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TMI Blog1998 (9) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... risers. Pursuant to the said tender notice, the respondent submitted a bid which was accepted by the petitioner and the contract was awarded to the respondent as per the terms and conditions in the contract dated October 15, 1986. Thereafter disputes have arisen between the petitioner and the respondent over the amounts due and payable to the respondent for the construction of two offshore well platforms at South Bassein field in the Arabian sea. In all, the respondent raised 13 claims, claiming US $2,380,473.88 described as claims A to L in the statement of claims which was referred to the arbitrators, Mr. R. P. Bhat nominated by the respondent and Mr. K. M. Anjeneyan nominated by the petitioner. Before the arbitrators, the petitioner filed a counter claim against the respondent claiming reduction in post drilling hook-up and short supply of spares claiming US $ 225,057.00. Oral evidence was recorded by the two arbitrators who also heard extensive arguments. There were, however, differences of opinion between the two arbitrators regarding the merits of the claim of the claimants and thus the matter came to be referred to the umpire, Shri M. N. Chandurkar. By the impugned award, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard passed by him in respect of Claim No. 9 is contrary to the law laid down by the apex court in P. V. Raghava Reddi v. CIT [1962] 44 ITR 720 and Standard Triumph Motor Co. Ltd. v. CIT [1993] 201 ITR 391. In order to appreciate the submissions of Mr. Dada, it is necessary to refer to the respective pleadings of the parties. Under Claim No. 9, the respondent has in the statement of claim sought an award for an amount of US $ 432,500.35 which is claimed to have been deducted by the petitioner for the purpose of meeting the liability of the respondent for surtax under the Companies (Profits) Surtax Act, 1964 (hereinafter referred to as "the Surtax Act"). The Surtax Act was repealed in 1988, but during the time it was in force, it imposed a surtax, in addition to normal corporate tax, in the years in which the chargeable profits of the assessee for the previous year exceeded 15 per cent. of its capital computed in accordance with the Surtax Act. According to the respondent, its chargeable profits did not exceed 15 per cent. of its capital as computed in accordance with the Surtax Act and it was, therefore, not liable to pay any surtax nor was any surtax due from or payable by the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... US dollars and that the amount of US $ 689,807 retained by them cannot be converted at the current exchange rate. The petitioner while admitting that they had deducted the sum of US $ 689,807 during the year 1987 from the invoices of BB and BD and IJK projects and gave the break up that from the amount of BB project US $ 432,500 were deducted and from IJK project account US $ 257,317 were deducted thus making a total of US $ 689,807, took the stand that this amount was equivalent in rupees to Rs. 88,16,484 as on the date when the deduction was made. According to the petitioner, the said amount was kept in their books of account under the heading "Deduction of tax at source" at the exchange rate applicable during the year 1986-87. Consequently, according to the petitioner, it was not liable for payment of any difference in Indian rupee value and US dollar between the date when the deduction was made and the time when the amount was deposited, i.e., May 21, 1990. The umpire accepted the case of the petitioner that though an amount of US $ 432,500 is, at one stage, considered by the petitioner as tax deducted at source, the said amount was really the amount retained by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment year 1986-87 and the deduction was legal and not uncalled for. Thus the assessment against the petitioner was in its capacity as a representative assessee. As held by the umpire the petitioner did not want to retain the monies beyond the period necessary. However, the petitioner was directed by the Income-tax Department not to refund but to retain the amount of surtax on the basis of the computation under section 44BB of the Income-tax Act. The petitioner was directed to deposit the amount retained by it of surtax and informed that the amount was required to be paid pursuant to the notice under section 226(3) of the Income-tax Act. It is thus clear that the money retained in rupees in 1987 towards tax liability of the respondent was credited in the account of the respondent in the books of account of the petitioner in rupees. In law the effect is that the petitioner had paid the amount to the respondent in 1987 as the money was held by it as a depositee. In P. V. Raghava Reddi v. CIT [1962] 44 ITR 720; AIR 1962 SC 977, the non-resident company instructed the assessee, in view of the difficulties in this country in remitting the monies abroad, to credit the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Indian company credited the royalty to the appellant in its account books. With respect to its Indian income, the appellant filed its returns through the Indian company. For the assessment years 1967-68 and 1968-69, the appellant filed its returns disclosing the royalty in which it was stated that the appellant was maintaining its accounts on the mercantile basis. For the assessment years 1969-70 and 1970-71, the appellant admitted the royalty but filed nil returns claiming that it was maintaining its accounts on cash basis and no part of the royalty had been received by it and that, therefore, nothing was taxable. It was argued that a mere entry in the account books of the Indian company does not amount to receipt of income by the assessee. In other words, the said royalty can be said to have been received by the assessee only when it received the same in the U. K. Rejecting the contention it was held that the credit entry into the accounts of the assessee in the books of the Indian company does amount to its receipt by the assessee and is accordingly taxable and that it is immaterial when it did actually receive it in the U. K. Applying the above principle, it is clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sudarsan Trading Co. v. Government of Kerala, AIR 1989 SC 890 and (iii) Hindustan Tea Co. v. K. Sashikant and Co., AIR 1987 SC 81. The decision of the Privy Council in Champsey Bhara's case, AIR 1923 PC 66, was explained by the Supreme Court in Dr. S. Dutt v. University of Delhi, AIR 1958 SC 1050. It was argued before the Supreme Court that even if the decision of the arbitrator was erroneous that was not enough; before it could be set aside, it had further to be shown that the error appeared on the face of the award. Reliance was placed on the above quoted observation in Champsey Bhara's case, AIR 1923 PC 66. In paragraph 13 of the judgment, the Supreme Court observed : "In our view, all that is necessary for an award to disclose an error on the face of it is that it must contain, either in itself or in some paper intended to be incorporated in it, some legal proposition which on the face of it and without more, can be said to be erroneous. This was the decision of the Judicial Committee in the Champsey Bhara and Co.'s case, AIR 1923 PC 66." In Sudarsan Trading Co.'s case, AIR 1989 SC 890, relied upon by Mr. Madon, the Supreme Court has clearly recognised that the award may be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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