TMI Blog2001 (11) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee, it is liable to pay tax on "10 per cent. of the aggregate of the amounts specified in sub-section (2) of section 44BB". Accordingly, he has included in the computation of its profits and gains of business or profession of "the non-resident assessee" the sum received by it from its principal for the purpose of making payment of income-tax in connection with the activities carried on by him in India which is related to processing/ exploration/production of mineral oil in India. This claim was originally accepted by the Assessing Officer. However, the Commissioner of Income-tax considered the inclusion of income-tax for aggregate of sums in the amounts referred to in sub-section (2) of section 44BB to be erroneous and prejudicial to the interests of the Revenue and directed the Assessing Officer to recompute the income of the assessee by including the entire receipt of the income-tax payable by the company in India as part of the income from profits and gains of business falling under section 28(iv) of the Income-tax Act, 1961 by excluding it from the computation of income made under section 44BB(2). On the other hand, the assessee has contended that computation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 44BB and cannot be pressed into service for computation of income. Before considering the provisions of section 44BB it will be apposite to refer to the relevant part of the scheme of the Act of 1961. Section 4 which is the charging section for levying tax on income of any person under the Act provides that income-tax shall be charged at the rate or rates enacted by the Central Act in accordance with and subject to the provisions of the Act in respect of his total income of the previous year relevant for that assessment year of every person. The expression "total income" has been defined in section 2(45) of the Act to mean the total income referred to in section 5, computed in the manner laid down in this Act. Chapter IV of the Act deals with computation of total income. Section 14 of the Act envisages that all incomes for the purposes of charge of income-tax, computation of total income shall be classified under the following heads--(a) Salaries; (b) [Deleted]; (c) Income from house property; (d) Profits and gains of business or profession; (e) Capital gains; and (f) Income from other sources. This Chapter IV has further been divided into sub-parts which provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "44BB. Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils.--(1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee, being a non-resident, engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, 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": Provided that this sub-section shall not apply in a case where the provisions of section 42 or section 44D or section 115A or section 293A apply for the purposes of computing profits or gains or any other income referred to in those sections. (2) The amounts referred to in sub-section (1) shall be the following, namely:- (a) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the provision of service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Secretary, Board of Revenue [1964] 15 STC 74; AIR 1964 SC 207. About the former expression the court said while considering article 372: "The expression 'subject to' conveys the idea of a provision yielding place to another provision or other provisions to which it is made subject." About the non obstante clause with which article 278 began, the court speaking through Subba Rao J. said: "The phrase 'notwithstanding anything in the Constitution' is equivalent to saying that in spite of the other articles of the Constitution, or that the other articles shall not be an impediment to the operation of article 278." The court explained the effect of operation of the two phrases with reference to the provisions before it: "While article 372 is subject to article 278, article 278 operates in its own sphere inspite of article 372." The principle enunciated by the Supreme Court in South India Corporation (P.) Ltd. v. Secretary, Board of Revenue [1964] 15 STC 74; AIR 1964 SC 207, was reiterated by the apex court in Union of India v. Kokil (G.M.) [1984] 65 FJR 1; [1984] AIR 1984 SC 1022; [1984] Suppl. SCC 196, wherein it said: "It is well known that a non obstante clause is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned by the said provision, is to make section 44BB subject to section 28(iv) contrary to the legislative mandate that it will operate in spite of it is not includible in section 44BB(2). If it is includible in items includible aggregate only 10 per cent. of it would go in the computations. If it does not fall in the specified amount under section 44BB(2) it cannot be included in the computation at all for the purpose of computing income of such an NR whose income from the business of exploration of mineral oils is to be computed. In the present case there is no dispute about the fact that the assessee is a non-resident falling in that category. That being so, whether it is clause (i) or clause (iv), no part of section 28, or for that matter no provision of section 28 to section 41 as a whole and sections 43 and 43A could be resorted to for the purpose of computing the business of exploration of mineral oil. It may be noticed that these methods have not been included only to the extent that they are contrary to section 44BB, but section 44BB has been given overriding effect of the special mode in entirety for the computation of profits and gains of business in the case of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 44BB and because of the non obstante clause, section 28 of the Act will have no application. In other words, the value of the perquisite arising from the business will have to be computed as provided in section 44BB(1) when the business is exploration of mineral oil." The court, therefore, held that the tax liability of the non-resident firm which has been undertaken by the Indian firm and has been paid by the Indian firm would be a perquisite arising from the business of oil exploration under the agreement entered into by the non-resident firm with the Indian firm and would be taxable as such. The computation of the same will have to be made under sub-section (1) of section 44BB and, therefore, only ten per cent. of the same would be deemed to be the profits of such business chargeable to tax and not the entire sum. In these circumstances the Income-tax Appeals bearing Nos. 67 of 2001, 68 of 2001 and 71 of 2001 have no merit and are hereby dismissed. I.T.R. Nos. 48 of 1999, 49 of 1999, 50 of 1999, 51 of 1999, 52 of 1999, 53 of 1999, 54 of 1999 and 55 of 1999 (CIT v. Oil and Natural Gas Commission). These are applications under section 256(2) of the Income-tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
