TMI Blog2009 (6) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... for their disposal. At the outset, it is pertinent to mention here, that Income Tax Appeal No. 91 of 2006 and Income Tax Appeal No. 98 of 2006, are being reheard and disposed of in compliance of order dated 13th of October 2008, passed by the Apex court in Civil Appeal No. 6105 of 2008 and Civil Appeal No. 6106 of 2008. The common questions of law involved in these appeals are as under: 1. Whether, the assessee, a non-resident company, was entitled to claim deduction for expenses incurred by it between the period 1993-1999, particularly, when according to the Department there was no permanent establishment in existence in India during the relevant period? 2. Whether, the Income Tax Appellate Tribunal has erred in law in holding that the expenses claimed by the assessee were allowable and constitute business loss to be set off under Section 71 of the Income Tax Act, 1961? 2. Brief facts of the case relating to Income Tax Appeal No. 91 of 2006, are that the respondent / assessee, a non-resident company, entered into contract with Oil and Natural Gas Corporation (for short ONGC) in connection with the work of drilling operations in oil exploration. Business under the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the A.O., was challenged before the CIT(A) by filing Appeal No. 415 / DDN / 2002 -03, but said appeal was allowed partly by the CIT(A), vide its order dated 21.02.2003. Thereafter, the assessee filed I.T.A. No. 3057 / DEL / 2003 before the ITAT, Delhi, which was allowed. Hence, the appeal by the Revenue. 4. The facts in connection with Income Tax Appeal No. 49 of 2005, are that the respondent / assessee Foramer France, another non-resident company, also having its office in France, had a contract with ONGC in the year 1983, which expired in the year 1991-92, and thereafter there was no business activity till 1998, and fresh contract was awarded to the assessee only in the year 1999. The assessee submitted its return before the A.O. (Jt. Commissioner of Income-tax, Dehradun) for the assessment year 1997-1998, showing income to the tune of Rs. 5,49,628/- on account of interest received from the refund of income tax. As against this, expenses were claimed on various heads, such as, legal professional charges, salary and administrative charges, vehicle maintenance, travelling expenses, miscellaneous expenses and depreciation. After processing the return under Section 143(1)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the enterprise; (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage or display; (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research, or for other activities which have a preparatory or auxiliary character, for the enterprise; (f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from this combination is of preparatory or auxiliary character. 5. Notwithstanding the provisions of paragraphs 1 and 2 where a person other than an agent of an independent status to whom paragraph 6 applies is acting in one of the Contracting States on behalf of an enterprise of the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere upheld by the CIT(A). On the other hand, learned counsel for the respondent / assessee argued that the assessee were very much in business and were making attempt to get a new contract, but they could get fresh contract only in 1999. It is contended on behalf of the respondent / assessee that merely for the reason that there was 'lull in business' it cannot be said that the assessee were 'not in business' during the relevant period. 7. Learned counsel for the respondent / assessee drew attention of this Court to Annexure -1 filed with the counter affidavit in Income Tax Appeal No. 49 of 2005, showing that in October 1996, the assessee was making correspondence with ONGC relating to hiring of manpower services in respect of export key personnel for drilling in deep waters. On perusal of said letter we find that this letter has been issued from Dubai office of the assessee in aforesaid appeal. In our opinion, this does not reflect that the business was being done in India as the earlier contract had long been expired and new contract by then had not been given to the assessee. Merely for the reason that the assessee sent some letters and made some offer from Dubai to ONGC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to the expenditure incurred by the company in doing its business. On perusal of said case law we find that the facts of said case were different and it was not a case where the company was not in business in India. Similarly, para 99 in Ishikawajima-Harima Heavy Industries Ltd. Vs. Director of Income-tax, Mumbai; 2007 ITR (288) 408 (at page 446), which was read out before us by learned counsel for the respondent / assessee, in our opinion does not help the respondent / assessee in this case for the reason that in that case the assessee company registered in Japan had its business activities in India during the relevant period, and in that situation the Apex court observed - 'there exists a distinction between a business connection and a permanent establishment. As the permanent establishment cannot be said to be involved in the transaction, the aforementioned provision will have no application. The permanent establishment cannot be equated to a business connection, since the former is for the purpose of assessment of income of a non-resident under a Double Taxation Avoidance Agreement, and the latter is for the application of Section 9 of the Income Tax Act.' 10. Lastly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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