Director Of Income-Tax ... vs Ravva Oil (Singapore) P. Ltd.
2006 Latest Caselaw 2273 Del

JUDGMENT

1. The undisputed facts are that the assessed, a non-resident company, has its head office at Singapore and a sole branch office in India in connection with the exploration of oil. The finding returned by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal ("the ITAT") is that the expenses incurred by the assessed at its head office on account of administration, accounting and management services were wholly related to the Indian operations. It has, accordingly, been held that Section 44C of the Income-tax Act, 1961 ("the Act"), will not apply.

2. Before the Assessing Officer ("the AO"), the assessed relied upon the decision of the hon'ble Calcutta High Court in Rupenjuli Tea Co. Ltd. v. CIT and contended that since the assessed did not carry on any business outside India, the entire head office expenses attributable to the business in India had to be allowed. In the said decision, it was held by the High Court at Calcutta that Section 44C is applicable only if the assessed has branches in India as well as outside India. The question of apportioning the head office expenses "attributable" to the business in India as contemplated by Section 44C of the Act would not arise where the assessed's operations are restricted only to India and no part of the expenses is allocable to operations outside India. Although the Assessing Officer did not accept this contention, the Commissioner of Income-tax (Appeals) held in favor of the assessed. The further appeal by the Revenue has been dismissed by the Income-tax Appellate Tribunal by the impugned order.

3. Mr. Sanjeev Sabharwal, learned Counsel for the appellant, contends that 3 the restriction on the head office expenditure allowable to a non-resident assessed in terms of Section 44C would apply even where the situation contemplated under Section 44C does not exist. In other words, he contends that the quantification of the allowable expenditure as stipulated in Section 44C(a), which is a percentage of the "adjusted total income", read with "Explanation (i)" would apply to the present case.

4. Mr. Venkataraman, learned senior Counsel for the assessed submits that 4 the facts of the present case are in pari materia with that obtaining in the decision in Rupenjuli Tea Co. Ltd. . He also placed reliance upon the subsequent judgment of the Bombay High Court in CIT v. Emirates Commercial Bank Ltd. . He submits that the above settled position of law has held the field for nearly two decades, with the Revenue not having not successfully challenged either of these decisions.

5. We are of the view that the present appeals stand covered by the decisions of the Calcutta and Bombay High Courts referred to above. We find no reason to take a different view in the matter. The course to be adopted in matters such as these, where the law is well-settled for a number of years, as explained by the hon'ble Supreme Court in CIT v. Shapoorji Pallonji Mistry and CIT v. Balkrishna Malhotra commends itself to us.

6. The hon'ble Supreme Court has, in the last mentioned decision, explained (SCC page 549 and at page 762 of 81 ITR): "Interpretation of a provision in a taxing statute rendered years back and accepted and acted upon by the Department should not be easily departed from. It may be that another view of the law is possible but law is not a mere mental exercise. The courts while reconsidering the decisions rendered a long time back particularly under taxing statutes cannot ignore the harm that is likely to happen by unsettling law that had been once settled".

7. In the circumstances, we are of the view that no substantial question of law arises in these appeals. These appeals are, accordingly, dismissed.