The Appeal and its Grounds

Vetco Gray Pte. Ltd., the appellant, sought to contest the order dated March 24, 2022, imposed by the Commissioner of Income Tax (International Taxation)-3, Delhi. It was contended that the order suffered from jurisdictional oversight, legal errors, and was void ab initio. The appellant advanced several legal arguments, raising questions about the lack of personal hearing, erroneous exercise of revisionary powers, and the misapplication of income attribution principles among others.

Assessment and Revisionary Proceedings

The root of the contention lay in the assessment proceedings for the year under dispute, where the appellant’s income from offshore supplies was not accepted as non-taxable by the assessing officer. Instead, the officer deemed a percentage of gross receipts from offshore supplies as taxable in India, attributing it to the services performed by the appellant’s Permanent Establishment (PE) in India.

Subsequently, the CIT, under Section 263 of the Act, called into question the assessment order for being erroneous and prejudicial to the interests of revenue. The CIT proposed a re-assessment, advocating for a higher rate of tax applicability on the gross receipts from offshore supplies and on alleged rental income from equipment, which was hotly disputed by Vetco Gray.

The Tribunal’s Decision

The tribunal meticulously reviewed the submissions, relevant legal provisions, past precedents, and the facts of the case. It concluded that the assessing officer’s decision was based on a consistent approach taken in previous years, hence cannot be termed erroneous within the meaning of Section 263.

Moreover, the tribunal found that the CIT had grossly misapprehended the facts regarding the alleged rental income from Halliburton Offshore Services. Consequently, the tribunal quashed the revisionary order under Section 263, thus restoring the original assessment order for AY 2017-18.

Conclusion

This landmark judgment underscores the tribunal’s pivotal role in adjudicating tax disputes, its interpretation of complex tax laws, and its critical examination of the exercise of revisionary powers under Section 263 of the Income-Tax Act, 1961. The case of Vetco Gray Pte. Ltd. vs CIT (International Taxation), Delhi-3, serves as a significant precedent in international taxation jurisprudence.