1993 (10) TMI 131 - AT - Income Tax

Summary

Issues:
1. Whether corporate taxes paid on behalf of a non-resident company can be treated as income of the assessee under section 44BB of the Income-tax Act.

Comprehensive Analysis:
The judgment by the Appellate Tribunal ITAT Jaipur involved the issue of whether corporate taxes paid on behalf of a non-resident company could be considered as income of the assessee under section 44BB of the Income-tax Act. The case revolved around M/s Compagnie General-de-Geophysique, a non-resident company covered by section 44BB, and M/s Oil India Limited, a Government of India-owned Corporation, which entered into a contract for exploration, production, and transportation of crude oil and natural gas. The Assessing Officer computed the income of the non-resident company under section 44BB but treated the entire amount of corporate taxes paid as a perquisite under section 28(iv) and added it separately to the income of the assessee for each relevant year.

In the appeals filed by the assessee, the CIT (Appeals) held that since the income had to be computed under section 44BB, the corporate taxes could not be added separately as income. However, he directed that 10% of the corporate taxes should be treated as income under section 44BB. The revenue challenged this decision, arguing that the corporate taxes were rightly considered as perquisites under section 28(iv) by the Assessing Officer. The Tribunal disagreed with the revenue's submissions, emphasizing that section 44BB overrides sections 28 to 41 and sections 43 and 43A. It clarified that under section 28, income chargeable under the head "Profits and gains of business or profession" includes perquisites. Therefore, the profits and gains of the non-resident company under section 44BB would encompass any benefits or perquisites, including corporate taxes paid.

The Tribunal concluded that the profits and gains of the non-resident company under section 44BB would include 10% of the sums received, which also covered the corporate taxes deemed to be received in India. Despite the debate on deriving profits from tax payments, the deeming provisions of section 44BB mandated that such taxes be deemed as profits and gains of the assessee. Consequently, the Tribunal upheld the CIT (Appeals) order for all relevant years and dismissed the appeals filed by the revenue.