2008 (7) TMI 458 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of Section 44BB vs. Section 44D of the Income-tax Act.
2. Applicability of CBDT's Instruction No. 1862.
3. Requirement of Committee on Disputes (COD) approval for the appeal.

Issue-wise Detailed Analysis:

1. Applicability of Section 44BB vs. Section 44D of the Income-tax Act:
The primary contention was whether the services rendered by the Non-Resident Company (NRC) fell under Section 44BB or Section 44D of the Income-tax Act. The revenue argued that the services were technical in nature and should be taxed under Section 44D. However, the CIT(A) held that the services were covered under Section 44BB. The Tribunal noted that the NRC entered into seven agreements with the assessee to conduct various training programs, which were listed in the assessment order. The revenue earned by NRC was offered as receipt taxable under Section 44BB, and the return was filed by ONGC Ltd. as the representative assessee of NRC. The Assessing Officer, however, applied Section 44D read with Section 115A, calculating a significantly higher income and tax. The CIT(A) sided with the assessee, and the department appealed against this decision.

2. Applicability of CBDT's Instruction No. 1862:
The revenue also contended that the CIT(A) erred in applying CBDT's Instruction No. 1862, dated 22-10-1990, to the case. The CIT(A) had held that this instruction was applicable, whereas the revenue argued that Section 44D should apply based on the facts and circumstances. The Tribunal did not delve deeply into this issue but focused more on the primary contention regarding the applicability of Section 44BB vs. Section 44D.

3. Requirement of Committee on Disputes (COD) Approval:
A significant procedural issue was whether COD approval was required for the appeal. The department initially sought adjournments on the grounds that COD approval was being processed. However, relying on the Madras High Court decision in CIT v. Combustion Engg. Inc., USA, the department later argued that no COD approval was needed since the NRC was not a Public Sector Undertaking (PSU). The Tribunal noted that in the agreements, the income-tax liability was to be borne by ONGC, a PSU. Thus, the real dispute was between the Income-tax Department and ONGC, necessitating COD approval as per the Supreme Court's decision in ONGC v. CCE. The Tribunal emphasized that in similar cases, the department had sought COD approval, and the absence of such approval in this case meant the appeal could not proceed on merits.

Conclusion:
The Tribunal dismissed the departmental appeal for want of COD approval, highlighting the necessity of such approval in disputes involving PSUs. The Tribunal left open the possibility for the department to revive the appeal if COD approval was obtained. The decision underscores the procedural requirements in tax disputes involving government entities and PSUs, adhering to the Supreme Court's mandate.