NATIONAL PETROLEUM CONSTRUCTION COMPANY versus DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(2), INTERNATIONAL TAXATION, NEW DELHI & ANR

NATIONAL PETROLEUM CONSTRUCTION COMPANY versus DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(2), INTERNATIONAL TAXATION, NEW DELHI & ANR

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले



1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4964 OF 2022
(ARISING OUT OF SLP (C) NO. 9233 OF 2020)
NATIONAL PETROLEUM CONSTRUCTION COMPANY ....Appellant (s)
versus
DEPUTY COMMISSIONER OF INCOME TAX,
CIRCLE 2(2), INTERNATIONAL TAXATION,
NEW DELHI & ANR. .…Respondent (s)
J U D G M E N T
Indira Banerjee, J.
Leave granted.
2. This appeal is against the judgment and final order dated 20th
December 2019 passed by High Court of Delhi dismissing the Writ
Petition being Writ Petition (C) No.8527 of 2019 filed by the Appellant
against the refusal of the Respondent No.1 to modify the Certificate
dated 26th June 2019 issued to the Appellant for the Financial/Previous
Year 2019-20, corresponding to the Assessment Year 2020-21, under
Section 197 of the Income Tax Act 1961, hereinafter referred to as the
2
“IT Act”, for Tax Deduction at Source (TDS) at the rate of 4% in respect
of payments received by the Appellant from Oil and Natural Gas
Company Ltd. hereinafter referred to as the “ONGC” towards work done
out of India as well as within India.
3. The Appellant, National Petroleum Construction Company, is a
company incorporated under the laws of the United Arab Emirates (UAE)
and is a tax resident of that country. The provisions of the Agreement
for Avoidance of Double Taxation hereinafter referred to as the “AADT”
between India and the UAE apply in determining the taxable income of
the Appellant under the IT Act.
4. The Appellant is, inter alia, engaged in the fabrication of
Petroleum Platforms, Pipelines and other equipment, installation of
Petroleum Platforms, Submarine Pipelines, onshore and offshore oil
facilities and coating of Pipelines.
5. Pursuant to different tender notices issued by ONGC from time to
time, the Appellant submitted tenders, inter alia, for installation of
Petroleum Platforms and submarine Pipelines. The tenders submitted
by the Appellant were accepted and contracts were executed by and
between the Appellant and ONGC. The first contract was executed by
and between the Appellant and ONGC in the Financial Year 1996-97,
corresponding to the Assessment Year 1997-98.
6. On 28th August 2005, the Appellant was awarded a contract
termed as Contract No. MR/OW/MM/NHBS4WPP for Well Platform Project-
3
II hereinafter referred to as ‘LEWPP Contract’ pursuant to a global
tender floated by ONGC in July 2005. This was the third contract
between the Appellant and ONGC. Later on 23rd November 2006, the
Appellant entered into another contract termed as Contract No.
MR/OW/MM/C-Series/03/2006, hereinafter referred to as ‘C-Series
Contract’, for C-Series Project.
7. The scope of work as described in the “General Conditions of
Contract” for LEWPP Contract and C-Series Contract included “Surveys
(pre-engineering, pre-construction/pre-installation and post-installation),
Design, Engineering, Procurement, Fabrication, Anticorrosion & Weight
coating (in case of rigid pipeline), Load-out, Tie-down/Sea fastening,
Tow-out/Sail-out, Transportation, Installation, Hook-up, Installation of
submarine pipelines, Installation and hook-up of submarine cables,
Modifications on existing facilities, Testing, Pre-commissioning,
Commissioning of entire facilities as described in the bidding
document”.
8. The contracts referred to above included various activities. Whilst
the activities relating to survey, installation and commissioning were
done entirely in India, the platforms were designed, engineered and
fabricated overseas - at Abu Dhabi.
9. The Appellant has been filing its Income Tax Returns from the
Assessment Year 1997-98. The Appellant’s income has been computed
on a presumptive basis by taxing the gross receipts pertaining to the
4
activities in India, less verifiable expenses at the rate of 10% and the
receipts pertaining to activities out of India at the rate of 1%.
10. The Appellant adopted the said basis for computing its assessable
income and filed its returns for the Assessment Year 1999-2000
onwards. Accordingly the returns filed by the Appellant for the
Assessment Years 2004-05, 2005-06 and 2006-07 were processed under
Section 143(1) of the IT Act. However, the returns filed by the Appellant
for Assessment Years 2007-08 and 2008-09, were not accepted by the
Assessing Officer, hereinafter referred to as the ‘AO’.
11. The AO passed a Draft Assessment Order dated 31st December
2009 for the Assessment Year 2007-08 holding that the Appellant had a
Fixed Place Permanent Establishment in India in the form of a Project
Office at Mumbai. The AO further held that Arcadia Shipping Ltd. (ASL),
agent of the Appellant had a Permanent Establishment in India, which
constituted a Dependent Agent Permanent Establishment, hereinafter
referred to as “DAPE”, of the Appellant.
12. With regard to the Appellant’s contention that the fabricated
material was sold to ONGC outside India, the AO found that the contract
was a turnkey and a composite contract and was not divisible as
claimed by the Appellant. Accordingly, the AO held that the entire
contractual receipts including the payments for activities performed
outside India were taxable in India. The consideration received by the
Appellant for design and engineering was held to be Fees for Technical
5
Services, hereinafter referred to as the 'FTS'. Since, the Appellant had
not maintained separate books pertaining to the contract, the AO
estimated the Appellant’s profit at 25% of the consideration received
from ONGC.
13. The Appellant did not accept the Draft Assessment Order and filed
its objections before the Dispute Resolution Panel hereinafter referred to
as the “DRP”. The DRP held that Article 5 of the AADT provided an
inclusive definition of ‘Permanent Establishment’ (PE) and that the
Appellant’s Project Office constituted a PE of the Appellant in India. The
DRP concurred with the AO that ASL was a DAPE of the Assessee.
14. The DRP observed that pre-engineering or pre- design survey,
claimed to be done by a sub-contractor employed by the Appellant,
was an integral part of the contract and the time spent by the subcontractor would also constitute the time spent by the Appellant in India
in computing residence in India for over nine months during the
Assessment Year, in terms of the AADT.
15. The DRP rejected the contention that the contract was a divisible
contract and the income of the Appellant for the activities done outside
India was not taxable under the IT Act.
16. The Appellant filed an appeal against the order of the assessment
passed by the AO before the Income Tax Appellate Tribunal hereinafter
referred to as the “ITAT”. The ITAT concurred with the AO and rejected
the Appellant’s contention that it did not have a PE in India. The ITAT
6
also concurred with the AO that the establishment of ASL in India was a
DAPE of the Appellant.
17. The ITAT, however, accepted the Appellant’s contention that the
contract could be segregated into offshore and onshore activities and
the Appellant’s income for the activities carried on out of India could not
be attributed to its PE in India.
18. The ITAT rejected the Appellant’s contention that the tax payable
should be computed as per the formula adopted in the preceding years,
i.e. 10% of the receipts attributable to activities in India, less expenses
in India and 1% of the receipts attributable to activities carried on
overseas.
19. By a judgment and order dated 29th January 2016, in the Appeal
being ITA No. 143 of 2013, filed by the Appellant and other related
Appeals filed by the Revenue, the Division Bench of the High Court of
Delhi concurred with the view of the ITAT that consideration for activities
carried on overseas could not be attributed to the Appellant’s PE in
India. The Court observed that it was not disputed that invoices raised
by the Appellant specifically indicated whether the work was done
outside India or in India. Thus, even though the contracts might be
turnkey contracts, the value of the work done outside India was
segregable.
20. Two contracts were concluded by and between the Appellant and
ONGC, one dated 30th September 2016, hereinafter referred to as
7
LEWPP Contract, and the other dated 7th February 2018, hereinafter
referred to as the R-series Contract, which have led to this Appeal. The
Appellant received payments for work done under the said two
contracts in the Previous/Financial Year 2019-20 corresponding to the
Assessment Year 2020-21.
21. By a judgment and order dated 9th May 2017 in Writ Petition being
Writ Petition (C) No. 2117 of 2017, the High Court of Delhi set aside a
Certificate dated 31st January 2017 issued by the Respondent No.1
under Section 197 of the IT Act, requiring deduction of TDS at the rate
of 4% on all payments made by ONGC to the Appellant for activities out
of India and in India in respect of the contract dated 30th September
2016. The R-series Contract was executed after the judgment of the
High Court dated 9th May 2017, referred to above. The High Court had
no occasion to consider the R-series contract.
22. On or about 8th May 2019, the Appellant applied for a certificate
under Section 197 of the IT Act for deduction of Nil tax on payments
received from ONGC for activities carried on outside India, in the
Financial Year 2019-20 in relation to the aforesaid contracts.
23. The Respondent, Income Tax Authorities raised queries on its
portal, to which the Appellant responded by a letter dated 21st May
2019 addressed to the Respondent No.1. On further query from the
Income Tax Department, the Appellant filed a reply on 13th June 2019
pointing out that no income from activities outside India could be
8
brought to tax in India. The Appellant also submitted a table showing
the similarities between the contracts forming the subject-matter of the
decision of the High Court and the contracts in the year under
consideration, that is, the Financial Year 2019-20.
24. By the said letter dated 13th June 2019, the Appellant pointed out
that for over two and half months since the start of the Financial Year
2019-20, no certificates had been issued to the Appellant under Section
197 of the IT Act as a result of which the Appellant was suffering undue
hardship as its cash flow was being hampered. The Appellant, therefore,
requested the Respondent No.1 to issue certificate at the earliest. On
17th June 2019, the Appellant submitted activity-wise key dates for each
platform under the R-Series and LEWPP Contracts to the Respondent
No.1.
25. By letter dated 22nd June 2019, addressed to the Respondent No.1,
the Appellant answered further queries. However, in view of the
financial crunch faced by the Appellant, the Appellant requested :
“The Applicant humbly submits that since it is facing
financial hardship as the first quarter of FY 2019-20 has
come to an end and it is yet to have the lower withholding
tax certificate, the Applicant (without prejudice to its legal
position), is willing to offer a concession to have the
certificate at the tax rate of 4% plus applicable surcharge
and cess for the entire contractual revenues, which is in line
with the recently concluded assessment proceedings for AY
2016-17 in Applicant’s own case, where your goodself
concluded that the entire contractual revenues were
chargeable to tax under Section 44BB of the Act at an
effective tax rate of 4% plus applicable surcharge and cess.
9
In light of the above, it is our humble request to your
goodself to kindly issue the certificate at your earliest
convenience.”
26. The Appellant contends that a certificate of Nil TDS, for payments
received in respect of activities outside India, should have been issued
to the Appellant, in deference to decisions rendered by various
Appellate Authorities from the Assessment Years 2007-08 to 2015-16,
opining that income in respect of activities out of India was not taxable
in India and as also the judgments of the Delhi High Court referred to
above.
27. In the Assessment Year 2018-19, the Respondent had followed the
same approach as in the Assessment Year 2017-18 and issued a
certificate dated 10th April 2018 under Section 197 of the Act for Nil TDS
in respect of payments for activities outside India. This direction was in
respect of both LEWPP Contract as well as R-Series Contract.
28. However, in departure from the position taken in the previous
years, the Respondent No.1 issued a certificate dated 26th June 2019
under Section 197(1) of the IT Act for the Financial Year 2019-2020
corresponding to the Assessment Year 2020-2021 directing ONGC to
deduct TDS at the rate of 4% on receipts in respect of activities both
outside and inside India.
29. The Appellant filed a Writ Petition under Article 226 of the
Constitution of India being Writ Petition (C) No.8527 of 2019, inter alia,
10
challenging the said certificate dated 26th June 2019. The Writ Petition
has been dismissed by the judgment and order impugned in this Court.
30. Mr. Ganesh appearing on behalf of the Appellant forcefully argued
that the Respondent No.1 had erred in law in not granting Nil rate TDS
to the Appellant for the financial year 2019-20 under Section 197 of the
IT Act.
31. Mr. Ganesh argued that Appellant was assessed for Assessment
Years 2007-08, 2008-09 and 2009-10 in respect of contracts similar to
the above noted contracts and was held not to be taxable in India. Even
though the Assessing Authority had, from the Assessment Year 2007-08
taken the view that revenue in respect of activities outside India were
taxable in India, the ITAT being the Appellate Authority, held to the
contrary. The Appellate Authority had all along taken the stand that the
Appellant has no Permanent Establishment in India and no such income
from activities outside India would be chargeable to tax in India.
32. Mr. Ganesh relied upon the judgment rendered by the High Court
in the Appellant’s own case in respect of the Assessment Years 2007-08
and 2008-09 which is reported in (2016) 383 ITR 648. The Delhi High
Court analyzed the contract of the Appellant with Respondent ONGC
and held that the project office of the Appellant did not constitute a
Fixed Base Permanent Establishment under the provisions of the Double
Taxation Avoidance Agreement. The question of splitting profits arising
from the contract into two categories, that is, profits attributable to
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India and profits attributable to overseas activities did not arise. The
judgment was followed in respect of appeal of the Respondent for the
Assessment Year 2009-10. Mr. Ganesh argued that R-Series and LEWPP
Contracts relevant to the Assessment Year in question that is
Assessment Year 2020-21 corresponding to the Previous Year 2019-20,
are identical to the contracts considered by the Appellate Authority in
Appellant’s own case in relation to the Assessment Years 2007-08,
2008-09 and 2009-10.
33. The Delhi High Court issued notice to the Revenue Authorities, in
response to which a counter affidavit was filed enumerating the grounds
and reasons justifying the issuance of the impugned certificate.
34. After hearing the parties at length, the High Court held that an
administrative decision was subject to judicial review under Article 226
of the Constitution of India only on grounds of perversity, patent
illegality, irrationality, want of power to take the decision and procedural
irregularity. Judicial review is directed not against the decision but the
decision making process. The High Court did not find any such
arbitrariness in the approach of the concerned Respondents in the
exercise of their jurisdiction, that called for interference under Article
226 of the Constitution of India. The High Court found that the reasons
in the note-sheet could not be said to be so fallacious, unfair or
unreasonable that they required intervention of the High Court.
35. The High Court further observed and held:
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“18. Sub Section (1) of Section 195 of the Act provides that any
person responsible for paying to a non-resident, any sum
chargeable to tax under the provisions of the Act, shall, at the
time of credit of such income to the account of the payee, or at
the time of the payment thereof in cash or by the issue of a
cheque or draft or any other mode, whichever is earlier, deduct
income-tax thereon at the rates enforced.
***
24. … As of now, we are not concerned with a regular
assessment proceeding but, with determination of rate of tax
deduction. On perusal of reasons, it becomes manifest that
during the course of enquiry under Section 197 of the Act, the
petitioner was asked to furnish the details regarding the scope
and nature of the aforenoted contracts. Revenue contends that
for the R-series contracts, the petitioner has made contradictory
statement regarding commissioning period and period of as-built
documentation etc. Petitioner, in its submission dated
22.06.2019, contends that commissioning work is not undertaken
by them for the R-series contracts, and the same is to be
performed by ONGC. Without going into the question as to
whether the petitioner's stand is contradictory, we may note that
the Assessing Officer while exercising its power under Section
197, during the course of the enquiry, cannot undertake an
exhaustive exercise to determine this issue conclusively. We find
force in the submissions of Mr. Raghvendra Kumar Singh that the
question as to whether the petitioner has constituted a PE,
cannot possibly be undertaken in the enquiry having regard to
the time frame permissible under law for deciding the application
under Section 197 of the Act. The reasons shown to us also take
note of the fact that in the immediate preceding years i.e., AY2016-17 and AY- 2017-18, for which regular assessment has been
completed, petitioner has been held to have a Permanent
Establishment (PE) in India, and its total income from the
contracts with ONGC have been held to be taxable under the IT
Act. Section 44BB of the Act is applied, and 10% of the
contractual receipts were considered as business profits. The rate
of tax being 40%, a certificate was, accordingly, issued @ 4%. For
the other assessment years as well, assessment has been
completed and appeal is pending before the appellate
authorities. The Petitioner, obviously, disputes the finding of the
Respondent as erroneous and misplaced, on the ground that for
AY- 2015-16, the first appellate authority-following the decision of
this Court in petitioner's own case, has held that the petitioner
has no PE in India. Be that as it may, for AY-2016-17 and 2017-18,
this question has been determined against the petitioner. It is
well-settled proposition that in tax jurisprudence, the principle of
res judicata is not applicable to income tax proceedings... [Ref:
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New Jehangir Vakil Mills Co. Ltd. v. CIT: [1963] 49 ITR 137 (SC)
(Full bench)]. "It is well settled that in matters of taxation there is
no question of res judicata because each year's assessment is
final only for that year and does not govern later years, because
it determines only the tax for a particular period." [Ref:
Instalment Supply (P) Ltd. v. Union of India : AIR 1962 SC 53
(Constitution bench)].
***
27. In the present case, there cannot be any dispute that
existence of PE is required to be determined by law for each year
separately on the basis of the scope, extent, nature and duration
of activities in each year. In this regard, the contracts in question
i.e. R-series contracts dated 07.02.2018 and LEWPP series
contracts dated 30.09.2016 would have to be taken into
consideration. Concededly, this Court in its decision dated
09.05.2017 did not have the occasion to consider the R-series
contract dated 07.02.2018. The Court only considered the
contract dated 30.09.2016 as noted in para -1 of the said
decision. There is thus, a distinguishing feature - the R-series
contract has not been considered by this Court in its order dated
09.05.2017. Moreover, in the instant case, the reasons record
that the two contracts are indivisible, and the petitioner cannot
divide the contractual receipts in two categories viz. inside India
and Outside India services. The installation PE will come into
existence, if "project or activity continues for a period of more
than 9 months" under Indo-UAE DTAA. This question of fact will
have to be determined separately for each assessment year, and
we are informed that for AY-2016-17 and AY-2017-18, the
determination is presently against the petitioner. We cannot
accept the petitioner's contention that the assessment
proceedings for the AYs 2007-08, 2008-09 and 2009-10 have
already determined this question in favour of the petitioner and
there is no change in any circumstances. This question would
require to be determined and finding of the fact would have to be
arrived at, by a careful consideration of terms of contract,
determination whereof cannot be undertaken in the proceedings
under Section 197 of the Act.
***
29. Further, the petitioner's contention that under each of the
contracts, the installation activities were completed in less than
9 months, and that the scope of R-series contracts, did not
include commissioning activities, are all factual aspects which
cannot be examined while exercising judicial review over the
decision of the respondent under Section 197 of the Act.
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30. The petitioner has relied upon the judgments in IshikawajimaHarima Heavy Industries: [2007] 288 ITR 408 (SC) and Hyundai
Heavy Industries: [2007] 291 ITR 482 (SC), which do not appear
to be applicable to the facts of the present case. In Ishikawajima
(supra), the Supreme Court held that for a non-resident entity to
be taxed in India, it should carry on business through a
permanent establishment in India, and income taxed is on the
basis of extent appropriate to the part played by permanent
establishment in those transactions, and that only such part of
the income, as is attributable to the operations carried out in
India can be taxed in India. In the said case, a clear distinction
could be identified between onshore and offshore activities. In
the present case, the respondents contend that no such
distinction is clearly identifiable from the contracts in question.
Further, the said cases (Ishikawajima (supra) and Hyundai heavy
Industries (supra)) relate to assessment proceedings, whereas, in
the present case, we are concerned with proceedings for grant of
certificate under section 197. The scope of enquiry and
investigation in both these proceedings is different, especially
after the introduction of Explanation 2 to section 195 and at the
stage of section 197 proceedings, the question of existence of
permanent establishment is not required to be gone into.
Therefore, having regard to the aforesaid provision, we cannot
direct the Revenue to hold that the petitioner does not have a PE
and give the consequent effect of such finding while deciding an
application under Section 197 of the Act. Determination of all
these questions would have to be undertaken during the course
of regular assessment.
***
32. ...However, we cannot ignore the fact that Petitioner took
categorical stand and prevailed upon the revenue to accept the
declaration made in the said communication. Although the
declaration was qualified, yet, since the petitioner requested the
respondent to deduct the tax @ 4% + applicable surcharge &
cess for the entire contractual revenues, revenue was justified in
accepting the same and the petitioner cannot be permitted to
resile there from, once the department has accepted petitioner's
proposal.”
36. It is well settled that the obligation to deduct TDS is limited to
appropriate proportion of income chargeable to tax under the IT Act that
forms part of the gross sum of money payable to the non-resident. A
person paying any sum to a non-resident is not liable to deduct any tax
at source if such sum is not chargeable to tax under the IT Act, as held
15
by this Court in G E India Technology Centre Pvt. Ltd. v.
Commissioner of Income Tax and Another
1
.
37. The High Court rightly held that the question of whether the
Appellant had PE, could not possibly be undertaken in an enquiry for
issuance of Certificate under Section 197 of the IT Act, having regard to
the time-frame permissible in law for deciding an application, more so,
when regular assessment had been completed in respect of the
immediate preceding year and the Appellant found to be taxable under
the IT Act at 10% of the contractual receipts. The Assessing Authority
found that the Appellant had PE in India in the concerned Assessment
Years. The appeal of the Appellant is possibly pending disposal.
38. As held by the High Court, it is well settled that the principle that
res judicata is not applicable to income tax proceedings because
assessment for each year is final only for that year and does not cover
later years.
39. Whether the Appellant had PE or not, during the Assessment Year
in question, is a disputed factual issue, which has to be determined on
the basis of the scope, extent, nature and duration of activities in India.
Whether project activity in India continued for a period of more than
nine months, for taxability in India in terms of the AADT, is a question of
fact, that has to be determined separately for each Assessment Year.
1 (2010) 327 ITR 456 (SC)
16
40. It may be true, that for a non-resident entity to be taxed in India,
it should carry on business through a Permanent Establishment in India,
as held by this Court in Ishikawajima-Harima Heavy Industries Ltd.
v. Director of Income Tax, Mumbai
2
 and Commissioner of Income
Tax and Anr. v. Hyundai Heavy Industries Co. Ltd.
3
. However, the
judgments would only be attracted if there were a definite finding that
the Appellant did not have any PE in India during the Assessment Year in
question, which as stated above, would also depend on the duration and
scope of the activities in India. The nature, extent and the duration of
work done in India, could vary from year to year.
41. It is reiterated that in the immediately preceding Assessment
Year, the Assessing Authority proceeded to assess the Appellant on the
basis that it did have a Permanent Establishment (PE) in India.
Moreover, as rightly held by the High Court, Ishikawajima-Harima
Heavy Industries (supra) and Hyundai Heavy Industries (supra)
related to assessment proceedings whereas this case pertains to
issuance of certificate under Section 197 of the IT Act. The scope of
enquiry and investigation in proceedings for grant of Certificate under
Section 197 of the IT Act is different from the scope of assessment
proceedings. The High Court rightly declined to direct the Revenue to
hold that the Appellant did not have PE in India.
2 (2007) 288 ITR 408 (SC)
3 (2007) 291 ITR 482 (SC)
17
42. By its letter dated 22nd June 2019, referred to above, the Appellant
made a request to the Revenue for issuance of Certificate under Section
197(1) of the IT Act permitting deduction of TDS at the rate of 4% plus
applicable surcharge and cess, for all contractual receipts, in line with
assessment proceedings for the Assessment Year 2016-2017 without
prejudice to its legal position, since the Appellant had been facing
financial hardship and urgently required funds. On 26th June 2019, the
Respondent No.1 issued the impugned Certificate directing ONGC to
deduct TDS at the rate of 4% for all sums receivable in respect of
activities both outside and inside India.
43. The impugned Certificate being as per the request of the
Appellant, it is not open to the Appellant to make a volte-face and
challenge the impugned Certificate.
44. It may be true that the letter of request dated 22nd June 2019, of
the Appellant, referred to above, for issuance of a Certificate under
Section 197 of the IT Act, for TDS at the rate of 4% on all receipts was
without prejudice to the rights in law and contentions of the Appellant.
Such a request without prejudice to the rights and contentions of the
Appellant would not operate as estoppel against the Appellant in any
Assessment Proceedings, Appellate proceedings or any other
proceedings. However, the impugned Certificate having been issued as
per the Appellant’s own request, the Appellant is estopped from
questioning the impugned Certificate by initiation of proceedings under
18
Article 226 of the Constitution of India. The Appellant itself made a
request for Certificate for TDS at the rate of 4% on all receipts.
45. There is no such infirmity in the reasoning of the High Court which
calls for interference of this Court under Article 136 of the Constitution
of India. As rightly held by the High Court, since the Appellant requested
issuance of Certificate for deduction of TDS at 4% of taxable value it is
not for the Appellant to challenge the certificate. Moreover, it appears
that in the final assessment for one or two preceding Assessment Years
it was found that the Appellant did have PE in India. Appeals are
pending. In any event, Tax deducted at source is adjustable against the
tax, if any, ultimately assessed as payable by the Assessee and any
excess tax deducted is refundable with interest. Interference is not
warranted at this stage.
46. Moreover, in course of hearing, Counsel for the Revenue handed
us a Draft Assessment Order, issued in respect of the Assessment Year
in question, that is 2020-21, holding that the Appellant had PE in India
and was liable to tax in India under the IT Act.
47. Needless to mention that any observation made by this Court or
by the High Court will not influence the final assessment which has to
be made in accordance with law taking into account all relevant facts
and circumstances or any appeal therefrom. In the event, it is found
that the Appellant is not liable to tax, the Appellant will be entitled to
refund of TDS with interest.
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48. The Appeal is dismissed.
…….................................J
 [ INDIRA BANERJEE ]
NEW DELHI;
JULY 29, 2022
20
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4964  OF 2022
(ARISING OUT OF SLP(C) No. 9233 OF 2020
NATIONAL PETROLEUM CONSTRUCTION COMPANY ...APPELLANT
Versus
DEPUTY COMMISSIONER OF INCOME TAX,
CIRCLE 2(2)(2), INTERNATIONAL TAXATION,
NEW DELHI & ANR. ...RESPONDENTS
J U D G M E N T
J.K. Maheshwari, J.
Leave granted.
2.  After going through the judgment and the opinion formed
by esteemed Justice Ms. Indira Banerjee, I respectfully disagree
to the conclusions as drawn for the reasons to follow.
3.  On perusal of detailed facts as stated in the order, it is
clear that appellant­company is incorporated under the laws of
United Arab Emirates (in short ‘UAE’) and is engaged in the
business   of   Surveys   (pre­engineering,   pre­construction/preinstallation   and   post­installation),   Design,   Engineering,
21
Procurement, Fabrication, Anticorrosion & Weight coating (in
case of rigid pipeline, Load­out, Tie­down/Sea fastening Towout/Sail­out, Transportation, Installation, Hook­up, Installation
of submarine pipeline, installation and hook­up of submarine
cables,   Modifications   on   existing   facilities,   Testing,   Precommissioning, Commissioning of entire facilities as described
in the biding document. Since the year 2007­2008, the ONGC
was granting contract to the appellant to carry out the work.
For the assessment years 2007­2008 and 2008­2009, the CSeries and LEWPP contracts were granted to the appellant on
year to year basis. After completion of those contracts as per
the record of the case, the payment of zero percent tax on the
income   outside   India   in   terms   of   the   assessments   were   in
question.   The   High   Court   of   Delhi   passed   the   order   on
29.01.2016 for the said assessment years i.e. 2007­2008 and
2008­2009   to   the   said   contracts   wherein   it   was   held   that
assessee   did   not   have   the   PE   in   India   and   earned   profit
attributable to that PE and in fact the income was from the
activities carried out outside of India. However, the orders of
assessment   for   the   years   2007­2008   and   2008­2009
22
respectively as well as the corresponding orders passed by the
ITAT in the corresponding appeals were set aside. It has been
brought   to   knowledge   that   Civil   Appeal   No.8761/2016   filed
against the said order is pending before this Court. 
4. On perusal of the provisions of the Income Tax Act (for
short “IT Act”), it reveals the proceedings of the assessment falls
under  Chapter   XIV   of   the  IT   Act,   which   includes   return   of
income, permanent account number, scheme for submission of
returns through tax return and its preparation, assessment,
rectification of mistake etc. While the present case relates to
certificates   for   deduction   at   lower   rate   or   no   deduction   of
income at source, which falls in Chapter XVII of the IT Act.
Therefore, what is the recourse and considerations available to
the assessing officer at the time of issuance of the certificate
under Section 197(1) of the IT Act or he has to rely upon the
assessment orders of the previous years. 
5. While examining the said issue in the facts and context of
the present case, some provisions are required to be referred.
As per Section 6(3) of the IT Act for the resident in India, the
income inside the country is taxable. Under sub­section (3), it
23
is specified that if any Indian company is said to be a resident
in   India   in   any   previous   year   or   its   place   for   effective
management in that year was in India the income of such is
taxable. By the explanation, the place of effective management
has been clarified whereby it is clear that if any commercial
decision necessary for the conduct of a business of an entity as
a whole or in substance is made, it would be called as a place
of effective management. 
6. As per Section 5(2) of the IT Act, it is clear that subject to
the other provisions of the Act, the total income of any previous
year of a person who is a non­resident includes all income from
whatever sources derived either is received or is deemed to be
received in India in such year by or on behalf of such person; or
accrues or arises or is deemed to accrue or arise to him in India
during such year. Explanation (1) of it clarifies that income
accruing or arising outside India shall not be deemed to be
received in India within the meaning of this section on account
of the fact that it has been taken into account in the balance
sheet prepared in India. Explanation (2) removes the doubts
whereby   the   income   which   has   been   included   in   the   total
24
income of a person on the basis that it has accrued or arisen or
is deemed to have accrued or arisen to him shall not again be
so included on the basis that it is received or deemed to be
received by him in India. The aforesaid provision has been
brought with an intent to check the double taxation. Thus,
from above for clarity, it is reiterated that any income outside
India to a non­resident would not be taxable in India even if it
is specified in the balance sheet prepared in India.
7. By a judgment of this Court in the case of  G.E.   India
Technology Centre Pvt. Ltd. (supra) in the context of Section
195(1),   interpretation   of   the   word   “chargeable”   under   the
provisions of IT Act has been made by which it is clarified that
a person paying interest or any other sum to a non­resident is
not liable to deduct tax if such sum is not chargeable to tax
under the I.T. Act. Further, the Court clarified where there is
no obligation on the part of the payer and no right to receive
the sum by the recipient and that the payment does not arise
out of any contract or obligation between the payer and the
recipient but is made voluntarily, such payments cannot be
regarded as income under the I.T. Act.
25
8. It is not in dispute in the present case that incorporation
of the appellant’s company is under the laws of UAE. In the
context,  the   treaty/agreement   entered   by  India   with   foreign
countries   including   UAE,   are   recognized   under   Chapter   IX
starting from Section 90 onwards and for avoidance of double
tax, the procedure has been prescribed in Chapter X. In the
above said agreement/treaty between India and UAE known as
Agreement of Avoidance of Double Taxation (in short “AADT”)
was   executed.   Clause   (1)   and   (6)   of   Article   7   of   the   said
agreement   are   relevant   to   the   present   case,   which   are
reproduced for ready reference as under:
“(1). The profits of an enterprise of a Contracting
State shall be taxable only in that State unless
the enterprise carries on business in the other
Contracting State through a permanent
establishment situated therein. If the enterprise
carries on business as aforesaid, the profits of the
enterprise may be taxed in the other State but
only so much of them as is attributable to that
permanent establishment.”
“(6). For the purposes of preceding paragraphs,
the profits to be attributed to the permanent
establishment shall be determined by the same
method year by year unless there is good and
sufficient reason to the contrary.”
26
Perusal of the aforesaid makes it clear that enterprises of a
contracting state shall be taxable in the said state unless the
business is carried out in other contracting state through a
permanent establishment situated there. It is further clarified
that the profit of the enterprises may be taxed in other state to
the   extent   of   the   profit   attributable   to   that   PE.   The
determination thereof shall be on year to year basis and the
deviation, if any, may be based on good and sufficient reasons
to the contrary. Thus, it is clear that the income earned in
India   may   be   taxable   even   by   an   entity   which   is   not
incorporated   in   India   but   the   profit   earned   for   a   contract
carried out outside India by such entity shall not be taxable.
The issue regarding establishment of PE at a place where the
work is required to be executed, and profit earned attributable
to that PE is a matter of enquiry based on the material brought
on record during assessment for the said assessment year. 
9. But for the purpose of tax deduction at source at lower
rate or no deduction during contractual period, the assessing
officer has been empowered under Section 197(1) to issue a
certificate   to   that   effect   in   the   manner   so   prescribed   as
27
specified in Chapter XVII of Income Tax Act which relates to
collection and recovery of tax. On perusal of the scope of the
said Chapter, it is clear that the assessment in respect of the
income is required to be made later in relevant assessment year
but the tax on such income may be payable by deduction at
source by way of advance payment or as specified in SubSection 1A of Section 92 of IT Act as the case may be. As the
present case relates to quashment of the TDS certificate dated
26.06.2019   and   seeking   relief   to   issue   the   fresh   certificate
under Section 197, therefore, for ready reference, it is hereby
reproduced as thus:
197. Certificate for deduction at lower rate.
(1) Subject to rules made under sub-section (2A),
where, in the case of any income of any person
or sum payable to any person, income-tax is
required to be deducted at the time of credit or,
as the case may be, at the time of payment at
the rates in force under the provisions of sections
192, 193, 194, 194A, 194C, 194D, 194G, 194H,
194-I, 194J, 194K, 194LA, 194LBB, 194LBC, 194M,
49[194-O] and 195, the Assessing Officer is
satisfied that the total income of the recipient
justifies the deduction of income-tax at any lower
rates or no deduction of income-tax, as the case
may be, the Assessing Officer shall, on an
application made by the assessee in this behalf,
give to him such certificate as may be
appropriate.
28
(2) Where any such certificate is given, the
person responsible for paying the income shall,
until such certificate is cancelled by the
Assessing Officer, deduct income-tax at the rates
specified in such certificate or deduct no tax, as
the case may be.
(2A) The Board may, having regard to the
convenience of assessees and the interests of
revenue, by notification in the Official Gazette,
make rules specifying the cases in which, and the
circumstances under which, an application may
be made for the grant of a certificate under subsection (1) and the conditions subject to which
such certificate may be granted and providing for
all other matters connected therewith.
Bare reading of it makes clear that in the case of any income of
the person, income tax is required to be deducted at the time of
credit or as the case may be at the time of payment at the rates
in force as per various sections specified, including Section 195
subject to the rules made under Sub­Section 2A. The rules have
been framed to carry out the purpose of the act which are
known as Income Tax Rules, 1962. The present case relates to
Section 195 of the IT Act which pertains to the payment of tax
deducted at source by non­residents. As per the provision of
Section 197, if the assessing officer is satisfied that the total
29
income of the recipient justifies any lower rate or no deduction
of income tax as the case may be, he shall issue a certificate to
the assessee on an application submitted by him. The said
certificate shall be valid until it is cancelled by the assessing
officer.   Section   2A   was   introduced   conferring   powers   to   the
Board having regard to the convenience of the assessee and the
interest of revenue, and the rule is made to submit application
and the conditions for issuance of certificate, notifying it in
Official   Gazette.   Pursuant   thereto,   a   notification   dated
29.03.2011 was published in the Official Gazette specifying the
cases and the circumstances under which the application may
be   made   for   grant   of   certificate   and,   the   conditions   for
satisfaction of assessing officer who may grant certificate.
10. By   way   of   the   said   notification   dated   29.03.2011,
amendment in the Income Tax Rules, 1962 was made and these
Rules are known as Income Tax (Second Amendment) Rules,
2011 by which Rule 28 AA has been added. The said rule was
further  amended  by notification dated  25.10.2018. The  said
amended rules are relevant for this case, however, reproduced
as thus:
30
“Certificate for deduction at lower rates or
no deduction of tax from income other than
dividends.
28AA . (1) Where the Assessing Officer, on an
application made by a person under sub-rule (1)
of rule 28 is satisfied that existing and estimated
tax liability of a person justifies the deduction of
tax at lower rate or no deduction of tax, as the
case may be, the Assessing Officer shall issue a
certificate in accordance with the provisions of
sub-section (1) of section 197 for deduction of tax
at such lower rate or no deduction of tax.
(2) The existing and estimated liability referred to
in sub-rule (1) shall be determined by the
Assessing Officer after taking into consideration
the following:—
(i) tax payable on estimated income of the
previous year relevant to the assessment
year;
(ii) tax payable on the assessed or returned 2[or
estimated income, as the case may be, of
last four] previous years;
(iii) existing liability under the Income-tax Act,
1961 and Wealth-tax Act, 1957;
(iv) advance tax payment 3[tax deducted at
source and tax collected at source for the
assessment year relevant to the previous
year till the date of making application under
sub-rule (1) of rule 28];
(v) omitted on 25.10.2018
(vi) omitted on 25.10.2018
(3) The certificate shall be valid for such period of
the previous year as may be specified in the
certificate, unless it is cancelled by the Assessing
Officer at any time before the expiry of the
specified period.
 ['(4) The certificate for deduction of tax at any
lower rates or no deduction of tax, as the case
may be, shall be issued direct to the person
31
responsible for deducting the tax under advice to
the person who made an application for issue of
such certificate:
Provided that where the number of persons
responsible for deducting the tax is likely to
exceed one hundred and the details of such
persons are not available at the time of making
application with the person making such
application, the certificate for deduction of tax at
lower rate may be issued to the person who made
an application for issue of such certificate,
authorising him to receive income or sum after
deduction of tax at lower rate.
 (5) The certificates referred to in sub-rule (4)
shall be valid only with regard to the person
responsible for deducting the tax and named
therein and certificate referred to in proviso to the
sub-rule (4) shall be valid with regard to the
person who made an application for issue of such
certificate.
(6) The Principal Director General of Income-tax
(Systems) or the Director General of Income-tax
(Systems), as the case may be, shall lay down
procedures, formats and standards for issuance of
certificates under sub-rule (4) and proviso thereto
and the Principal Director General of Income-tax
(Systems) or the Director General of Income-tax
(Systems) shall also be responsible for evolving
and implementing appropriate security, archival
and retrieval policies in relation to the issuance of
said certificate.”
11.  From the above, it is clear for issuance of a certificate
under Section 197 of the IT Act, an application shall be made to
assessing officer under sub­rule (1) of Rule 28. The assessing
officer after recording satisfaction that existing and estimated
32
tax liability justifies the deduction of tax at lower rate or no
deduction of tax as the case may be shall issue certificate.
While exercising the power to issue a certificate, the assessing
officer is required to follow the procedure as per sub­rule (2).
The assessing officer shall consider the existing and estimated
liability that what may be tax payable on estimated income of
the previous year; tax payable on the assessed or returned
income   of   the   last   four   years   from   previous   year;   existing
liability   under   the   IT   Act;   advance   tax   payment   i.e.   tax
deducted   and   collected   at   source   for   the   assessment   year
relevant to the previous year till the date of making application
under   sub­rule   (1)   of   Rule   28.   Thus,   for   the   purpose   of
issuance of certificate under Chapter XVII of Section 197 of the
IT Act, the procedure for determination has been prescribed to
the assessing officer on which satisfaction may be recorded by
him. 
12. It is further required to say that for assessment under
Section 143, the assessment of total income or loss may be
computed   by   the   assessing   officer   in   a   return   filed   by   the
assessee for the said assessment year after making adjustment
33
and disallowing exemptions wrongly claimed. Thereafter, the
recovery can be made by an order of the competent officer as
per Second Schedule of the IT Act read with Sections 222 and
276 alongwith Sections 220 & 221 with interest and penalty.
Thus, in my considered view the issuance of the certificate
under Section 197(1) is based on the existing and estimated tax
liability   after   recording   satisfaction   by   assessing   officer
following   the   procedure   so   prescribed,   in   rules,   but   the
procedure for assessment as specified in Chapter XIV of the IT
Act is different. 
13. The High Court in the impugned order relied upon the
proceedings   of   the   Revenue   Department,   which   has   been
referred in para 10 of the judgment. As per the proceedings
referred,   the   department   has   acknowledged   the   High   Court
order dated 29.01.2016 and said that for assessment years
2007­2008 to 2010­2011 there was no PE in India, but the
department   filed   the   appeal   C.A.   No.8761/2016   is   pending
before this Court. In para 10(7), the High Court further referred
the decision of Delhi High dated 09.05.2017 passed in W.P.(C)
No.2117/2017 and CM No.9268/2017. The said judgment is
34
solely on the issue of issuance of the certificate under Section
197 relates to the financial year 2016­2017. As per the ratio of
the said judgment, it is clear that the certificate issued by the
respondent no.1 regarding deductions of the TDS at the rate of
4% on the entire payment made by the ONGC was set aside.
Following   the   said   decision,   the   department   issued   the
certificate   for   financial   year   2016­2017   at   the   rate   of   4%
excluding surcharge and cess for inside India revenue and at
the rate of 0% for outside India revenue. Further for financial
years   2017­2018   and   2018­2019   certificates   were   issued
following the said decision of Delhi High Court for both type of
contracts i.e. LEWPP and R­Series. Thereafter, it was recorded
that assessments for assessment years 2015­2016 and 2016­
2017 have been completed with a finding that activities of the
appellant were covered under Section 44BB of the IT Act. It was
further   recorded   that   the   assessment   for   assessment   year
2017­2018 was selected under CASS which is still pending.
Thereafter, noting was made that it is difficult to bifurcate the
revenue generated by onshore and offshore activities. However,
the rate of deduction proposed was at the rate of 4%. The
35
relevant excerpt of note sheets further reflect that the demand
of existing liability was Rs.35.88 crores for the year 2015­16
and 2016­17 but later it was reduced to Rs.2.67 crores out of
which Rs.2.63 crores pertained to assessment year 2017­18
which   was   still   under   scrutiny   for   assessment,   thus   there
appear   no   existing   demand.   The   said   note   sheets   of   the
Revenue do not reflect that clause (i), (ii), (iii) and (iv) of Rule
28AA(2) of Rules regarding estimated and assessed liability of
last   four   previous   years;   existing   liability   and   advance   tax
payment i.e. deducted and collected at source till the date of
submitting application have been considered for determination,
and the assessing officer had applied its mind prior to issuance
of desired certificate. 
14. On   perusal   of   the   findings   recorded   in   the   impugned
order,   it   reveals   that   Delhi   High   Court   made   unreasonable
attempt to distinguish previous order dated 09.05.2017 relying
the note sheets of the revenue and tried to distinct LEWPP and
R­Series contracts. In my considered view on admitting the
certificates @ 0% tax deductions for both LEWPP and R­Series
contracts for the preceding financial years, the High Court was
36
not justified to make distinction between two types of contracts.
In fact the Court must see the satisfaction recorded by the
assessing officer after determination of the issues specified in
Rule 28AA(2). The appellant reiterated that the terms of LEWPP
contract and R­Series contract were identical while department
without   disputing   the   said   fact   relied   upon   the   orders   of
assessment   passed   in   previous   years   without   bringing   on
record the fact of estimated liability. In my view, distinction
drawn, accepting the contention of the revenue by the High
Court ignoring admission of issuing certificate for both types of
contracts is completely misplaced. In fact, the certificate under
Section 197(1) is issued during a financial year and on closing
of   the   said   financial   year,   assessment   may   be   made   after
submission   of   the   return   of   income   and   documents   with
respect to the income from the contract of that particular year.
The department may enquire about establishment of PE and
income attributable to that PE in assessment proceeding but
while dealing the issue of issuance of certificate under Section
197(1)   relying   upon   said   issues   by   the   High   Court   is   not
justified.   During   course   of   hearing,   the   counsel   for   the
37
appellant handed over two orders dated 08.09.2021 passed by
Commissioner   of   Income   Tax   (Appeals)   for   assessment   year
2016­2017 and 2017­2018 allowing the appeals filed by the
appellant   challenging   the   assessment   order   for   respective
assessment year. While allowing the appeal, Commissioner of
Income Tax held that the appellant did not have PE during
relevant   financial   year   and   accordingly   in   absence   of   PE
contract receipts were not taxable in India.    
15. The record of the case indicates that for the financial year
2017­18 two certificates each dated 08.06.2017 (Annexures P­6
&   P­7)   were   issued   for   zero   TDS   which   is   related   to   the
assessment year 2018­19. Similarly, for financial year 2018­19
(assessment year 2019­20) two certificates dated 10.04.2018
and 08.05.2019 (Annexures P­8 & P­9 respectively) were issued
for zero TDS. Therefore, after the order of the High Court dated
09.05.2017, it may be a relevant consideration to assessing
officer to record satisfaction, which has not been considered by
the High Court. The reply of the appellant dated 22.06.2019
has   been   referred   in   the   impugned   order   stating   that   the
appellant   reserve   its   right   subject   to   legal   objections   and
38
requested for issuance of certificate at the rate of 4% plus
applicable surcharges and cess because of financial hardship.
In my opinion, the said letter cannot influence the wisdom of
the Court, where the prescribed procedure under Rule 28AA
has not been followed by the assessing officer. However, on the
basis   of   letter   dated   22.06.2019   no   lineage   contrary   to
prescribed procedure can influence the Court. 
16. As per discussion made above, in my view, since there
was   no   change   in   circumstances   and   the   situation   of   the
appellant   in   the   financial   years   2017­2018   and   2018­2019
(assessment years 2018­19 and 2019­20) respectively and at
the financial year 2019­20 in question (assessment year 2020­
21), are the same, however, the principle of consistency ought
to be followed while considering the application under Section
197 of the IT Act. This Court in the case of M/s Radhasoami
Satsang, Saomi Bagh, Agra v. Commissioner of Income Tax,
(1992)   1   SCC   659 has   categorically   upheld   the   principle   of
consistency in following words:
“16. We are aware of the fact that strictly
speaking res judicata does not apply to income
39
tax proceedings. Again, each assessment year
being a unit, what is decided in one year may not
apply in the following year but where a
fundamental aspect permeating through the
different assessment years has been found as a
fact one way or the other and parties have
allowed that position to be sustained by not
challenging the order, it would not be at all
appropriate to allow the position to be changed in
a subsequent year.
17. On these reasonings in the absence of any
material change justifying the Revenue to take a
different view of the matter — and if there was no
change it was in support of the assessee — we do
not think the question should have been
reopened and contrary to what had been decided
by the Commissioner of Income Tax in the earlier
proceedings, a different and contradictory stand
should have been taken. We are, therefore, of the
view that these appeals should be allowed and
the question should be answered in the
affirmative, namely, that the Tribunal was
justified in holding that the income derived by the
Radhasoami Satsang was entitled to exemption
under Sections 11 and 12 of the Income Tax Act
of 1961.
18. Counsel for the Revenue had told us that the
facts of this case being very special nothing
should be said in a manner which would have
general application. To are inclined to accept this
submission and would like to state in clear terms
that the decision is confined to the facts of the
case and may not be treated as an authority on
aspects which have been decided for general
application”
40
17. Further, upholding the dictum laid down in Radhasoami
(supra), in case of Bharat Sanchar Nigam Limited and Anr. v. 
Union of India and Ors., (2006) 3 SCC 1, this Court has held 
that if facts and law in a subsequent assessment year are the 
same, no authority whether quasi­judicial or judicial can 
generally be permitted to take a different view in following 
words:
“20. The decisions cited have uniformly held that
res judicata does not apply in matters pertaining
to tax for different assessment years because res
judicata applies to debar courts from entertaining
issues on the same cause of action whereas the
cause of action for each assessment year is
distinct. The courts will generally adopt an earlier
pronouncement of the law or a conclusion of fact
unless there is a new ground urged or a material
change in the factual position. The reason why
the courts have held parties to the opinion
expressed in a decision in one assessment year
to the same opinion in a subsequent year is not
because of any principle of res judicata but
because of the theory of precedent or the
precedential value of the earlier pronouncement.
Where facts and law in a subsequent assessment
year are the same, no authority whether quasijudicial or judicial can generally be permitted to
take a different view. This mandate is subject
only to the usual gateways of distinguishing the
earlier decision or where the earlier decision is
per incuriam. However, these are fetters only on
a coordinate Bench which, failing the possibility
of availing of either of these gateways, may yet
differ with the view expressed and refer the
41
matter to a Bench of superior strength or in some
cases to a Bench of superior jurisdiction.”
18. In   view   of   the   foregoing   discussion,   in   my   considered
opinion   the   order   passed   by   the   High   Court   is   without
considering   the   perspective   and   scope   of   issuance   of   the
certificate for deduction of tax at lower rate or no deduction at
tax and also without following the prescribed procedure. The
High Court has wrongly distinguished the previous judgement
dated 09.05.2017 on the premises which is not tenable, and
relied   upon   undertaking   dated   22.06.2019   of   appellant
submitted perforce. After due consideration in my view High
Court   has   committed   error   in   dismissing   the   writ   petition;
therefore, I am unable to concur the opinion of the esteemed
sister Judge.
 19. During   hearing,   it   is   said   that   against   the   previous
judgment   of   Delhi   High   Court   dated   29.01.2016   C.A.
No.8761/2016 is pending, which relates to assessment orders
pertaining to financial years 2007­2008 to 2009­2010, but it
cannot be connected to the issue of certificate under Section
197(1) of the IT Act for the year 2019­2020. The other judgment
42
of   Delhi   High   Court   dated   09.05.2017   directly   deals   the
issuance of the certificate under Section 197(1) of the IT Act.
For the reasons mentioned in detail I endorse the view taken by
Delhi High Court as correct and plausible view. Thus, it is
made clear here that the TDS certificate granted under Section
197 (1) shall be provisional subject to the assessment of the
returned income. 
20.  In view of the foregoing, the appeal filed by the appellant
is hereby allowed setting aside the order of the High Court with
a direction to the respondent to reconsider the application of
the   appellant   and   issue   certificate   following   the   prescribed
procedure.
21. Resultantly, this appeal is hereby allowed to the extent
indicated hereinabove. 
……………………………J.
 [J.K. MAHESHWARI
]
NEW DELHI;
July 29, 2022
43
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4964 OF 2022
(Arising out of SLP (C) No. 9233 of 2020)
NATIONAL PETROLEUM CONSTRUCTION COMPANY … Appellant(s)
 VERSUS
DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2(2)
INTERNATIONAL TAXATION NEW DELHI & ANR. … Respondent(s)
O R D E R
Leave granted.
In view of the difference of opinion between us, the Registry is
directed to place the matter before Hon’ble the Chief Justice of India so
that an appropriate Bench could be constituted to hear the matter.
………………………………………………………,J.
 (Indira Banerjee)
………………………………………………………,J.
 (J.K. Maheshwari)
New Delhi;
July 29, 2022

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