TMI Blog1996 (7) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder 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), 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts made had to be included for determination of income under section 44BB. As regards the mobilisation and de-mobilisation charges, the foreign company brought certain machinery and equipment for survey and oil exploration and installed such machinery and equipment at a particular site. When these were not required any further, they were dismantled and installed at another site. The payments made for such mobilisation and de-mobilisation were also directly relatable to the services and facilities referred to under section 44BB. As regards the supply of machinery and spare parts, the Assessing Officer had failed to make enquiry so as to enable him to give a finding as to whether such payments were really covered under sub-section (2) of section 44BB. The following aspects were not duly adverted to at all : " (i) As to whether the said equipments and spare parts were used in making survey and oil exploration by the foreign company for which service charges have been paid ; and (ii) Whether the said equipments were required to be supplied by the foreign company for assigned contract work as per terms of the contract. Mr. Shishodia further argued that the Tribunal has erred in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t chargeable from the assessee in view of the notification dated March 31, 1983, issued by the Central Board of Direct Taxes which notification had been duly examined by the Appellate Tribunal, vide para. 11 of its order dated June 20, 1990, in similar appeals decided by the Delhi Bench of the Income-tax Appellate Tribunal. The direction regarding multiple grossing up did not find any mention whatsoever in the notice under section 263 and the Delhi Bench of the Income-tax Appellate Tribunal has also negatived the contention regarding its sustainability even on its merits. Mr. Gupta further submitted that even the single stage grossing up done by the assessee voluntarily was not warranted. Regarding the work executed outside India, the facts had been taken note of by the Inspecting Assistant Commissioner (Assessment) and which had not been made the subject-matter of his application of mind under section 263 by the learned Commissioner. In the subsequent assessment years, the Assessing Officer had himself taken 10 per cent. of the receipts as taxable and also pointed out that the assessment orders as framed were prejudicial to the interests of the Revenue as the assessments had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w all such notifications holding the field. When no surtax was payable by the foreign company and merely on account of the fact that the assessee had paid the surtax when the foreign companies were exempted from paying the surtax, vide notification dated March 31, 1983, issued by the Central Government under section 24AA of the Companies (Profits) Surtax Act, 1964, without recording any finding that the surtax was actually payable by the assessee, we do not think that there was any error on the part of the Income-tax Appellate Tribunal to have exempted the assessee from the liability to pay surtax. As regards the point of grossing up, the Income-tax Appellate Tribunal has rightly held that the notice under section 263 of the Income-tax Act served on the assessee did not mention this aspect of the matter and the assessee was not called upon to make an answer with regard to this question. The Commissioner of Income-tax did not actually give out by way of any firm finding in his order that the assessments were erroneous and prejudicial to the interests of the Revenue for grossing up and all he did was that while setting aside the assessments so as to make it re-done, he directed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessments already made by the Assessing Officer. Referring to the decision in CIT v. Princess Usha Trust [1984] 145 ITR 203 (MP), Mr. Shisodia argued that whether the Tribunal was justified in setting aside the order passed by the Commissioner under section 263 and whether the Tribunal was correct in holding that the order of the Income-tax Officer, though erroneous, was not prejudicial to the interests of the Revenue, were questions of law fit for reference. That was a case where the Commissioner set aside, under section 263, the assessment and directed the Income-tax Officer to make a fresh assessment after complying with the provisions of section 144B, since the Commissioner was of the view that the order of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue. On appeal by the assessee, the Tribunal set aside the order of the Commissioner on the ground that the Income-tax Officer's order, though erroneous, was not prejudicial to the interests of the Revenue. On an application by the Revenue under section 256(2) for directing the Tribunal to refer certain questions of law, it was so held by a Division Bench of the Madhya Pradesh High Court tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pressing Factory) v. CIT [1958] 33 ITR 176 (Raj) ; AIR 1957 Raj 326, it was held that the High Court has the authority to require a reference from the Appellate Tribunal upon a question of law and in the words of their Lordships of the Privy Council in Alcock Ashdown and Co. v. Chief Revenue Authority, AIR 1923 PC 138 "always supposing that there is a serious point of law to be considered, there lies a duty upon the Chief Revenue authority to state a case for the opinion of the court and if he does not appreciate that there is such a serious point, it is in the power of the court to control him and to order him to state the case" and further that if there is such a point of law "it ought to be decided in a regular manner and upon proper materials". But, it is equally true that a point of law on which a reference ought to be made or may be required to be made, must properly arise out of the order of the Tribunal within the meaning of section 256(1). It further seems to us that whether a question of law arises on an order of the Tribunal would depend upon the facts and circumstances of a given case, but we are disposed to think that as a rule in order that such a point should arise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k to the Tribunal to find new facts or embark upon a new line of enquiry which would enable either the assessee or the Commissioner to make out a case which had never been made during the course of the proceedings before the income-tax authorities or the Tribunal so far. Such additions thereto or alterations therein as the High Court may direct in that behalf are additions of facts to the statement of case or alterations therein which though they were part of the record before the income-tax authorities or the Tribunal were not incorporated in the statement of case drawn up by the Tribunal either because such facts or statements, though contained in the record, were not found by the Tribunal or were omitted to be incorporated in the statement of case drawn up by it. We cannot fall in error to direct the Tribunal to submit a supplementary statement of a case on points not mentioned in its judgment. In CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589, 611; AIR 1961 SC 1633, it was held that only in exceptional cases the court could call upon the Tribunal to state a supplemental case after giving its own decision on the contention. When a question was already raised before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Tribunal refuses to state a case on the ground that no question of law arises, the assessee or the Commissioner may, if he is not satisfied with the correctness of the decision of the Appellate Tribunal, make an application to the High Court to require the Appellate Tribunal to state the case and to refer it to the High Court and on receipt of any such requisition the Tribunal shall state the case and refer it. If the High Court is not satisfied with the statement of case referred under sub-sections (1) and (2) of section 256 and the facts are not sufficient to enable the determination of the question raised thereby, the court may, in exercise of the power under sub-section (4) (now section 258), refer the case back to the Appellate Tribunal to make such additions thereto or alterations therein as the court may direct in that behalf. Under sub-section (5) of section 66 (now section 260), the High Court upon hearing any such case shall decide the question of law raised thereby. The Supreme Court in New Jehangir Vakil Mills Ltd. v. CIT [1959] 37 ITR 11, 19, 20 observed (at page 645 of 73 ITR) : " 'It is clear...that the only question of law which the assessee or the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sections 256, 258).". It is also well settled that in an application under section 66(2) (now section 256(2) of the Income-tax Act), the High Court cannot order that a case be stated on questions which were not included in the application submitted under section 66(1) (now section 256(1)). It was observed by the Supreme Court in CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589, 609, 610 (at page 646 of 73 ITR) : " ...the power of the court to direct a reference under section 66(2) (now section 256(2), is subject to two limitations--the question must be one which the Tribunal was bound to refer under section 66(1) (now section 256(1)) and the applicant must have required the Tribunal to refer it...It is, therefore, clear that under section 66(2) (now section 256(2)), the court cannot direct the Tribunal to refer a question unless it is one which arises out of the order of the Tribunal and was specified by the applicant in his application under section 66(1) (now section 256(1))." The High Court was, therefore, incompetent to call upon the Tribunal to submit a statement of case on questions of fact or questions which were not incorporated in the application under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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