IN HIGH COURT OF DELHI AT NEW DELHI Reserved on: 5.11.2019 Pronounced on: 20.12.2019 W.P.(C) 8527/2019 & CM APPL. 35220/2019 NATIONAL PETROLEUM CONSTRUCTION COMPANY Petitioner Through: Mr. Balbir Singh, Senior Advocate with Mr. Prakash Kumar, Ms. Monica Benjamin and Ms. Rashi Singh, Advocates. versus DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(2)(2), INTERNATIONAL TAXATION, NEW DELHI & ANR. Respondents Through: Mr. Raghvendra K. Singh, Senior Standing Counsel. CORAM: JUSTICE VIPIN SANGHI JUSTICE SANJEEV NARULA JUDGMENT SANJEEV NARULA, J 1. present writ petition under Article 226/227 of Constitution of India seeks writ of certiorari quashing impugned certificate dated 26.06.2019 under Section 197 (1) of Income Tax Act, (hereinafter referred as Act ) issued by respondent No.1-Deputy Commissioner of Income Tax, Circle -2 (2) (2), International Tax, New Delhi rejecting application of petitioner to grant certificate for NIL deduction of tax at source, on payments made to it, by Oil and Natural Gas Corporation Ltd. (ONGC- Deductor) and for issuance of writ of mandamus directing Assessing Officer to grant certificate authorizing aforesaid deductor to make W.P.(C)8527/2019 Page 1 of 27 payments to petitioner without deducting tax at source. Brief facts 2. Briefly stated, facts leading to filing of instant writ petition are that petitioner- National Petroleum Construction Company is incorporated and existing under laws of United Arab Emirates (UAE). Therefore, provisions of agreement for avoidance of double tax between India and UAE (DTAA) apply in determining taxable income of petitioner. principal activities of Petitioner comprise of fabrication and installation of onshore and offshore oil facilities and submarine pipelines and pipelines coating. 3. Petitioner entered into Contract No. MR/ES/MM/LEWPP (TENDER- 3)/01/P85 1 C 1600 1/20 16 dated September 30, 20 16 ('LEWPP Contract') and Contract No. MR/ES/MM/R-SERIES (Tender No. 07P85 1 C 17005120 1719030008323) dated February 07, 201 8 ('the R -Series Contract') , with ONGC for carrying out work of project management, survey, design, engineering, procurement, fabrication, transportation, removal/replacement of existing topside decks, hookup, testing, and commissioning (only for LEWPP Contract) of 10 platforms. Thus, ONGC is deductor/payer in respect of payments under aforesaid contracts. 4. Petitioner was assessed for AYs- 2007-08, 2008-09 and 2009-2010 in respect of contracts similar to abovenoted contracts, and was held to be W.P.(C)8527/2019 Page 2 of 27 not taxable in India. Petitioner contends that lower tax authorities have continuously opined from AY- 2007-08 to AY-2015-16 that outside India contractual revenues are taxable in India. However, appellate forums, all across these Assessment Years, have held to contrary, observing that petitioner has no permanent establishment (PE) in India, and no income earned from outside India activities will be chargeable to tax in India. litigation history of petitioner from AY- 2007-08 to AY 2015-2016, at various appellate levels, is illustrated in following tabulation: A. Year ONGC Contract (s) under Level of Appellate Forum consideration (last order in place) 2007-08 4WPP Delhi High Court 2008-09 4WPP and C- Series Delhi High Court 2009-10 C- Series Delhi High Court 2010-11 B-22, RS-12, C-Series and 4WPP Delhi High Court 2011-12 B-22 and RS-12 Commissioner of Income Tax (Appeals) 2012-13 C-Series, RS-12, B-22 and B- ITAT (Delhi Bench) Series 2013-14 C-Series,RS-12, B-22 and WO-16 Commissioner of Income Tax & SB-14 (Appeals) 2014-15 B-Series, B-22 and WO-16 & SB- Commissioner of Income Tax 14 (Appeals) 2015-16 B-Series, B-22, WO-16 & SB-14, Commissioner of Income Tax C-Series and RS-12 (Appeals) 5. Particularly, petitioner relies upon judgment rendered by this Court in petitioner s own case for AY-2007-08 and AY 2008-2009 reported in [2016] ITR 383 648 (Del), wherein this Court after re-evaluating petitioner s contract with ONGC, inter alia held that project office of petitioner did not constitute fixed base PE under provisions of DTAA and in absence thereof, splitting of profits arising from contracts into two categories viz. profits attributable to India and profits attributable to W.P.(C)8527/2019 Page 3 of 27 overseas, does not arise. petitioner also asserts that decision in appeal of Revenue for AY-2009-10, follows aforesaid judgment. 6. Petitioner also contends that both R-series and LEWPP are similar to aforementioned 4WPP and C-Series contracts, and has given comparative analysis to depict similarities in scope of work and bifurcation of price for each platform viz. inside and outside India. 7. Petitioner also draws strength from order passed by this Court dated 09.05.2017 for AY- 2017-18, whereby direction was issued to Tax Department to issue fresh certificate under Section 197 (1) of Act, accepting alternative plea of petitioner, without prejudice to its right to contest said deduction in accordance with law. In said order, Court directed that ONGC would deduct tax @4% + surcharge + education cess of revenues in respect of only inside India activities. Tax department has since issued certificate under Section 197 of Act @ 4% on activities inside India, and NIL on outside India, for LEWPP contracts as well as R- series contracts for AY-2019-2020. 8. Petitioner argues that considering that R-series and LEWPP contracts, relevant to Assessment Year in question, are identical to contracts considered by this Court in its decision pertaining to petitioner s own case for AY-2007-08, 2008-09 and 2009-10, there is no creation of permanent establishment (PE) in India and no income of foreign component is taxable in India. On this premise, petitioner filed application under Section 197 before Respondent No-1, requesting for issuance of certificate directing W.P.(C)8527/2019 Page 4 of 27 ONGC to make payments without deduction of tax. application was processed and queries were raised by respondent to which petitioner filed its replies dated 08.05.2019; 21.05.2019; 13.06.2019 and 22.06.2019. After providing hearing to petitioner and on consideration of its submissions, respondent granted certificate dated 26.06.2019, in prescribed format, to deductor/ONGC for deduction @ 4% of gross receipts, which is impugned in present petition. Proceedings in present petition. 9. Notice was issued to revenue and in response thereto, counter affidavit has been filed, enumerating in detail, grounds and reasons justifying issuance of impugned certificate. Thereafter, on 31.10.2019, on hearing submissions advanced by Mr. Balbir Singh, learned senior counsel for petitioner, respondents were directed to produce original records before this Court dealing with petitioner s application under Section 197. In compliance thereto, on 05.11.2019, Mr. Raghvendra K. Singh, learned Sr. Standing counsel for respondents produced relevant original record and also tendered in Court copy of note-sheet setting out reasons for rejecting petitioner s request. copy thereof was furnished to Petitioner and same has been taken on record. 10. During course of hearing, Mr. Balbir Singh made his submissions also on aforesaid reasons set forth in note-sheets and with consent of learned counsels for parties, we heard matter for final W.P.(C)8527/2019 Page 5 of 27 disposal. Before proceeding further, it would be appropriate to first extract recorded reasons that have to be analysed for purpose of deciding present petition. same [true-typed] read as under [the struck-off portions are as they appear in original copy]: 6. In instant application, applicant has requested rate of deduction @ 2.65% for entire estimated receipts i.e. form onshore and offshore activities. 7. Hon ble High Court, for A.Y. 2007-08 to 2010-11, held that there is no PE in case of assessee. departmental appeals for these years are pending before Hon ble Apex Court. 7. Accordingly, following decision of Hon ble Delhi High Court order dated 09.05.2017 in W.P.(C) 2117/2017 & CM No. 9268/2017, certificate u/s 197 for F.Y. 2016-17 was issued @ 4% (excluding surcharge and cess) for inside India Revenue and @ 0% for outside India Revenue. Further for F.Y. 2017-18 as well as F.Y. 2018-19, certificate was issued accordance with order of Hon ble Delhi High Court dated 09.05.2017 for both contracts under consideration i.e. for LEWPP and R-Series contracts. In view of above, if approved, certificate u/s 197 may be issued to @ 2.65 % on payment mentioned above i.e. INR 5562942700. Such certificate would be provisional in nature and subject to final assessment. File is put up for kind perusal and approval please. Sd/- ITI 16/05/2019 DCIT, Circle-2(2)(2), (Intl. Tax.), New Delhi Pl. verify what is basis of offshore & onshore revenue breakup and how estimated cost c is arrived at. Also verify from applicant on how onshore supply /services provided? W.P.(C)8527/2019 Page 6 of 27 ITI above queries were raised before applicant through online TDS Tracer portal against which he has submitted his submission on 21/05/2019. same is being submitted for year kind perusal & direction please. Sd/- 22/05/2019 DCIT, Cir-2(2)(2), IT-2, New Delhi. Please check assessement history in this case. Check whether case has been assessed under 44BB of IT Act, 1961 in previous AY. Sd/- ITI 06/06/2019 From perusal of assessment record, it was noticed that assessment of assessee in previous years i.e. AYs 2015-16 & 2016-17 has been completed by observing that since activities carried out by assessee are related to business exploration etc of mineral oils, activities are covered under section 44BB of Income Tax Act, 1961. Accordingly, 10% of receipts was attributed to assessee as per section 44BB of IT Act, 1961. For AY- 2017-18, case of assessee was selected under CASS which is still pending. Sd/- 06/06/2019 DCIT, Cir-2(2)(2), IT-2, New Delhi. nature of contracts is such that it is difficult to bifurcate revenue in onshore and onshore supply and service. service component is embedded in supply portion and invoices are also raised as such. Therefore in order to project interest of revenue as it is possible out assessement and ascertain complete facts FTS to be estimated @ 40% and taxable @ 10%. Therefore rate of 4% is proposed. W.P.(C)8527/2019 Page 7 of 27 Submitted for your kind considerations u approved. Sd/- 06/06/19 Addl. CIT (IT) 2 (1), Delhi. N/4 National Petroleum Construction Company (197) As per dossier, there is demand of 35.88 cr. pending in different years. Please verify issue on which additions have been made and whether same issues are relevant in current year as well. Pl. also examine reasons of non-collection of demand and why low TDS certificate should be granted pending demand. Sd/- 06.06.19 DGT Please check status of demand as per dossiers. Identify issues involved on which demand has been raised. Check if issues are still relevant for current A.Y. Sd/- 06/06/19 ITI As per direction, status of demands & Assessment history is being submitted for year kind perusal & directions please. Sd/- 11/06/2019 DCIT, Cir-2(2)(2), IT-2, New Delhi: issue involved in past few years is taxability of income. In case of 2015-16 & 16-17 assessment, it was held that W.P.(C)8527/2019 Page 8 of 27 activities of applicant comes Section 44BB & taxed accordingly. outstanding demand of Rs.35.88 cr. is currently reduced to Rs 2,67 crores out of which Rs. 2.63 crores pertains to AY 2017-18, which is under scrutiny for assessment. Submitted for kind perusal & necessary directions. Sd/- 11/06/2019 Addtl. CIT Range 2(2)IT Delhi n/5 National Petroleum Construction Co.(197) Applicant preferred WP(C) 2117/2017 against 197 certificated dtd. 30th Sept, 2016 31st Jan, 2017 cost ---- with ONGC dated 30th September, 2016. certificate u/s 197 dtd. 31st Jan, 2017 was issued @ 4% plus education cess and surcharge. Hon ble Delhi High Court while deciding writ petition ruled upon its judgment in applicant s case for AY 2007-08 and 2008-09 wherein wrt similar contracts with NPCC and ONCG, court held that NPCC did not constitute PE U/A 5(3)(e) rws 5(2)(c) and 5(1) of DTAA. Court also held that installation PE was also not formed since installation activity in India was less than 9 months threshold. court also held that there is no distinguishing feature of present contracts vis- -vis previous contracts. contracts under consideration have been entered in to by applicant in Feb 18 & Sept 16. Please verify whether these contracts form PE or not. Sd/- 12.06.15 DGT Pl.verify from client whether contracts form PE or not. Are contracts similar to previous contracts and in what aspect. Sd/- 12/06/2019 ITI W.P.(C)8527/2019 Page 9 of 27 Assesses has submitted his reply regarding above mentioned query on 13.06.2019 which is put up for your kind perusal & necessary direction. Sd/- 14.06.19 DCIT, cir-2(2) (2), it-2, New Delhi DCIT circle 2 (2) (2) IT Delhi As per submission of assesse, scope of work of R-Series & LEWPP is similar to contracts entered in AY 2007-08 and 08-09. applicant has further produced on chart of all contracts (ONGC) entered in AY 2015-16 and AY 2016-17 wherein scope and activities carried are similar in nature and bifurcation of off- shore and on-shore in made on basis of nature of activities. In assessment of applicant for AY2015-16 and AY 2016-17, entire revenue was charged u/s 44BB of Act considering contract composite, turnkey contract and it was considered to establish PE in India. applicant has stated that both contracts with ONGC are for projects in Bombay High & nearby areas. For LEWPP contract applicant has stated project-wise calculation of days. Considering that these projects for LEWPP Contract are in geographical and commercial coherence, same may constitute Installation PE. Submitted for kind perusal and necessary direction please. Sd/- 14/06/19 Addtl.CIT range 2 (2) IT Delhi Pl Verify- dates as per submission of applicant for computation of IE do not match with activity sheet as per contracts. Pl verify & put up. Sd/- 14.06.19 DGT W.P.(C)8527/2019 Page 10 of 27 Upload query as TRACES Sd/- 19.06.19 ITI As directed, queries have been raised on Traces. Reply same has been furnished by applicant through offline on 18.06.2019. same is being forwarded to you for your kind perusal and direction please. Sd/- 19.06.19 DCIT, cir 2 (2) (2), IT-2, New Delhi applicant has furnished activity wise dates for each platform under both contracts. For R-Series contract, applicant has not mentioned commissioning period and period of as built documentation (which is mentioned for LEWPP contract and relevant for installation). Also, transportation period is considered at India location for R-Series contract while for LEWPP contract, it transportation is considered at UAE location. Pl verify above from client through TRACES. Sd/- 20.06.19 DCIT circle 2(2)(2) IT-2 applicant has furnished its reply. In its reply dated 13/06/2016, it has stated in its comparative analysis that commissioning activities were undertaken. While in its reply dated 22/06/2016 it has stated that commissioning work was not applicable for R-Series contract thus making contradictory statements. LEWPP contract is dated Sep 2016 & R-Series contract is dated Feb 2018 and since contracts are different from previous years, question of whether applicant constitutes PE requires exhaustive information and not feasible to verify at 197 application stage considering paucity of time and applicant s request. In its reply, applicant has further requested to issue certificate @4% plus applicable surcharge and cess for entire W.P.(C)8527/2019 Page 11 of 27 contractual revenues which is in line with recently concluded assessment proceeding for AY 2016-17 where revenues were charged v/s 44BB of Act. Submitted for kind perusal and necessary direction please. Sd/- 24.06.19 Addtl. UIT Range 2(2) IT Delhi agreements under consideration are different from agreements under consideration for AY 2007-08 and 2008-09. In AY. 2007-08 & 2008-09, Hon ble Delhi H.C. decided that PE is not formed in India. AO was accordingly instructed to verify existence of PE. However, due to discrepencies between days calculated by applicant and activity schedule, AO was asked to verify same. applicant has meanwhile requested for issue of certificate @4% on entire revenue, in line with stand taken by AO in assessment. Accordingly, certificate may be issued @4% , if approved. Sd/- 24.06.19 CIT(IT)-2 Approved @ 4% as proposed. Certificate Generated on 26/06/19 Sd/- 25.06.19 Addl CIT IT 2(2) Sd/- 25.06.19 DCIT Submissions of petitioner 11. Mr. Balbir Singh, learned senior counsel for petitioner attacked reasons spelt out in note-sheet as also those disclosed in counter W.P.(C)8527/2019 Page 12 of 27 affidavit on several grounds. He submitted that reasons provided by respondent were silent on issue of effect of this Court s order dated 09.05.2017 in W.P(C) 2117/2017, wherein LEWPP contract was examined and Revenue was directed to issue fresh certificate under Section 197 of Act @0% (NIL) for outside India revenues. He also submitted that reasons also do not take note of certificate for FY 2018-19 issued @ 0% for outside India revenues in respect of both contracts which are subject matter of impugned certificate. 12. He argued that Respondents contention regarding revenue bifurcation into onshore and offshore supply and services being not clear, is completely frivolous and untenable. Though contracts in question may be turnkey contracts, yet value of work done outside India is ascertainable. reasons given by respondent are misplaced as, for AY 2015-16, first appellate authority followed this Court s decision in petitioner s own case and has held that petitioner has no PE in India. Accordingly, outside India revenues will not be chargeable to tax under Section 44BB of Act. Respondents are wrongly assuming that subject contracts constitute installation PE under India-UAE DTAA. In each of contracts, installation activities were completed in less than 9 months and hence, installation PE is not triggered. Respondents are wrongly distinguishing R- series contract, alleging it to be not identical to contracts undertaken by petitioner in prior years. Petitioner carried out commissioning activities under each of prior ONGC contracts, including LEWPP contracts, and appellate forums have ruled in favour of petitioner that outside India revenues are not taxable in India. Thus, if lesser activities are undertaken in W.P.(C)8527/2019 Page 13 of 27 R-series contracts, in comparison to previous contracts, it is beyond imagination as to how Respondents perceive that outside India revenues are liable to be taxed in India. 13. Mr. Singh further submitted that Section195 of Act provides for tax withholding on any other sum chargeable under Act in case of non- resident. Thus, only in respect of sum which is chargeable to tax as per provisions of Act, there is obligation on payer to deduct taxes. action of respondents is blatant disregard of judicial discipline by not following earlier decisions. Besides, such action will cause financial hardship to petitioner as it would block funds and cause other serious prejudice. Contentions of Respondent 14. Mr. Raghvendra K. Singh, learned senior standing counsel for respondents on other hand argued that there were cogent reasons discernible from record therefore Court should not entertain present petition. He submitted that there was no arbitrariness in action of respondents and on contrary it was fair and reasonable. In such situation, Court would ordinarily not like to interfere with decision taken by respondents. Mr. Singh further distinguished decision rendered by this Court in petitioner s own case and submitted that same would have no applicability, inasmuch as, contracts that were subject matter of proceedings before this Court in AY- 2007-08, 2008-09, 2009-10 were different. He further submitted that order dated 09.05.2017 passed by this W.P.(C)8527/2019 Page 14 of 27 Court would also not govern present case because said case only dealt with LEWPP series contract dated 30.09.2016 whereas in present case, certificate for TDS at lower rate is also being sought for R-Series contract dated 07.09.2018. principle of res judicata is not applicable to income tax proceedings and determination of existence of PE is required by law, to be determined for each year separately. Further, income tax department has consistently challenged stand of petitioner and even for AY- 2007-08 and 2008-09, judgment of this Court has been challenged before Supreme Court and appeal is pending. He further submitted that position in law has undergone change to detriment of petitioner, in view of Explanation 2 added to Section 195 vide Finance Act, 2012. Lastly, he submitted that petitioner has itself consented and acquiesced to certificate @4% on gross receipts as opposed to @2.65% and thus petitioner has no right to challenge same. Analysis and Findings 15. We have learned counsels for parties at length. 16. Having regard to history of litigation involving petitioner-referred to above, we consider it necessary to examine record of Revenue to satisfy ourselves as to manner in which respondents have approached present matter. Consequently, original record of respondents was summoned. We have carefully perused sameand relevant provisions extracted in earlier part of judgment. reasons indicate that Respondents have exercised jurisdiction under Section 197 with due W.P.(C)8527/2019 Page 15 of 27 application of mind. It is cardinal principle of administrative law that, under Article 226 of Constitution of India, judicial review is directed not against decision, but decision making process, as reiterated in recent judgment of Supreme Court in Sarvepalli Ramaiah (dead) as per legal representatives and Ors. v. District Collector, Chittor District and Ors. (2019) 4 Supreme Court Cases 500, relevant portion whereof is reproduced as under: 40. Administrative decisions are subject to judicial review under Article 226 of Constitution, only on grounds of perversity, patent illegality, irrationality, want of power to take decision and procedural irregularity. Except on these grounds administrative decisions are not interfered with, in exercise of extra ordinary power of judicial review. xxxxxx 43. Judicial review under Article 226 is directed, not against decision, but decision making process. Of course, patent illegality and/or error apparent on face of decision, which goes to root of decision, may vitiate decision making process. In this case there is no such patent illegality or apparent error. In exercise of power under Article 226, Court does not sit in appeal over decision impugned, nor does it adjudicate hotly disputed questions of fact. (Emphasis supplied) 17. Having perused and examined file notings, we do not find any arbitrariness in approach of respondents in exercise of jurisdiction by them. reasons given in note-sheet cannot be said to be so grossly unfair or unreasonable that they require intervention of Court, and present petition could have been rejected on this ground alone. However, W.P.(C)8527/2019 Page 16 of 27 since we have heard learned counsels for parties at considerable length on merits of case, we proceed to give our decision on other aspects as well. 18. Sub Section (1) of Section 195 of Act provides that any person responsible for paying to non-resident, any sum chargeable to tax under provisions of Act, shall, at time of credit of such income to account of payee, or at time of payment thereof in cash or by issue of cheque or draft or any other mode, whichever is earlier, deduct income-tax thereon at rates enforced. 19. Section 197 of Act deals with grant of certificate for deduction at lower rate. Sub-Section (1) of Section 197 of Act provides that subject to rules made under Sub-Section (2)(a), where, in case of any income of any person, income-tax is required to be deducted at time of credit or, as case may be, at time of payment at rates in force under provisions including Section 195, Assessing Officer is satisfied that total income of recipient justifies deduction of income-tax at any lower rates or no deduction of income-tax, as case may be, he shall on application made by Assessee, give to him such certificate as may be appropriate. Sub-Section (2) of Section 197 provides that where any such certificate is given, person responsible for paying income shall, until such certificate is cancelled by Assessing Officer, deduct income-tax at rates specified in such certificates or deduct no tax, as case may be. W.P.(C)8527/2019 Page 17 of 27 20. Thus, on conjoint reading of aforesaid provisions, it emerges that in absence of certificate of deduction of tax at source at lower rate or nil rate, payer-whose liability it is to deduct tax at source under Section 195 of Act, is likely to incur risk of being declared defaulter. However, if certificate under Section 197 of Act is in operation, such consequence would not arise. At same time, certificate under Section 197 of Act for deduction of tax at lower rate or nil rate, also benefits Assessee, who would be entitled to receive full payment from payer without deduction. 21. Explanation 2 to Section 195, inserted vide Finance Act 2012 clarifies that obligation to comply with Sub-Section (1) to make deductions applies to non-residents, irrespective of whether such non-resident has residence, or place of business, or business connection in India, or any other presence in any manner whatsoever in India. said Explanation inserted vide Finance Act, 2012 w.r.e.f. from 01.04.1962, read as under: Explanation 2. For removal of doubts, it is hereby clarified that obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not non-resident person has (i) residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India. 22. purpose of aforesaid Explanation is to provide for safeguard that in case of tax liability ultimately being determined in assessment proceedings, recovery of tax may not become difficult. W.P.(C)8527/2019 Page 18 of 27 23. Vide application dated 08.05.2019, filed in prescribed Form-13 for FY-2019-20, copy whereof has been enclosed with Revenues submissions, Petitioner sought issuance of certificate for deduction at lower rate under Section 197 of Act @ 2.6% on gross receipts in respect of payments made by ONGC to petitioner under two contracts, (i) R-series contract dated 07.02.2018 for total estimated receipt in FY- 2019-20 of Rs.495.75 crores, and; (ii) LEWPP series contract dated 30.09.2016 for total estimated receipt in FY 2019-20 of Rs.60.54 crores. 24. Respondents have granted impugned certificate for deduction @ 4% of gross receipts. assessment for above noted contracts would be undertaken in future viz. AY-2019-20 and 2017-18 respectively. As of now, we are not concerned with regular assessment proceeding but, with determination of rate of tax deduction. On perusal of reasons, it becomes manifest that during course of enquiry under Section 197 of Act, petitioner was asked to furnish details regarding scope and nature of aforenoted contracts. Revenue contends that for R-series contracts, 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 R-series contracts, and same is to be performed by ONGC. Without going into question as to whether petitioner s stand is contradictory, we may note that Assessing Officer while exercising its power under Section 197, during course of enquiry, cannot undertake exhaustive exercise to determine this issue conclusively. We find force in W.P.(C)8527/2019 Page 19 of 27 submissions of Mr. Raghvendra Kumar Singh that question as to whether petitioner has constituted PE, cannot possibly be undertaken in enquiry having regard to time frame permissible under law for deciding application under Section 197 of Act. reasons shown to us also take note of fact that in immediate preceding years i.e., AY- 2016-17 and AY- 2017-18, for which regular assessment has been completed, petitioner has been held to have Permanent Establishment (PE) in India, and its total income from contracts with ONGC have been held to be taxable under IT Act. Section 44BB of Act is applied, and 10% of contractual receipts were considered as business profits. rate of tax being 40%, certificate was, accordingly, issued @ 4%. For other assessment years as well, assessment has been completed and appeal is pending before appellate authorities. Petitioner, obviously, disputes finding of Respondent as erroneous and misplaced, on ground that for AY- 2015-16, first appellate authority-following decision of this Court in petitioner s own case, has held that petitioner has no PE in India. Be that as it may, for AY-2016-17 and 2017-18, this question has been determined against petitioner. It is well-settled proposition that in tax jurisprudence, principle of res judicata is not applicable to income tax proceedings. In matters of recurring annual tax decision on appeal with regard to one year s assessment is said not to deal with eadem questio as that which arises in respect of assessment for another year and consequently not to set up estoppel. [Ref: 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, W.P.(C)8527/2019 Page 20 of 27 because it determines only tax for particular period. [Ref: Instalment Supply (P) Ltd. v. Union of India AIR 1962 SC 53 (Constitution bench)]. 25. petitioner has argued that need for consistency and certainty requires that there must exist strong and compelling reasons for departure from settled position, which must be spelt out and they are conspicuously absent in present case. Mr. Balbir Singh has strongly argued that stand taken by respondents in previous year should have been followed and in this regard, he relies upon decision of Supreme Court in case of Radhasoami Satsang v CIT [1992] 193 ITR 321 (SC). Besides, Mr. Singh, as quoted earlier has also led considerable emphasis on decision of this Court dated 09.05.2017, wherein this Court directed respondents to issue certificate under Section 197 of Act, accepting alternative plea of petitioner that ONGC would deduct tax @4% +surcharge +Education cess on revenues in respect of only inside India activities of petitioner. 26. We are, however, not impressed with aforesaid contention and do not find judgment of Supreme Court in Radhasoami Satsang (supra) to be applicable in present case. In said case, issue arose whether assessee is charitable trust, and this position had not been contested by income tax department from AY- 1367-38 to AY 1963 -64. In these circumstances, Court held as under: where fundamental aspect permeating through different assess ment years has been found as fact one way or other and W.P.(C)8527/2019 Page 21 of 27 parties have allowed that position to be sustained by not challenging order, it would not be at all appropriate to allow position to be changed in subsequent year. 27. In present case, there cannot be any dispute that existence of PE is required to be determined by law for each year separately on basis of scope, extent, nature and duration of activities in each year. In this regard, 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 occasion to consider R-series contract dated 07.02.2018. Court only considered contract dated 30.09.2016 as noted in para 1 of said decision. There is thus, distinguishing feature R-series contract has not been considered by this Court in its order dated 09.05.2017. Moreover, in instant case, reasons record that two contracts are indivisible, and petitioner cannot divide contractual receipts in two categories viz. inside India and Outside India services. installation PE will come into existence, if project or activity continues for 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, determination is presently against petitioner. We cannot accept petitioner s contention that assessment proceedings for AYs 2007-08, 2008-09 and 2009-10 have already determined this question in favour of petitioner and there is no change in any circumstances. This question would require to be determined and finding of fact would have to be arrived at, by careful consideration of terms of contract, determination whereof cannot be W.P.(C)8527/2019 Page 22 of 27 undertaken in proceedings under Section 197 of Act. 28. judgment relied upon by petitioner in GE India Technology Cen. (P) Ltd vs. CIT [327 ITR 456 (SC)] holds that obligation to deduct tax at source on remittance made to non-resident does not arise unless such remittance is sum chargeable under Act. There is no quarrel on this proposition. However, at same time, one also has to take into consideration Explanation 2 to Section 195 inserted vide Finance Act, 2012. At this juncture, it would be beneficial to refer to judgment of Supreme Court in Commissioner of Agriculture Income Tax v. Plantation Corporation, [2001] 247 ITR 155 (SC) wherein effect of Explanation has been explained as under: This Court has always been reiterating that if intendment is not in words used, it is nowhere else and so long as there is no ambiguity in statutory language, resort to any interpretative process to unfold legislative intent becomes impermissible and need for interpretation arises only when words in statute are on their own terms ambivalent and do not manifest intention of Legislature - Doypack Systems (P.) Ltd v. Union of India 1988 (2) SCC 299 and Keshavji Ravji & Co. v. CIT 1990 (2) SCC 231. That apart Explanation is intended to either explain meaning of certain phrases and expressions contained in statutory provision or depending upon its language it might supply or take away something from contents of provision and at times even to, by way of abundant caution, clear any mental cobwebs surrounding meaning of statutory provision spun by interpretative process to make position beyond controversy or doubt. 29. Further, petitioner s contention that under each of contracts, W.P.(C)8527/2019 Page 23 of 27 installation activities were completed in less than 9 months, and that scope of R-series contracts, did not include commissioning activities, are all factual aspects which cannot be examined while exercising judicial review over decision of respondent under Section 197 of Act. 30. petitioner has relied upon judgments in Ishikawajima-Harima Heavy Industries: [2007] 288 ITR 408 (SC) and Hyundai Heavy Industries: [2007] 291 ITR 482 (SC), which do not appear to be applicable to facts of present case. In Ishikawajima (supra), Supreme Court held that for non-resident entity to be taxed in India, it should carry on business through permanent establishment in India, and income taxed is on basis of extent appropriate to part played by permanent establishment in those transactions, and that only such part of income, as is attributable to operations carried out in India can be taxed in India. In said case, clear distinction could be identified between onshore and offshore activities. In present case, respondents contend that no such distinction is clearly identifiable from contracts in question. Further, said cases (Ishikawajima (supra) and Hyundai heavy Industries (supra)) relate to assessment proceedings, whereas, in present case, we are concerned with proceedings for grant of certificate under section 197. scope of enquiry and investigation in both these proceedings is different, especially after introduction of Explanation 2 to section 195 and at stage of section 197 proceedings, question of existence of permanent establishment is not required to be gone into. Therefore, having regard to aforesaid provision, we cannot direct Revenue to hold that petitioner does not have PE and give consequent effect of such finding while deciding application W.P.(C)8527/2019 Page 24 of 27 under Section 197 of Act. Determination of all these questions would have to be undertaken during course of regular assessment. manner of determination of issues relating to tax deduction and regular assessment are inherently and fundamentally different. While there may be certain circumstances where finding with respect to previous year can be taken into consideration, however, in instant case, we cannot find any reason to hold approach of Respondents to be patently illegal or erroneous on face of it. question of existence of permanent establishment, which requires detailed enquiry, is not envisaged at stage of deciding application for issuance of certificate under Section 197 of Act. full fledged investigation can be done by Assessing Officer during course of assessment. 31. Before parting, we may also take note of petitioner s communication dated 22.06.2019, whereby request for issuance of certificate, was made. same is extracted as under: Without prejudice to legal submissions of Applicant that it does not have and shall not constitute PE for these contracts in India, and thus contract revenues shall not be taxable in India, Applicant, in alternative (without admitting), humbly submits that even if your goodself consider that Applicant may constitute PE in India, only inside India revenues (i.e., revenues towards installation and commissioning activities) can at best be held to be taxable in India as per section 44RB of Act as held by Hon'ble Suprenle Court in case of Hyundui Heuvy Industries Ltd. (291 ITR 482). Your goodself would also appreciate that in Applicant's own case, Hon'ble Delhi High Court held that even in case of PE, outside India revenues cannot be held to be attributable to PE in India. W.P.(C)8527/2019 Page 25 of 27 Applicant humbly submits that since it is facing financial hardship as first quarter of FY 2019-20 has come to end and it is yet to have lower withholding tax certificate, Applicant (without prejudice to its legal position), is willing to offer concession to have certificate at tax rate of 4% plus applicable surcharge and cess for entire contractual revenues, which is in line with recently concluded assessment proceedings for AY 2016-17 in Applicant's own case, where pour goodself concluded that entire contractual revenues were chargeable to tax under section 44BB of Act at effective tax rate of 4% plus applicable surcharge and cess. 32. Petitioner contends that aforesaid concession was made without prejudice to its legal position , and cannot deprive petitioner to contest legal position. However, we cannot ignore fact that Petitioner took categorical stand and prevailed upon revenue to accept declaration made in said communication. Although declaration was qualified, yet, since petitioner requested respondent to deduct tax @ 4%+applicable surcharge & cess for entire contractual revenues, revenue was justified in accepting same and petitioner cannot be permitted to resile there from, once department has accepted petitioner s proposal. 33. Needless to say, opinion expressed in this judgment is only tentative view, keeping in view limited scope of jurisdiction exercised by respondents under section 197 and even more limited scope of jurisdiction being exercised by us under Article 226 of Constitution of India. All questions urged by petitioner relating to constitution of PE vis- -vis contracts in question and other related questions raised by it will have to be examined at appropriate stage by tax authorities W.P.(C)8527/2019 Page 26 of 27 uninfluenced by observations expressed herein. 34. writ petition is dismissed with no order as to costs. Accordingly, all pending applications are disposed of. SANJEEV NARULA, J VIPIN SANGHI, J DECEMBER 20, 2019 Pallavi W.P.(C)8527/2019 Page 27 of 27 National Petroleum Construction Company v. Deputy Commissioner of Income-tax, Circle-2(2)(2), International Taxation, New Delhi & Anr