Issue before Court:
Whether certain govt. agencies (ONGC) in agreement with foreign companies would entitle for the exemption of surtax under notification no. GSR 307 (E) dated 3.1983.
Brief facts:
- ONGC (A person authorised by central govt. by notification dated 02.08.1989) had executed agreements with different foreign companies for services or facilities or for supply of ship, aircraft, machinery and plant, as may be, all of which were to be used in connection with the prospecting or extraction or production of mineral oils.
- Such agreements do not contemplate a direct association or participation of the ONGC in the prospecting or extraction or production of mineral oils but involved the taking of services and facilities or use of plant or machinery which is connected with the business of prospecting or extraction or production of mineral oils.
- The primary authority, competent to frame assessment, took the view that the agreements executed by the ONGC with the foreign companies being for services to be rendered and such agreements not being for association or participation in the prospecting or extraction or production of mineral oils, would not be entitled for exemption under notification GSR 307 (E).
- The agreements in question, according to assessing authority, were, “Service Agreements” and hence covered by sub-section 2(b) of Section 24-AA of the Surtax Act and were accordingly beyond the purview of the exemption notification.
- The said view taken by primary authority was reversed by CIT (A) which was upheld by ITAT later on. On appeal by revenue Hon’ble High Court of Uttrakhand overturned the view of CIT (A) & ITAT.
- Section 24-AA of the Surtax Act vests in the Central Government the power to make exemption, reduction in rate or other modification in respect of Surtax in favour of any class of foreign companies which are specified in sub-section (2), in regard to the whole or any part of the chargeable profits liable to tax under the Surtax Act.
Contention of the revenue:
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