tax Appellate Tribunal in R. A. Nos. 15, 16 and 17/JP of 1992 arising out of I. T. A. Nos. 420, 421 and 422/JP of 1988 for the assessment year 1984-85. D. B. Income-tax Reference Application No. 29 of 1995 is also directed against the self-same order passed by the Income-tax Appellate Tribunal in R. A. Nos. 15, 16 and 17/JP of 1992 arising out of I. T. A. Nos. 420, 421 and 422/JP of 1988 for the assessment year 1983-84. In all these income-tax reference applications, common questions of fact and law are involved and they have been taken up for hearing analogously. Compagnie Generale de Geophysique is a foreign company assessed through its Indian agent, Oil and Natural Gas Commission, which is a corporation owned by the Government of India. Compagnie Generale de Geophysique, the non-resident company, entered into a contract with the Oil and Natural Gas Commission for carrying out seismic survey for processing of data for the Oil and Natural Gas Commission in North-West Himalayas. It deployed its specialised equipment and personnel for carrying out the said work. The Oil and Natural Gas Commission as the agent for Compagnie Generale de Geophysique declared income of Rs. 84,740 for the assessment year 1985-86 and the assessment was completed under Section 143(3) of the Income-tax Act on income of Rs. 2,94,053 on November-18, 1985, Rs. 3,90,890 for the assessment year 1984-85, and the assessment was completed under Section 143(3) of the Income-tax Act on income of Rs. 13,56,400 on November 18, 1985, and Rs. 28,77,530 for the assessment year 1983-84 and the assessment was completed under Section 143(3) of the Income-tax Act on income of Rs. 49,42,170 on December 9, 1985. The Commissioner of Income-tax, Jodhpur, initiated proceedings under Section 263 of the Income-tax Act, vide show-cause notice issued on March 21, 1988, for the following reasons : " (1) While income-tax perquisite value has been added in determining the income of the non-resident company, the surtax leviable on the foreign company which was payable by the Oil and Natural Gas Commission was not added. (2) For application of net profit rate, the payment received by the foreign company from the Oil and Natural Gas Commission on account of other services including supply of spares and materials, and mobilisation and demobilisation charges, etc., had been excluded by the Assessing Officer on the ground that they were non-taxable and without any element of profit."
(3.) BEFORE the Commissioner of Income-tax, it was contended by the assessee that Section 44BB overrides the provisions of Section 28, under which the perquisite is required to be included in the profits and gains of business. Further, it was contended that the surtax is not payable by the Oil and Natural Gas Commission as representative assessee of the nonresident company. However, the Commissioner of Income-tax held that Section 44BB does not override the entire provisions of Section 28 and, therefore, besides income-tax, the Assessing Officer ought to have added the value of perquisite on account of surtax borne by the Oil and Natural Gas Commission on behalf of the foreign company. Further, relying on the Supreme Court decisions in Smt. Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 and Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323, the Commissioner of Income-tax held that the assessment orders were erroneous and prejudicial to the interest of the Revenue and set aside the assessments and directed them to be made afresh. While doing so, the Commissioner of Income-tax also mentioned that it should also be kept in view that while framing the fresh assessments, it was to be found out whether it was a case of single or multiple grossing up, even though this point was not specifically mentioned in the show-cause notice. The assessee filed an appeal before the Income-tax Appellate Tribunal against the order of the Commissioner of Income-tax and the Tribunal vide its order dated May 14, 1991, quashed the order of the Commissioner of Income-tax under Section 263. As regards the perquisite on account of surtax, the Tribunal found that in view of the Notification No. GSR 307(E) (see [1983] 142 ITR (St.) 88), dated March 31, 1983, the foreign company was not liable to surtax and there was no question of adding any perquisite on that account. As regards the other issue, the Income-tax Appellate Tribunal has observed that 'the income was computed by taxing 15 per cent, of the net receipts of the non-resident company as taxable, although in terms of Section 44BB, a sum equal to 10 per cent, of the aggregate of the amounts mentioned in Section 44BB could be deemed to be the profits and gains of such business. Therefore, Section 44BB could not assist the Commissioner of Income-tax in arriving at a conclusion that the assessments were erroneous and prejudicial to the interests of the Revenue. As regards the issue of single or multiple grossing up, the Income-tax Appellate Tribunal observed that it was not mentioned in the notice under Section 263 nor was it held specifically by the Commissioner of Income-tax that the assessments were erroneous and prejudicial to the interest of the Revenue. The Department filed reference applications under Section 256(1), which were rejected by the Tribunal, vide its order dated July 21, 1993, and hence, these three applications were filed under Section 256(2) before this court craving a reference on the following question ; " Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the order of the Assessing Officer was not erroneous relying only on one issue and without giving a finding on all the issues on which the order of the Assessing Officer was cancelled under Section 263 of the Income-tax Act, 1961 ?" ;