Under Section 44BB of the IT Act, only 10 per cent of the aggregate amount received, including the tax paid by the Indian company on behalf of the foreign company, can be treated as deemed income of the assessee.

1. On an application under Section 256(1) of the IT Act, 1961, following questions were referred for the

opinion of this Court: “Whether on the tacts and in the circumstances of the case, the Tribunal is legally justified in:

1. upholding the order of the learned CIT(A) who held that the amount of corporate tax paid by the OIL on behalf of the company falls under Section 44B(2) and therefore, only 10 per cent of that amount may be treated as income of the assessee.

2. observing that the amount of corporate taxes paid by the OIL on behalf of the non-resident company does not amount to perquisite within the meaning of Section 28 (iv) ?“

2. The relevant assessment years are 1985-86 to 1988-89. The assessee IVI/s Compagnie General-de-Geophysique, a non-resident company, entered into contract with the Oil India Ltd., for exploration, production and transportation of crude oil and natural gas. Amongst the terms of contract, the corporate tax of the NRE company was to be borne by the Oil India Ltd. As per those terms, the Oil India Ltd., paid the contracted sums for the job done by the assessee company and the amount received on behalf of foreign company and also paid the corporate tax, on behalf of that company, as an Indian agent for that company, within the meaning of Section 163 of the Act as also the Oil India Ltd, filed return on behalf of that company. The Oil India Ltd. also paid sales-tax and discharged the tax liability of the foreign company.

The AO, while considering the amount of tax paid by the Oil India Ltd. on behalf of the foreign company, treated the entire amount of corporate taxes paid on that income as perquisite within the meaning of Section 28(iv) and added that amount separately to the income of the assessee under Section 44BB.

The case of the Oil India Ltd. was that in view of provisions of Section 44BB of the Act, only 10 per cent of that amount can be taxed. The AO did not agree. According to him, the amount of taxes paid should be taxed under Section 28(iv). The entire amount of tax and surtax is perquisite and that has to be added, as provisions of Sub-clause (iv) of Section 28 are not contrary to Section 44BB of the Act.

In appeal before the CIT(A), the Appellate Tribunal after hearing the parties, allowed the appeal observing that in view of provisions of Sub-clause (2) of Section 44BB of the IT Act, the tax can be levied at only 10 per cent of the gross receipts. The gross receipts included amount of tax and surtax, paid by the Oil India Ltd. on behalf of the assessee. That view has been affirmed even by the Taxation Tribunal.

3. None appeared for the assessee. We have heard learned counsel for the Department Mr. Bhandawat, who has supported case of the Department and the view taken by the AO and also furnished details and total receipts as also amount of tax paid in all the four years:

Details of total receipts and amount paid

Asst. yr. Amount received Tax paid Surtax paid

1985-86 84,39,204 6,20,2813,50,475

1986-87 6,70,00,611 45,72,791 29,97,488

1987-88 4,81,86,306 31,32,110 19,87,192

1988-89 1,48,35,765 10,12,543

4. The provisions of Section 44BB of the Act begins with non obstante clause and provides that notwithstanding anything contrary contained in Sections 28 to 41, according to Sections 43 and 43A, the tax payable by the assessee on the aggregate receipts, is the sum equal to 10 per cent of the aggregate amount.

5. Thereis no dispute on the amount received. The limited controversy raised is whether the tax should be charged on the total amount of tax paid by the Oil India Ltd. on behalf of foreign company or 10 per cent of the amount of taxes paid by the Oil India Ltd.

6. Considering the plain language used in relevant provision, which starts with non obstante clause, 10 per cent of aggregate amount received, be treated as deemed income of the assessee for that year. This tax paid by the company is also one of the amount received, which can deemed to have been received by the assessee and pa