Payment by ONGC for Gulf Piping Not Taxable though Situs of Contract was in India: ITAT [Read Order]

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The Delhi bench of Income Tax Appellate Tribunal ( ITAT ) in M/s ONGC Ltd v. DCIT (International Taxation) held that the payment made by the ONGC towards Gulf piping is not taxable in India as per the Double Taxation Avoidance Agreement (DTAA) though the situs of the contract was in India.

Assessee entered into a contract with Clough Engineering Ltd, Australia for construction of the deck engineering procurement, installation and commissioning of work in connection with integrated development of G-1 and GS-15 fields of ONGC located in Bay of Bengal. Since the construction of the platform deck was under progress, ONGC entered into a contract with Gulf Piping for providing services in relation to construction of the deck. The entire scope of work was undertaken by Golf Piping in UAE and ONGC was to collect/sail away the deck. Under the contract, ONGC paid a certain amount to Gulf Piping and never offered the same to tax in India since the entire work was executed outside India. However, the Assessing Officer held that the receipts are taxable in India under Section (9)(1)(i) of the Income Tax Act by holding the same to be income accruing or arising in India on the ground that the situs of the contract was in India.

Following the Delhi High Court judgment in CIT Vs. Bharat General Re-insurance Co. ltd, the Tribunal held that “merely because the assessee had taken same alternative plea without prejudice to the main contention, the same cannot be held against the assessee as there is no estoppel in law.”

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