2003 (10) TMI 32 - HC - Income Tax

(i) Whether the activities of the assessee were in the nature of works contract and therefore not covered by the notification of the Central Government dated March 31, 1983, u/s 24AA of the Companies (Profits) Surtax Act, 1964? - (ii) Whether the Income-tax Officer was right in adding the payment of surtax by the ONGC as perquisite/benefit in terms of section 28(iv) to the income of the assessee? - In our view the above two questions of law are required to be decided by us as they are substantial questions of law and the Tribunal was wrong in rejecting the application of the Department. - Accordingly, we direct the Tribunal to draw up a statement of case and refer the above two questions of law to this court u/s 256(1)

Summary

Issues:
1. Application under section 256(2) of the Income-tax Act rejected by the Tribunal.
2. Dispute regarding tax liability exemption for a non-resident company.
3. Interpretation of notification dated March 31, 1983, under section 24AA of the Companies (Profits) Surtax Act, 1964.
4. Addition of surtax payment by ONGC as a benefit/perquisite under section 28(iv) of the Income-tax Act.

Analysis:
The judgment pertains to an application under section 256(2) of the Income-tax Act, where the Commissioner of Income-tax sought a statement of case to be drawn up by the Tribunal regarding a tax dispute. The assessee, a non-resident company engaged by ONGC for oil exploration, claimed exemption from surtax based on a notification issued by the Central Government. However, the Department disagreed, contending that the exemption applied to joint ventures only. The Income-tax Officer added the surtax payment by ONGC to the assessee's income, considering it a benefit/perquisite under section 28(iv) of the Income-tax Act.

The court identified two key questions of law: firstly, whether the assessee's activities constituted a works contract not covered by the notification, and secondly, whether the Income-tax Officer was justified in treating the surtax payment as a benefit to the assessee. The court deemed these questions substantial and directed the Income-tax Appellate Tribunal to refer them for the court's opinion under section 256(1) of the Income-tax Act, overturning the Tribunal's rejection of the Department's application.

In conclusion, the court ordered the Tribunal to draw up a statement of case and refer the two questions of law for consideration. The judgment disposed of Income-tax Application No. 415 of 2001 without awarding costs to any party involved.