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

ABCDEFGH236SUPREME COURT REPORTS[2022] 17 S.C.R. [2022] 17 S.C.R. 236236NATIONAL PETROLEUM CONSTRUCTION COMPANYv.DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(2),INTERNATIONAL TAXATION, NEW DELHI & ANR.(Civil Appeal No. 4964 of 2022)JULY 29, 2022[INDIRA BANERJEE AND J. K. MAHESHWARI, JJ.]Income Tax Act, 1961 – ss.197, 195(1) – Income Tax (SecondAmendment) Rules, 2011 – r.28AA – Writ Petition filed by Appellantagainst the refusal of the Respondent no.1 to modify the Certificateissued to it for the financial year 2019-20 (corresponding to theAssessment Year 2020-21) u/s.197 for Tax Deduction at Source(TDS) at the rate of 4% in respect of payments received by theAppellant from ONGC towards work done out of India as well aswithin India, dismissed by High Court – Correctness of – Held:PerIndira Banerjee, J. High Court rightly held that the question ofwhether the appellant had Permanent Establishment (PE), couldnot possibly be undertaken in an enquiry for issuance of certificateu/s.197 of the IT Act –Further, the Appellant itself made a requestfor Certificate for TDS at the rate of 4% on all receipts – Thus, theimpugned certificate having been issued as per the appellant’s ownrequest, the appellant is estopped from questioning the certificateby initiation of proceedings u/Article 226 – No infirmity in thereasoning of the High Court calling for interference – Per J. K.Maheshwari, J. Since there was no change in circumstances and thesituation of the appellant in the financial years 2017-18 and 2018-19 respectively and in the financial year 2019-20 in question(assessment year 2020-21) are the same, the principle of consistencyought to be followed while considering the application u/s.197 ofthe IT Act – Order passed by High Court is without considering theperspective and scope of issuance of certificate for deduction oftax and also without following the prescribed procedure – HighCourt committed error in dismissing the writ petition – In view ofdifference of opinion, matter to be placed before Hon’ble the ChiefJustice of India to constitute an appropriate bench to hear the matter– Constitution of India – Article 226.(In the judgment of Indira Banerjee, J. )G.E. India Technology Centre Pvt. Ltd. v. Commissionerof Income Tax and Anr. (2010) 327 ITR 456 (SC); ABCDEFGH237Ishikawajima-Harima Heavy Industries v. Director ofIncome Tax, Mumbai (2007) 288 ITR 408 (SC);Commissioner of Income Tax and Anr. v. Hyundai HeavyIndustries Co. Ltd (2007) 291 ITR 482 (SC) – referredto.(In the judgement of J.K. Maheshwari, J.)M/s Radhasoami Satsang, Saomi Bagh, Agra v.Commissioner of Income Tax (1992) 1 SCC 659 : [1991]2 Suppl. SCR 312; Bharat Sanchar Nigam Limited andAnr. v. Union of India and Ors. (2006) 3 SCC 1 : [2006]2 SCR 823 – relied on.Case Law ReferenceIn the judgment of Indira Banerjee, J.(2010) 327 ITR 456 (SC)referred toPara 36(2007) 288 ITR 408 (SC)referred toPara 40(2007) 291 ITR 482 (SC)referred toPara 40In the judgment of J. K. Maheshwari, J.[1991] 2 Suppl. SCR 312relied on Para 16[2006] 2 SCR 823relied onPara 16CIVIL APPELLATE JURISDICTION : Civil Appeal No.4964of 2022.From the Judgment and Order dated 20.12.2019 of the High Courtof Delhi at New Delhi in WP (C) No.8527 of 2019.S. Ganesh, Sr. Adv., Bhargava V. Desai, Shivam Jasra, Ms. AditiDiwan, Advs. for the Appellant.N. Venkataraman, ASG, Shyam Gopal, Chandra Kant Sharma,Ms. Rashmi Malhotra, Ms. Preeti Rani, Akshya Amritanshu, Raj BahadurYadav, Advs. for the Respondents.The Judgments and Order of the Court were delivered byINDIRA BANERJEE, J.Leave granted.2. This appeal is against the judgment and final order dated 20thDecember 2019 passed by High Court of Delhi dismissing the Writ Petitionbeing Writ Petition (C) No.8527 of 2019 filed by the Appellant againstthe refusal of the Respondent No.1 to modify the Certificate dated 26thJune 2019 issued to the Appellant for the Financial/Previous Year 2019-20, corresponding to the Assessment Year 2020-21, under Section 197NATIONAL PETROLEUM CONST. CO. v. DEPUTY COMM’R OF INCOMETAX, CIRCLE 2(2), INTERNATIONAL TAXATION ABCDEFGH238SUPREME COURT REPORTS[2022] 17 S.C.R.of the Income Tax Act 1961, hereinafter referred to as the “IT Act”, forTax Deduction at Source (TDS) at the rate of 4% in respect of paymentsreceived by the Appellant from Oil and Natural Gas Company Ltd.hereinafter referred to as the “ONGC” towards work done out of Indiaas well as within India.3. The Appellant, National Petroleum Construction Company, is acompany incorporated under the laws of the United Arab Emirates (UAE)and is a tax resident of that country. The provisions of the Agreementfor Avoidance of Double Taxation hereinafter referred to as the “AADT”between India and the UAE apply in determining the taxable income ofthe Appellant under the IT Act.4. The Appellant is, inter alia, engaged in the fabrication ofPetroleum Platforms, Pipelines and other equipment, installation ofPetroleum Platforms, Submarine Pipelines, onshore and offshore oilfacilities and coating of Pipelines.5. Pursuant to different tender notices issued by ONGC fromtime to time, the Appellant submitted tenders, inter alia, for installationof Petroleum Platforms and submarine Pipelines. The tenders submittedby the Appellant were accepted and contracts were executed by andbetween the Appellant and ONGC. The first contract was executed byand 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 contracttermed as Contract No. MR/OW/MM/NHBS4WPP for Well PlatformProject-II hereinafter referred to as ‘LEWPP Contract’ pursuant to aglobal tender floated by ONGC in July 2005. This was the third contractbetween the Appellant and ONGC. Later on 23rd November 2006, theAppellant entered into another contract termed as Contract No. MR/OW/MM/C-Series/03/2006, hereinafter referred to as ‘C-SeriesContract’, for C-Series Project.7. The scope of work as described in the “General Conditions ofContract” for LEWPP Contract and C-Series Contract included “Surveys(pre-engineering, pre-construction/pre-installation and post-installation),Design, Engineering, Procurement, Fabrication, Anticorrosion & Weightcoating (in case of rigid pipeline), Load-out, Tie-down/Sea fastening,Tow-out/Sail-out, Transportation, Installation, Hook-up, Installation ofsubmarine pipelines, Installation and hook-up of submarine cables, ABCDEFGH239Modifications 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 commissioningwere done entirely in India, the platforms were designed, engineeredand fabricated overseas - at Abu Dhabi.9. The Appellant has been filing its Income Tax Returns from theAssessment Year 1997-98. The Appellant’s income has been computedon a presumptive basis by taxing the gross receipts pertaining to theactivities in India, less verifiable expenses at the rate of 10% and thereceipts pertaining to activities out of India at the rate of 1%.10. The Appellant adopted the said basis for computing itsassessable income and filed its returns for the Assessment Year 1999-2000 onwards. Accordingly the returns filed by the Appellant for theAssessment Years 2004-05, 2005-06 and 2006-07 were processed underSection 143(1) of the IT Act. However, the returns filed by the Appellantfor Assessment Years 2007-08 and 2008-09, were not accepted by theAssessing Officer, hereinafter referred to as the ‘AO’.11. The AO passed a Draft Assessment Order dated 31stDecember 2009 for the Assessment Year 2007-08 holding that theAppellant had a Fixed Place Permanent Establishment in India in theform of a Project Office at Mumbai. The AO further held that ArcadiaShipping Ltd. (ASL), agent of the Appellant had a PermanentEstablishment in India, which constituted a Dependent Agent PermanentEstablishment, hereinafter referred to as “DAPE”, of the Appellant.12. With regard to the Appellant’s contention that the fabricatedmaterial was sold to ONGC outside India, the AO found that the contractwas a turnkey and a composite contract and was not divisible as claimedby the Appellant. Accordingly, the AO held that the entire contractualreceipts including the payments for activities performed outside Indiawere taxable in India. The consideration received by the Appellant fordesign and engineering was held to be Fees for Technical Services,hereinafter referred to as the ‘FTS’. Since, the Appellant had notmaintained separate books pertaining to the contract, the AO estimatedthe Appellant’s profit at 25% of the consideration received from ONGC.13. The Appellant did not accept the Draft Assessment Orderand filed its objections before the Dispute Resolution Panel hereinafterNATIONAL PETROLEUM CONST. CO. v. DEPUTY COMM’R OF INCOMETAX, CIRCLE 2(2), INTERNATIONAL TAXATION [INDIRA BANERJEE, J.] ABCDEFGH240SUPREME COURT REPORTS[2022] 17 S.C.R.referred to as the “DRP”. The DRP held that Article 5 of the AADTprovided an inclusive definition of ‘Permanent Establishment’ (PE) andthat the Appellant’s Project Office constituted a PE of the Appellant inIndia. The DRP concurred with the AO that ASL was a DAPE of theAssessee.14. The DRP observed that pre-engineering or pre- design survey,claimed to be done by a sub-contractor employed by the Appellant, wasan integral part of the contract and the time spent by the sub- contractorwould also constitute the time spent by the Appellant in India in computingresidence in India for over nine months during the Assessment Year, interms of the AADT.15. The DRP rejected the contention that the contract was adivisible contract and the income of the Appellant for the activities doneoutside India was not taxable under the IT Act.16.The Appellant filed an appeal against the order of theassessment passed by the AO before the Income Tax Appellate Tribunalhereinafter referred to as the “ITAT”. The ITAT concurred with the AOand rejected the Appellant’s contention that it did not have a PE in India.The ITAT also concurred with the AO that the establishment of ASL inIndia was a DAPE of the Appellant.17. The ITAT, however, accepted the Appellant’s contention thatthe contract could be segregated into offshore and onshore activitiesand the Appellant’s income for the activities carried on out of India couldnot be attributed to its PE in India.18. The ITAT rejected the Appellant’s contention that the taxpayable should be computed as per the formula adopted in the precedingyears, i.e. 10% of the receipts attributable to activities in India, lessexpenses in India and 1% of the receipts attributable to activities carriedon overseas.19. By a judgment and order dated 29th January 2016, in the Appealbeing ITA No. 143 of 2013, filed by the Appellant and other relatedAppeals filed by the Revenue, the Division Bench of the High Court ofDelhi concurred with the view of the ITAT that consideration for activitiescarried on overseas could not be attributed to the Appellant’s PE inIndia. The Court observed that it was not disputed that invoices raisedby the Appellant specifically indicated whether the work was done outside ABCDEFGH241India or in India. Thus, even though the contracts might be turnkeycontracts, the value of the work done outside India was segregable.20. Two contracts were concluded by and between the Appellantand ONGC, one dated 30th September 2016, hereinafter referred to asLEWPP Contract, and the other dated 7th February 2018, hereinafterreferred to as the R-series Contract, which have led to this Appeal. TheAppellant received payments for work done under the said two contractsin the Previous/Financial Year 2019-20 corresponding to the AssessmentYear 2020-21.21. By a judgment and order dated 9th May 2017 in Writ Petitionbeing Writ Petition (C) No. 2117 of 2017, the High Court of Delhi setaside a Certificate dated 31st January 2017 issued by the RespondentNo.1 under Section 197 of the IT Act, requiring deduction of TDS at therate of 4% on all payments made by ONGC to the Appellant for activitiesout of India and in India in respect of the contract dated 30th September2016. The R-series Contract was executed after the judgment of theHigh Court dated 9th May 2017, referred to above. The High Court hadno occasion to consider the R-series contract.22. On or about 8th May 2019, the Appellant applied for a certificateunder Section 197 of the IT Act for deduction of Nil tax on paymentsreceived from ONGC for activities carried on outside India, in theFinancial Year 2019-20 in relation to the aforesaid contracts.23. The Respondent, Income Tax Authorities raised queries on itsportal, to which the Appellant responded by a letter dated 21st May 2019addressed to the Respondent No.1. On further query from the IncomeTax Department, the Appellant filed a reply on 13th June 2019 pointingout that no income from activities outside India could be brought to tax inIndia. The Appellant also submitted a table showing the similaritiesbetween the contracts forming the subject-matter of the decision of theHigh Court and the contracts in the year under consideration, that is, theFinancial Year 2019-20.24. By the said letter dated 13th June 2019, the Appellant pointedout that for over two and half months since the start of the FinancialYear 2019-20, no certificates had been issued to the Appellant underSection 197 of the IT Act as a result of which the Appellant was sufferingundue hardship as its cash flow was being hampered. The Appellant,therefore, requested the Respondent No.1 to issue certificate at theNATIONAL PETROLEUM CONST. CO. v. DEPUTY COMM’R OF INCOMETAX, CIRCLE 2(2), INTERNATIONAL TAXATION [INDIRA BANERJEE, J.] ABCDEFGH242SUPREME COURT REPORTS[2022] 17 S.C.R.earliest. On 17th June 2019, the Appellant submitted activity-wise keydates for each platform under the R-Series and LEWPP Contracts tothe Respondent No.1.25. By letter dated 22nd June 2019, addressed to the RespondentNo.1, the Appellant answered further queries. However, in view of thefinancial crunch faced by the Appellant, the Appellant requested :“The Applicant humbly submits that since it is facing financialhardship as the first quarter of FY 2019-20 has come to anend and it is yet to have the lower withholding tax certificate,the Applicant (without prejudice to its legal position), is willingto offer a concession to have the certificate at the tax rate of4% plus applicable surcharge and cess for the entirecontractual revenues, which is in line with the recentlyconcluded assessment proceedings for AY 2016-17 inApplicant’s own case, where your goodself concluded thatthe entire contractual revenues were chargeable to tax underSection 44BB of the Act at an effective tax rate of 4% plusapplicable surcharge and cess.In light of the above, it is our humble request to your goodselfto kindly issue the certificate at your earliest convenience.”26. The Appellant contends that a certificate of Nil TDS, forpayments received in respect of activities outside India, should havebeen issued to the Appellant, in deference to decisions rendered by variousAppellate Authorities from the Assessment Years 2007-08 to 2015-16,opining that income in respect of activities out of India was not taxablein India and as also the judgments of the Delhi High Court referred toabove.27. In the Assessment Year 2018-19, the Respondent had followedthe same approach as in the Assessment Year 2017-18 and issued acertificate dated 10th April 2018 under Section 197 of the Act for NilTDS in respect of payments for activities outside India. This directionwas in respect of both LEWPP Contract as well as R-Series Contract.28. However, in departure from the position taken in the previousyears, the Respondent No.1 issued a certificate dated 26th June 2019under Section 197(1) of the IT Act for the Financial Year 2019-2020corresponding to the Assessment Year 2020-2021 directing ONGC todeduct TDS at the rate of 4% on receipts in respect of activities bothoutside and inside India. ABCDEFGH24329. The Appellant filed a Writ Petition under Article 226 of theConstitution of India being Writ Petition (C) No.8527 of 2019, inter alia,challenging the said certificate dated 26th June 2019. The Writ Petitionhas been dismissed by the judgment and order impugned in this Court.30. Mr. Ganesh appearing on behalf of the Appellant forcefullyargued that the Respondent No.1 had erred in law in not granting Nilrate TDS to the Appellant for the financial year 2019-20 under Section197 of the IT Act.31. Mr. Ganesh argued that Appellant was assessed forAssessment Years 2007-08, 2008-09 and 2009-10 in respect of contractssimilar to the above noted contracts and was held not to be taxable inIndia. Even though the Assessing Authority had, from the AssessmentYear 2007-08 taken the view that revenue in respect of activities outsideIndia were taxable in India, the ITAT being the Appellate Authority, heldto the contrary. The Appellate Authority had all along taken the standthat the Appellant has no Permanent Establishment in India and no suchincome from activities outside India would be chargeable to tax in India.32. Mr. Ganesh relied upon the judgment rendered by the HighCourt in the Appellant’s own case in respect of the Assessment Years2007-08 and 2008-09 which is reported in (2016) 383 ITR 648. TheDelhi High Court analyzed the contract of the Appellant with RespondentONGC and held that the project office of the Appellant did not constitutea Fixed Base Permanent Establishment under the provisions of theDouble Taxation Avoidance Agreement. The question of splitting profitsarising from the contract into two categories, that is, profits attributableto India and profits attributable to overseas activities did not arise. Thejudgment was followed in respect of appeal of the Respondent for theAssessment Year 2009-10. Mr. Ganesh argued that R-Series and LEWPPContracts relevant to the Assessment Year in question that is AssessmentYear 2020-21 corresponding to the Previous Year 2019-20, are identicalto the contracts considered by the Appellate Authority in Appellant’sown case in relation to the Assessment Years 2007-08, 2008-09 and2009-10.33. The Delhi High Court issued notice to the Revenue Authorities,in response to which a counter affidavit was filed enumerating thegrounds and reasons justifying the issuance of the impugned certificate.34. After hearing the parties at length, the High Court held that anadministrative decision was subject to judicial review under Article 226NATIONAL PETROLEUM CONST. CO. v. DEPUTY COMM’R OF INCOMETAX, CIRCLE 2(2), INTERNATIONAL TAXATION [INDIRA BANERJEE, J.] ABCDEFGH244SUPREME COURT REPORTS[2022] 17 S.C.R.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 makingprocess. The High Court did not find any such arbitrariness in theapproach of the concerned Respondents in the exercise of theirjurisdiction, that called for interference under Article 226 of theConstitution of India. The High Court found that the reasons in the note-sheet could not be said to be so fallacious, unfair or unreasonable thatthey required intervention of the High Court.35. The High Court further observed and held:“18. Sub Section (1) of Section 195 of the Act provides thatany person responsible for paying to a non-resident, any sumchargeable to tax under the provisions of the Act, shall, atthe 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 ofa 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 regularassessment proceeding but, with determination of rate of taxdeduction. On perusal of reasons, it becomes manifest thatduring the course of enquiry under Section 197 of the Act,the petitioner was asked to furnish the details regarding thescope and nature of the aforenoted contracts. Revenuecontends that for the R-series contracts, the petitioner hasmade contradictory statement regarding commissioning periodand period of as-built documentation etc. Petitioner, in itssubmission dated 22.06.2019, contends that commissioningwork is not undertaken by them for the R-series contracts,and the same is to be performed by ONGC. Without goinginto the question as to whether the petitioner’s stand iscontradictory, we may note that the Assessing Officer whileexercising its power under Section 197, during the course ofthe enquiry, cannot undertake an exhaustive exercise todetermine this issue conclusively. We find force in thesubmissions of Mr. Raghvendra Kumar Singh that the questionas to whether the petitioner has constituted a PE, cannotpossibly be undertaken in the enquiry having regard to the ABCDEFGH245time frame permissible under law for deciding the applicationunder Section 197 of the Act. The reasons shown to us alsotake note of the fact that in the immediate preceding yearsi.e., AY-2016-17 and AY- 2017-18, for which regularassessment has been completed, petitioner has been held tohave a Permanent Establishment (PE) in India, and its totalincome from the contracts with ONGC have been held to betaxable under the IT Act. Section 44BB of the Act is applied,and 10% of the contractual receipts were considered asbusiness profits. The rate of tax being 40%, a certificate was,accordingly, issued @ 4%. For the other assessment years aswell, assessment has been completed and appeal is pendingbefore the appellate authorities. The Petitioner, obviously,disputes the finding of the Respondent as erroneous andmisplaced, on the ground that for AY- 2015-16, the firstappellate authority-following the decision of this Court inpetitioner’s own case, has held that the petitioner has no PEin India. Be that as it may, for AY-2016-17 and 2017-18, thisquestion has been determined against the petitioner. It is well-settled proposition that in tax jurisprudence, the principle ofres judicata is not applicable to income tax proceedings...[Ref: New Jehangir Vakil Mills Co. Ltd. v. CIT: [1963] 49ITR 137 (SC) (Full bench)]. “It is well settled that in mattersof taxation there is no question of res judicata because eachyear’s assessment is final only for that year and does notgovern later years, because it determines only the tax for aparticular period.” [Ref: Instalment Supply (P) Ltd. v. Unionof India : AIR 1962 SC 53 (Constitution bench)].***27. In the present case, there cannot be any dispute thatexistence of PE is required to be determined by law for eachyear separately on the basis of the scope, extent, nature andduration of activities in each year. In this regard, the contractsin question i.e. R-series contracts dated 07.02.2018 andLEWPP series contracts dated 30.09.2016 would have to betaken into consideration. Concededly, this Court in its decisiondated 09.05.2017 did not have the occasion to consider theR-series contract dated 07.02.2018. The Court onlyNATIONAL PETROLEUM CONST. CO. v. DEPUTY COMM’R OF INCOMETAX, CIRCLE 2(2), INTERNATIONAL TAXATION [INDIRA BANERJEE, J.] ABCDEFGH246SUPREME COURT REPORTS[2022] 17 S.C.R.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 Courtin its order dated 09.05.2017. Moreover, in the instant case,the reasons record that the two contracts are indivisible, andthe petitioner cannot divide the contractual receipts in twocategories viz. inside India and Outside India services. Theinstallation PE will come into existence, if “project or activitycontinues for a period of more than 9 months” under Indo-UAE DTAA. This question of fact will have to be determinedseparately for each assessment year, and we are informedthat for AY-2016-17 and AY-2017-18, the determination ispresently against the petitioner. We cannot accept thepetitioner’s contention that the assessment proceedings forthe AYs 2007-08, 2008-09 and 2009-10 have alreadydetermined this question in favour of the petitioner and thereis no change in any circumstances. This question wouldrequire to be determined and finding of the fact would haveto be arrived at, by a careful consideration of terms ofcontract, determination whereof cannot be undertaken in theproceedings under Section 197 of the Act.***29. Further, the petitioner’s contention that under each ofthe contracts, the installation activities were completed in lessthan 9 months, and that the scope of R-series contracts, didnot include commissioning activities, are all factual aspectswhich cannot be examined while exercising judicial reviewover the decision of the respondent under Section 197 of theAct.30. The petitioner has relied upon the judgments inIshikawajima-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 the facts of the presentcase. In Ishikawajima (supra), the Supreme Court held thatfor a non-resident entity to be taxed in India, it should carryon business through a permanent establishment in India, andincome taxed is on the basis of extent appropriate to the partplayed by permanent establishment in those transactions, and ABCDEFGH247that only such part of the income, as is attributable to theoperations carried out in India can be taxed in India. In thesaid case, a clear distinction could be identified betweenonshore and offshore activities. In the present case, therespondents contend that no such distinction is clearlyidentifiable from the contracts in question. Further, the saidcases (Ishikawajima (supra) and Hyundai heavy Industries(supra)) relate to assessment proceedings, whereas, in thepresent case, we are concerned with proceedings for grantof certificate under section 197. The scope of enquiry andinvestigation in both these proceedings is different, especiallyafter the introduction of Explanation 2 to section 195 and atthe stage of section 197 proceedings, the question of existenceof permanent establishment is not required to be gone into.Therefore, having regard to the aforesaid provision, wecannot direct the Revenue to hold that the petitioner does nothave a PE and give the consequent effect of such findingwhile deciding an application under Section 197 of the Act.Determination of all these questions would have to beundertaken during the course of regular assessment.***32. ...However, we cannot ignore the fact that Petitioner tookcategorical stand and prevailed upon the revenue to acceptthe declaration made in the said communication. Althoughthe declaration was qualified, yet, since the petitionerrequested the respondent to deduct the tax @ 4% + applicablesurcharge & cess for the entire contractual revenues, revenuewas justified in accepting the same and the petitioner cannotbe permitted to resile there from, once the department hasaccepted petitioner’s proposal.”36. It is well settled that the obligation to deduct TDS is limited toappropriate proportion of income chargeable to tax under the IT Actthat 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 taxat source if such sum is not chargeable to tax under the IT Act, as heldby this Court in G E India Technology Centre Pvt. Ltd. v.Commissioner of Income Tax and Another1.1 (2010) 327 ITR 456 (SC)NATIONAL PETROLEUM CONST. CO. v. DEPUTY COMM’R OF INCOMETAX, CIRCLE 2(2), INTERNATIONAL TAXATION [INDIRA BANERJEE, J.] ABCDEFGH248SUPREME COURT REPORTS[2022] 17 S.C.R.37. The High Court rightly held that the question of whether theAppellant had PE, could not possibly be undertaken in an enquiry forissuance of Certificate under Section 197 of the IT Act, having regard tothe time-frame permissible in law for deciding an application, more so,when regular assessment had been completed in respect of the immediatepreceding year and the Appellant found to be taxable under the IT Actat 10% of the contractual receipts. The Assessing Authority found thatthe Appellant had PE in India in the concerned Assessment Years. Theappeal of the Appellant is possibly pending disposal.38. As held by the High Court, it is well settled that the principlethat res judicata is not applicable to income tax proceedings becauseassessment for each year is final only for that year and does not coverlater years.39. Whether the Appellant had PE or not, during the AssessmentYear in question, is a disputed factual issue, which has to be determinedon the basis of the scope, extent, nature and duration of activities inIndia. Whether project activity in India continued for a period of morethan nine months, for taxability in India in terms of the AADT, is a questionof fact, that has to be determined separately for each Assessment Year.40. It may be true, that for a non-resident entity to be taxed inIndia, it should carry on business through a Permanent Establishment inIndia, as held by this Court in Ishikawajima-Harima Heavy IndustriesLtd. v. Director of Income Tax, Mumbai2 and Commissioner ofIncome Tax and Anr. v. Hyundai Heavy Industries Co. Ltd.3.However, the judgments would only be attracted if there were a definitefinding that the Appellant did not have any PE in India during theAssessment Year in question, which as stated above, would also dependon the duration and scope of the activities in India. The nature, extentand the duration of work done in India, could vary from year to year.41. It is reiterated that in the immediately preceding AssessmentYear, the Assessing Authority proceeded to assess the Appellant on thebasis that it did have a Permanent Establishment (PE) in India. Moreover,as rightly held by the High Court, Ishikawajima-Harima HeavyIndustries (supra) and Hyundai Heavy Industries (supra) related toassessment proceedings whereas this case pertains to issuance of2 (2007) 288 ITR 408 (SC)3 (2007) 291 ITR 482 (SC) ABCDEFGH249certificate under Section 197 of the IT Act. The scope of enquiry andinvestigation in proceedings for grant of Certificate under Section 197 ofthe IT Act is different from the scope of assessment proceedings. TheHigh Court rightly declined to direct the Revenue to hold that theAppellant did not have PE in India.42. By its letter dated 22nd June 2019, referred to above, theAppellant made a request to the Revenue for issuance of Certificateunder Section 197(1) of the IT Act permitting deduction of TDS at therate of 4% plus applicable surcharge and cess, for all contractual receipts,in line with assessment proceedings for the Assessment Year 2016-2017without prejudice to its legal position, since the Appellant had been facingfinancial hardship and urgently required funds. On 26th June 2019, theRespondent No.1 issued the impugned Certificate directing ONGC todeduct TDS at the rate of 4% for all sums receivable in respect ofactivities both outside and inside India.43. The impugned Certificate being as per the request of theAppellant, it is not open to the Appellant to make a volte-face andchallenge 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 underSection 197 of the IT Act, for TDS at the rate of 4% on all receipts waswithout prejudice to the rights in law and contentions of the Appellant.Such a request without prejudice to the rights and contentions of theAppellant would not operate as estoppel against the Appellant in anyAssessment Proceedings, Appellate proceedings or any other proceedings.However, the impugned Certificate having been issued as per theAppellant’s own request, the Appellant is estopped from questioning theimpugned Certificate by initiation of proceedings under Article 226 ofthe Constitution of India. The Appellant itself made a request forCertificate for TDS at the rate of 4% on all receipts.45. There is no such infirmity in the reasoning of the High Courtwhich calls for interference of this Court under Article 136 of theConstitution of India. As rightly held by the High Court, since the Appellantrequested issuance of Certificate for deduction of TDS at 4% of taxablevalue it is not for the Appellant to challenge the certificate. Moreover, itappears that in the final assessment for one or two preceding AssessmentYears it was found that the Appellant did have PE in India. Appeals arepending. In any event, Tax deducted at source is adjustable against theNATIONAL PETROLEUM CONST. CO. v. DEPUTY COMM’R OF INCOMETAX, CIRCLE 2(2), INTERNATIONAL TAXATION [INDIRA BANERJEE, J.] ABCDEFGH250SUPREME COURT REPORTS[2022] 17 S.C.R.tax, if any, ultimately assessed as payable by the Assessee and anyexcess tax deducted is refundable with interest. Interference is notwarranted at this stage.46. Moreover, in course of hearing, Counsel for the Revenuehanded us a Draft Assessment Order, issued in respect of the AssessmentYear in question, that is 2020-21, holding that the Appellant had PE inIndia and was liable to tax in India under the IT Act.47. Needless to mention that any observation made by this Courtor by the High Court will not influence the final assessment which has tobe made in accordance with law taking into account all relevant factsand circumstances or any appeal therefrom. In the event, it is found thatthe Appellant is not liable to tax, the Appellant will be entitled to refundof TDS with interest.48. The Appeal is dismissed.J. K. MAHESHWARI, J.Leave granted.2. After going through the judgment and the opinion formed byesteemed Justice Ms. Indira Banerjee, I respectfully disagree to theconclusions as drawn for the reasons to follow.3. On perusal of detailed facts as stated in the order, it is clearthat appellant-company is incorporated under the laws of United ArabEmirates (in short ‘UAE’) and is engaged in the business of Surveys(pre-engineering, pre-construction/pre-installation and post-installation),Design, Engineering, Procurement, Fabrication, Anticorrosion & Weightcoating (in case of rigid pipeline, Load-out, Tie-down/Sea fastening Tow-out/Sail-out, Transportation, Installation, Hook-up, Installation of submarinepipeline, installation and hook-up of submarine cables, Modifications onexisting facilities, Testing, Pre-commissioning, Commissioning of entirefacilities as described in the biding document. Since the year 2007-2008,the ONGC was granting contract to the appellant to carry out the work.For the assessment years 2007-2008 and 2008-2009, the C-Series andLEWPP contracts were granted to the appellant on year to year basis.After completion of those contracts as per the record of the case, thepayment of zero percent tax on the income outside India in terms of theassessments were in question. The High Court of Delhi passed the orderon 29.01.2016 for the said assessment years i.e. 2007-2008 and 2008- ABCDEFGH2512009 to the said contracts wherein it was held that assessee did not havethe PE in India and earned profit attributable to that PE and in fact theincome was from the activities carried out outside of India. However,the orders of assessment for the years 2007-2008 and 2008-2009respectively as well as the corresponding orders passed by the ITAT inthe corresponding appeals were set aside. It has been brought toknowledge that Civil Appeal No.8761/2016 filed against the said order ispending 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 ChapterXIV of the IT Act, which includes return of income, permanent accountnumber, scheme for submission of returns through tax return and itspreparation, assessment, rectification of mistake etc. While the presentcase relates to certificates for deduction at lower rate or no deduction ofincome at source, which falls in Chapter XVII of the IT Act. Therefore,what is the recourse and considerations available to the assessing officerat the time of issuance of the certificate under Section 197(1) of the ITAct 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 thepresent case, some provisions are required to be referred. As per Section6(3) of the IT Act for the resident in India, the income inside the countryis taxable. Under sub-section (3), it is specified that if any Indian companyis said to be a resident in India in any previous year or its place foreffective management in that year was in India the income of such istaxable. By the explanation, the place of effective management has beenclarified whereby it is clear that if any commercial decision necessaryfor the conduct of a business of an entity as a whole or in substance ismade, 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 theother provisions of the Act, the total income of any previous year of aperson who is a non-resident includes all income from whatever sourcesderived either is received or is deemed to be received in India in suchyear by or on behalf of such person; or accrues or arises or is deemed toaccrue or arise to him in India during such year. Explanation (1) of itclarifies that income accruing or arising outside India shall not be deemedto be received in India within the meaning of this section on account ofthe fact that it has been taken into account in the balance sheet preparedin India. Explanation (2) removes the doubts whereby the income whichNATIONAL PETROLEUM CONST. CO. v. DEPUTY COMM’R OF INCOMETAX, CIRCLE 2(2), INTERNATIONAL TAXATION [J. K. MAHESHWARI, J.] ABCDEFGH252SUPREME COURT REPORTS[2022] 17 S.C.R.has been included in the total income of a person on the basis that it hasaccrued or arisen or is deemed to have accrued or arisen to him shall notagain be so included on the basis that it is received or deemed to bereceived by him in India. The aforesaid provision has been brought withan intent to check the double taxation. Thus, from above for clarity, it isreiterated that any income outside India to a non-resident would not betaxable in India even if it is specified in the balance sheet prepared inIndia.7. By a judgment of this Court in the case of G.E. IndiaTechnology Centre Pvt. Ltd. (supra) in the context of Section 195(1),interpretation of the word “chargeable” under the provisions of IT Acthas been made by which it is clarified that a person paying interest orany other sum to a non-resident is not liable to deduct tax if such sum isnot chargeable to tax under the I.T. Act. Further, the Court clarifiedwhere there is no obligation on the part of the payer and no right toreceive the sum by the recipient and that the payment does not arise outof any contract or obligation between the payer and the recipient but ismade voluntarily, such payments cannot be regarded as income underthe I.T. Act.8. It is not in dispute in the present case that incorporation of theappellant’s company is under the laws of UAE. In the context, the treaty/agreement entered by India with foreign countries including UAE, arerecognized under Chapter IX starting from Section 90 onwards and foravoidance of double tax, the procedure has been prescribed in ChapterX. In the above said agreement/treaty between India and UAE knownas Agreement of Avoidance of Double Taxation (in short “AADT”)was executed. Clause (1) and (6) of Article 7 of the said agreement arerelevant to the present case, which are reproduced for ready referenceas under:“(1). The profits of an enterprise of a Contracting State shallbe taxable only in that State unless the enterprise carries onbusiness in the other Contracting State through a permanentestablishment situated therein. If the enterprise carries onbusiness as aforesaid, the profits of the enterprise may betaxed in the other State but only so much of them as isattributable to that permanent establishment.”“(6). For the purposes of preceding paragraphs, the profitsto be attributed to the permanent establishment shall be ABCDEFGH253determined by the same method year by year unless there isgood and sufficient reason to the contrary.”Perusal of the aforesaid makes it clear that enterprises of acontracting state shall be taxable in the said state unless the business iscarried out in other contracting state through a permanent establishmentsituated there. It is further clarified that the profit of the enterprises maybe 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 byan entity which is not incorporated in India but the profit earned for acontract carried out outside India by such entity shall not be taxable.The issue regarding establishment of PE at a place where the work isrequired to be executed, and profit earned attributable to that PE is amatter of enquiry based on the material brought on record duringassessment for the said assessment year.9. But for the purpose of tax deduction at source at lower rate orno deduction during contractual period, the assessing officer has beenempowered under Section 197(1) to issue a certificate to that effect inthe manner so prescribed as specified in Chapter XVII of Income TaxAct which relates to collection and recovery of tax. On perusal of thescope of the said Chapter, it is clear that the assessment in respect ofthe income is required to be made later in relevant assessment year butthe tax on such income may be payable by deduction at source by wayof advance payment or as specified in Sub-Section 1A of Section 92 ofIT Act as the case may be. As the present case relates to quashment ofthe TDS certificate dated 26.06.2019 and seeking relief to issue thefresh certificate under Section 197, therefore, for ready reference, it ishereby reproduced as thus:197. Certificate for deduction at lower rate. (1) Subject torules made under sub-section (2A), where, in the case of anyincome of any person or sum payable to any person, income-tax is required to be deducted at the time of credit or, as thecase may be, at the time of payment at the rates in force underthe 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 satisfiedthat the total income of the recipient justifies the deduction ofNATIONAL PETROLEUM CONST. CO. v. DEPUTY COMM’R OF INCOMETAX, CIRCLE 2(2), INTERNATIONAL TAXATION [J. K. MAHESHWARI, J.] ABCDEFGH254SUPREME COURT REPORTS[2022] 17 S.C.R.income-tax at any lower rates or no deduction of income-tax,as the case may be, the Assessing Officer shall, on anapplication made by the assessee in this behalf, give to himsuch certificate as may be appropriate.(2) Where any such certificate is given, the person responsiblefor paying the income shall, until such certificate is cancelledby the Assessing Officer, deduct income-tax at the ratesspecified in such certificate or deduct no tax, as the case maybe.(2A) The Board may, having regard to the convenience ofassessees and the interests of revenue, by notification in theOfficial Gazette, make rules specifying the cases in which,and the circumstances under which, an application may bemade for the grant of a certificate under sub-section (1) andthe conditions subject to which such certificate may be grantedand providing for all other matters connected therewith.Bare reading of it makes clear that in the case of any income ofthe person, income tax is required to be deducted at the time of credit oras the case may be at the time of payment at the rates in force as pervarious sections specified, including Section 195 subject to the rules madeunder Sub-Section 2A. The rules have been framed to carry out thepurpose of the act which are known as Income Tax Rules, 1962. Thepresent case relates to Section 195 of the IT Act which pertains to thepayment of tax deducted at source by non-residents. As per the provisionof Section 197, if the assessing officer is satisfied that the total incomeof the recipient justifies any lower rate or no deduction of income tax asthe case may be, he shall issue a certificate to the assessee on anapplication submitted by him. The said certificate shall be valid until it iscancelled by the assessing officer. Section 2A was introduced conferringpowers to the Board having regard to the convenience of the assesseeand the interest of revenue, and the rule is made to submit applicationand the conditions for issuance of certificate, notifying it in OfficialGazette. Pursuant thereto, a notification dated 29.03.2011 was publishedin the Official Gazette specifying the cases and the circumstances underwhich the application may be made for grant of certificate and, theconditions for satisfaction of assessing officer who may grant certificate.10. By way of the said notification dated 29.03.2011, amendmentin the Income Tax Rules, 1962 was made and these Rules are known as ABCDEFGH255Income Tax (Second Amendment) Rules, 2011 by which Rule 28 AAhas been added. The said rule was further amended by notification dated25.10.2018. The said amended rules are relevant for this case, however,reproduced as thus:“Certificate for deduction at lower rates or no deduction oftax from income other than dividends.28AA . (1) Where the Assessing Officer, on an applicationmade by a person under sub-rule (1) of rule 28 is satisfiedthat existing and estimated tax liability of a person justifiesthe deduction of tax at lower rate or no deduction of tax, asthe case may be, the Assessing Officer shall issue a certificatein accordance with the provisions of sub-section (1) of section197 for deduction of tax at such lower rate or no deductionof tax.(2) The existing and estimated liability referred to in sub-rule(1) shall be determined by the Assessing Officer after takinginto consideration the following:—(i)tax payable on estimated income of the previous yearrelevant to the assessment year;(ii)tax payable on the assessed or returned 2[or estimatedincome, as the case may be, of last four] previous years;(iii)existing liability under the Income-tax Act, 1961 andWealth-tax Act, 1957;(iv)advance tax payment 3[tax deducted at source and taxcollected at source for the assessment year relevant tothe previous year till the date of making applicationunder 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 previousyear as may be specified in the certificate, unless it iscancelled by the Assessing Officer at any time before theexpiry of the specified period.[‘(4) The certificate for deduction of tax at any lower ratesor no deduction of tax, as the case may be, shall be issuedNATIONAL PETROLEUM CONST. CO. v. DEPUTY COMM’R OF INCOMETAX, CIRCLE 2(2), INTERNATIONAL TAXATION [J. K. MAHESHWARI, J.] ABCDEFGH256SUPREME COURT REPORTS[2022] 17 S.C.R.direct to the person responsible for deducting the tax underadvice to the person who made an application for issue ofsuch certificate:Provided that where the number of persons responsible fordeducting the tax is likely to exceed one hundred and thedetails of such persons are not available at the time of makingapplication with the person making such application, thecertificate for deduction of tax at lower rate may be issued tothe person who made an application for issue of suchcertificate, authorising him to receive income or sum afterdeduction of tax at lower rate.(5) The certificates referred to in sub-rule (4) shall be validonly with regard to the person responsible for deducting thetax and named therein and certificate referred to in provisoto the sub-rule (4) shall be valid with regard to the personwho 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 casemay be, shall lay down procedures, formats and standardsfor issuance of certificates under sub-rule (4) and provisothereto and the Principal Director General of Income-tax(Systems) or the Director General of Income-tax (Systems)shall also be responsible for evolving and implementingappropriate security, archival and retrieval policies in relationto the issuance of said certificate.”11. From the above, it is clear for issuance of a certificate underSection 197 of the IT Act, an application shall be made to assessingofficer under sub-rule (1) of Rule 28. The assessing officer afterrecording satisfaction that existing and estimated tax liability justifies thededuction of tax at lower rate or no deduction of tax as the case may beshall issue certificate. While exercising the power to issue a certificate,the assessing officer is required to follow the procedure as per sub-rule(2). The assessing officer shall consider the existing and estimated liabilitythat what may be tax payable on estimated income of the previous year;tax payable on the assessed or returned income of the last four yearsfrom previous year; existing liability under the IT Act; advance tax paymenti.e. tax deducted and collected at source for the assessment year relevantto the previous year till the date of making application under sub-rule (1) ABCDEFGH257of Rule 28. Thus, for the purpose of issuance of certificate under ChapterXVII of Section 197 of the IT Act, the procedure for determination hasbeen prescribed to the assessing officer on which satisfaction may berecorded by him.12. It is further required to say that for assessment under Section143, the assessment of total income or loss may be computed by theassessing officer in a return filed by the assessee for the said assessmentyear after making adjustment and disallowing exemptions wronglyclaimed. Thereafter, the recovery can be made by an order of thecompetent officer as per Second Schedule of the IT Act read withSections 222 and 276 alongwith Sections 220 & 221 with interest andpenalty. Thus, in my considered view the issuance of the certificateunder Section 197(1) is based on the existing and estimated tax liabilityafter recording satisfaction by assessing officer following the procedureso prescribed, in rules, but the procedure for assessment as specified inChapter XIV of the IT Act is different.13. The High Court in the impugned order relied upon theproceedings of the Revenue Department, which has been referred inpara 10 of the judgment. As per the proceedings referred, the departmenthas acknowledged the High Court order dated 29.01.2016 and said thatfor assessment years 2007-2008 to 2010-2011 there was no PE in India,but the department filed the appeal C.A. No.8761/2016 is pending beforethis Court. In para 10(7), the High Court further referred the decision ofDelhi High dated 09.05.2017 passed in W.P.(C) No.2117/2017 and CMNo.9268/2017. The said judgment is solely on the issue of issuance ofthe certificate under Section 197 relates to the financial year 2016-2017.As per the ratio of the said judgment, it is clear that the certificate issuedby the respondent no.1 regarding deductions of the TDS at the rate of4% on the entire payment made by the ONGC was set aside. Followingthe said decision, the department issued the certificate for financial year2016-2017 at the rate of 4% excluding surcharge and cess for insideIndia revenue and at the rate of 0% for outside India revenue. Furtherfor financial years 2017-2018 and 2018-2019 certificates were issuedfollowing the said decision of Delhi High Court for both type of contractsi.e. LEWPP and R-Series. Thereafter, it was recorded that assessmentsfor assessment years 2015-2016 and 2016-2017 have been completedwith a finding that activities of the appellant were covered under Section44BB of the IT Act. It was further recorded that the assessment forNATIONAL PETROLEUM CONST. CO. v. DEPUTY COMM’R OF INCOMETAX, CIRCLE 2(2), INTERNATIONAL TAXATION [J. K. MAHESHWARI, J.] ABCDEFGH258SUPREME COURT REPORTS[2022] 17 S.C.R.assessment year 2017-2018 was selected under CASS which is stillpending. Thereafter, noting was made that it is difficult to bifurcate therevenue generated by onshore and offshore activities. However, therate of deduction proposed was at the rate of 4%. The relevant excerptof note sheets further reflect that the demand of existing liability wasRs.35.88 crores for the year 2015-16 and 2016-17 but later it was reducedto Rs.2.67 crores out of which Rs.2.63 crores pertained to assessmentyear 2017-18 which was still under scrutiny for assessment, thus thereappear no existing demand. The said note sheets of the Revenue do notreflect that clause (i), (ii), (iii) and (iv) of Rule 28AA(2) of Rules regardingestimated and assessed liability of last four previous years; existing liabilityand advance tax payment i.e. deducted and collected at source till thedate of submitting application have been considered for determination,and the assessing officer had applied its mind prior to issuance of desiredcertificate.14. On perusal of the findings recorded in the impugned order, itreveals that Delhi High Court made unreasonable attempt to distinguishprevious order dated 09.05.2017 relying the note sheets of the revenueand tried to distinct LEWPP and R-Series contracts. In my consideredview on admitting the certificates @ 0% tax deductions for both LEWPPand R-Series contracts for the preceding financial years, the High Courtwas not justified to make distinction between two types of contracts. Infact the Court must see the satisfaction recorded by the assessing officerafter determination of the issues specified in Rule 28AA(2). The appellantreiterated that the terms of LEWPP contract and R-Series contract wereidentical while department without disputing the said fact relied upon theorders of assessment passed in previous years without bringing on recordthe fact of estimated liability. In my view, distinction drawn, acceptingthe contention of the revenue by the High Court ignoring admission ofissuing certificate for both types of contracts is completely misplaced.In fact, the certificate under Section 197(1) is issued during a financialyear and on closing of the said financial year, assessment may be madeafter submission of the return of income and documents with respect tothe income from the contract of that particular year. The departmentmay enquire about establishment of PE and income attributable to thatPE in assessment proceeding but while dealing the issue of issuance ofcertificate under Section 197(1) relying upon said issues by the HighCourt is not justified. During course of hearing, the counsel for theappellant handed over two orders dated 08.09.2021 passed by ABCDEFGH259Commissioner of Income Tax (Appeals) for assessment year 2016-2017and 2017-2018 allowing the appeals filed by the appellant challengingthe assessment order for respective assessment year. While allowingthe appeal, Commissioner of Income Tax held that the appellant did nothave PE during relevant financial year and accordingly in absence ofPE contract receipts were not taxable in India.15. The record of the case indicates that for the financial year2017-18 two certificates each dated 08.06.2017 (Annexures P-6 & P-7) were issued for zero TDS which is related to the assessment year2018-19. Similarly, for financial year 2018-19 (assessment year 2019-20) two certificates dated 10.04.2018 and 08.05.2019 (Annexures P-8& P-9 respectively) were issued for zero TDS. Therefore, after theorder of the High Court dated 09.05.2017, it may be a relevantconsideration to assessing officer to record satisfaction, which has notbeen considered by the High Court. The reply of the appellant dated22.06.2019 has been referred in the impugned order stating that theappellant reserve its right subject to legal objections and requested forissuance of certificate at the rate of 4% plus applicable surcharges andcess because of financial hardship. In my opinion, the said letter cannotinfluence the wisdom of the Court, where the prescribed procedure underRule 28AA has not been followed by the assessing officer. However, onthe basis of letter dated 22.06.2019 no lineage contrary to prescribedprocedure can influence the Court.16. As per discussion made above, in my view, since there was nochange in circumstances and the situation of the appellant in the financialyears 2017-2018 and 2018-2019 (assessment years 2018-19 and 2019-20) respectively and at the financial year 2019-20 in question (assessmentyear 2020-21), are the same, however, the principle of consistency oughtto be followed while considering the application under Section 197 of theIT Act. This Court in the case of M/s Radhasoami Satsang, SaomiBagh, Agra v. Commissioner of Income Tax, (1992) 1 SCC 659 hascategorically upheld the principle of consistency in following words:“16. We are aware of the fact that strictly speaking resjudicata does not apply to income tax proceedings. Again,each assessment year being a unit, what is decided in oneyear may not apply in the following year but where afundamental aspect permeating through the differentassessment years has been found as a fact one way or theNATIONAL PETROLEUM CONST. CO. v. DEPUTY COMM’R OF INCOMETAX, CIRCLE 2(2), INTERNATIONAL TAXATION [J. K. MAHESHWARI, J.] ABCDEFGH260SUPREME COURT REPORTS[2022] 17 S.C.R.other and parties have allowed that position to be sustainedby not challenging the order, it would not be at all appropriateto allow the position to be changed in a subsequent year.17. On these reasonings in the absence of any material changejustifying 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 reopenedand contrary to what had been decided by the Commissionerof Income Tax in the earlier proceedings, a different andcontradictory stand should have been taken. We are, therefore,of the view that these appeals should be allowed and thequestion should be answered in the affirmative, namely, thatthe Tribunal was justified in holding that the income derivedby the Radhasoami Satsang was entitled to exemption underSections 11 and 12 of the Income Tax Act of 1961.18. Counsel for the Revenue had told us that the facts of thiscase being very special nothing should be said in a mannerwhich would have general application. To are inclined toaccept this submission and would like to state in clear termsthat the decision is confined to the facts of the case and maynot be treated as an authority on aspects which have beendecided for general application”17. Further, upholding the dictum laid down in Radhasoami (supra),in case of Bharat Sanchar Nigam Limited and Anr. v. Union ofIndia and Ors., (2006) 3 SCC 1, this Court has held that if facts andlaw in a subsequent assessment year are the same, no authority whetherquasi-judicial or judicial can generally be permitted to take a differentview in following words:“20. The decisions cited have uniformly held that res judicatadoes not apply in matters pertaining to tax for differentassessment years because res judicata applies to debar courtsfrom entertaining issues on the same cause of action whereasthe cause of action for each assessment year is distinct. Thecourts will generally adopt an earlier pronouncement of thelaw or a conclusion of fact unless there is a new ground urgedor a material change in the factual position. The reason whythe courts have held parties to the opinion expressed in adecision in one assessment year to the same opinion in a ABCDEFGH261subsequent year is not because of any principle of res judicatabut because of the theory of precedent or the precedentialvalue of the earlier pronouncement. Where facts and law in asubsequent assessment year are the same, no authority whetherquasi-judicial or judicial can generally be permitted to takea different view. This mandate is subject only to the usualgateways of distinguishing the earlier decision or where theearlier decision is per incuriam. However, these are fettersonly on a coordinate Bench which, failing the possibility ofavailing of either of these gateways, may yet differ with theview expressed and refer the matter to a Bench of superiorstrength or in some cases to a Bench of superior jurisdiction.”18. In view of the foregoing discussion, in my considered opinionthe order passed by the High Court is without considering the perspectiveand scope of issuance of the certificate for deduction of tax at lowerrate or no deduction at tax and also without following the prescribedprocedure. The High Court has wrongly distinguished the previousjudgement dated 09.05.2017 on the premises which is not tenable, andrelied upon undertaking dated 22.06.2019 of appellant submitted perforce.After due consideration in my view High Court has committed error indismissing the writ petition; therefore, I am unable to concur the opinionof the esteemed sister Judge.19. During hearing, it is said that against the previous judgment ofDelhi High Court dated 29.01.2016 C.A. No.8761/2016 is pending, whichrelates to assessment orders pertaining to financial years 2007-2008 to2009-2010, but it cannot be connected to the issue of certificate underSection 197(1) of the IT Act for the year 2019-2020. The other judgmentof Delhi High Court dated 09.05.2017 directly deals the issuance of thecertificate under Section 197(1) of the IT Act. For the reasons mentionedin detail I endorse the view taken by Delhi High Court as correct andplausible view. Thus, it is made clear here that the TDS certificate grantedunder Section 197 (1) shall be provisional subject to the assessment ofthe returned income.20. In view of the foregoing, the appeal filed by the appellant ishereby allowed setting aside the order of the High Court with a directionto the respondent to reconsider the application of the appellant and issuecertificate following the prescribed procedure.NATIONAL PETROLEUM CONST. CO. v. DEPUTY COMM’R OF INCOMETAX, CIRCLE 2(2), INTERNATIONAL TAXATION [J. K. MAHESHWARI, J.] ABCDEFGH262SUPREME COURT REPORTS[2022] 17 S.C.R.21. Resultantly, this appeal is hereby allowed to the extent indicatedhereinabove.O R D E RLeave granted.In view of the difference of opinion between us, the Registry isdirected to place the matter before Hon’ble the Chief Justice of India sothat an appropriate Bench could be constituted to hear the matter.Divya Pandey and Amarendra KumarMatter to be placed before Hon’ble CJI for(Assisted by : Rituja Choukesy, LCRA)constitution of appropriate Bench.