Commissioner of Income Tax vs Mangalore Refineries and Petrochemicals Ltd.

Having heard Mr. Suresh Kumar, learned counsel appearing for the Appellant/Revenue and Mr. Mistry, learned Senior Counsel appearing for the Respondent/Assessee we are of the view that the Revenue projects both questions which are framed at paragraph 4 at page 4 as substantial questions of law, but the Appeal deserves admission only on the first question. It deserves admission because this Court is concerned with an identical controversy in relation to the same Assessee, but for the prior Assessment Year. The Appeal is, therefore, ADMITTED on the following substantial question of law:--

"4(i) Whether, on the fact and circumstances of the case and in law the Hon''ble Tribunal was justified in deleting the demand raised u/s. 201(1) and 201(1A) holding that default for the remittances made prior to 31.03.1998 is barred by limitation?"

Mr. Suresh Kumar, however, submits that even the second question is a substantial question of law. That reads as under:--

"4(ii) Whether, on the fact and circumstances of the case and in law the Hon''ble Tribunal was justified in holding that the provisions of Section 44B are not applicable?"

In relation to that we must note that the concurrent findings of fact are based on a peculiar position. The Appeal is preferred by the Revenue to question a finding and in relation to the Assessee which is a Company registered under the Indian Companies Act, 1956. It is engaged inter-alia in the business of refining crude oil. The Assessee entered into three contracts for Catalytic Reforming Unit and Non Catalytic Reforming Project with the consortium of Toyo Engineering Corporation, Mitsui & Company Limited and Mitsubishi Corporation for offshore supply of equipment, offshore supply of designs and drawings and project management and supervision contract.

The case of the Department is that the Assessee has remitted/paid the amount for design and drawing contracts. It is in such situation and the facts peculiar to the present case, firstly, the Commissioner of Income Tax (Appeals) held that the Assessing Officer was in error in applying both Section 44B and Section 195 of the Income-tax Act, 1961. The facts as set out in paragraph 3.1 of the present Appeal stated to be statement of facts are not found to be so by both the Commissioner of Income-tax (Appeals) and the Income Tax Appellate Tribunal. In fact the question of law and projected at paragraph 4(ii) arises out of payment of demurrage. That is reimbursed to the supplier of crude oil. It is in the nature of reimbursement of expenses incurred on behalf of the Assessee. The Commissioner of Income-tax (Appeals) and the Income Tax Appellate Tribunal found that this reimbursement and of expenses incurred on behalf of the Assessee cannot be brought within sub-section (1) of Section 44B of the Income-tax Act, 1961. That is special provision for computing the profits and gains of shipping business in the case of a non-resident. That envisages the profits and gains of business of operation of ships. The sum to be covered by this provision should be of the nature referred to therein. In the present case, what has been paid is the sum for reimbursing the expenses incurred on behalf of the Assessee by a non-resident. The amount referred to in subsection (1) of Section 44B and which are deemed to be profits and gains of the business of operation of ships chargeable to tax under the head "Profits and gains of business or profession" shall be the amount firstly, paid or payable, whether in or out of India, to the Assessee or to any person on his behalf on account of the carriage of passengers, livestock, mail or goods shipped at any port in India and secondly, received or deemed to be received in India by or on behalf of the Assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India.

In the present case, the finding of fact is that both conditions envisaged by sub-section (1) of Section 44B are not fulfilled. The provision has been invoked in case of reimbursement of demurrage charges paid or reimbursed by the present Assessee for import of crude oil. It is such a finding of fact which is recorded at page 82 in paragraph 8.2 by the Commissioner of Income-tax (Appeals) and which has been confirmed by the Income Tax Appellate Tribunal in the impugned order dated 29.06.2011. The reasons assigned in paragraphs 15 and 16 of the ITAT''s order would, therefore, go to show that the view taken is in the peculiar facts and circumstances of the case at hand. The view taken, therefore, is possible one. It cannot be termed, by any stretch of imagination, as perverse or vitiated by error of law apparent on the face of the record. The second question, therefore, cannot be treated as a substantial question of law. The Appeal is dismissed to that extent. However, the Appeal is admitted on the substantial question of law framed above and it being identical to the pending Appeals that we direct that the present Appeal be heard along with the Income Tax Appeal Nos. 788/2008 and 1276/2008. The Respondent waives service.