National Petroleum Construction Company Vs DCIT Circle 2(2) International Taxation(Supreme Court)
Date-29th July, 2022
Sub-What is the scope of provisions regarding non deduction of tax at source u/s 197 of the Income-tax Act,1961-whether Permanent Establishment(PE) can be determined in pursuance to an application u/s 197 and whether different view can be taken from earlier years when there is no change in facts -Difference of opinion- Justice Indira Banerjee and Justice J K Maheshwari -matter referred to larger bench of Supreme Court.

The Supreme Court in this case was considering the SLP against decision of Delhi High Court which refused to interfere against the certificate for deduction of tax at source @ 4% which was issued to the Appellant being a resident of UAE regarding payment receivable from ONGC for onshore and offshore contracts. While Justice Indira Banerjee was of the opinion that the issue whether there was a PE or not can not be determined in pursuance of the application u/s 197, Justice J K Maheshwari in view of the fact certificate of Nil deduction was issued earlier on the same facts, relying on the decision in the case of M/s Radhasoami Satsang, Saomi Bagh, Agra v. Commissioner of Income Tax, (1992) 1 SCC 659(SC) was of the view that in absence of any material change the revenue cannot take a different view since even though principle of res judicata is not applicable to tax proceedings but principle of consistency is applicable.

Thus on a difference of opinion, the reference to larger bench was made. The issue will be of paramount interest in relation to the certificate u/s 197.

Ramesh Patodia
30-07-2022