Facts of the Case

The Revenue filed three appeals under Section 260A of the Income-tax Act, 1961 being ITA Nos. 361/2025, 362/2025 and 368/2025, challenging the common order dated 22.06.2023 and the order dated 21.06.2023 passed by the Income Tax Appellate Tribunal. The appeals related to Assessment Years 2018–19 and 2019–20 (ITA Nos. 361/2025 and 368/2025) and Assessment Year 2020–21 (ITA No. 362/2025.

The respondent assessee, National Petroleum Construction Company, a UAE-based entity, executed offshore and onshore projects in India for clients such as ONGC/L&T through a project office. The Assessing Officer held that the assessee constituted a Permanent Establishment in India and attributed profits accordingly. The Commissioner of Income Tax (Appeals) deleted the additions by following binding decisions in the assessee’s own case for earlier assessment years. The ITAT dismissed the Revenue’s appeals holding that the issue was fully covered in favour of the assessee.

Issues Involved

Whether the assessee had a Permanent Establishment in India in the form of a fixed place PE, installation PE or dependent agent PE under Article 5 of the India–UAE DTAA for Assessment Years 2018–19 to 2020–21, and whether any substantial question of law arose in view of binding precedent for earlier years.

Appellant’s Arguments

The Revenue contended that the Tribunal erred in following earlier orders and that the assessee’s project office and activities in India constituted a Permanent Establishment, warranting attribution of profits. It was argued that the Tribunal failed to appreciate the nature of offshore and onshore activities undertaken during the relevant assessment years.

Respondent’s Arguments

The assessee submitted that the issue of existence of a Permanent Establishment stood conclusively settled in its favour by the Delhi High Court in its own case for Assessment Years 2007–08 and 2008–09, and thereafter consistently followed by the ITAT and the High Court for subsequent years up to Assessment Year 2017–18. It was contended that there was no material change in the business model or nature of activities during the years under consideration.

Court Order / Findings

The Delhi High Court noted that the Tribunal had relied upon binding decisions in the assessee’s own case and that the Assessing Officer himself recorded that the nature of activities for the relevant assessment years was identical to those in earlier years. The Court observed that the existence of a Permanent Establishment for Assessment Years 2010–11 to 2017–18 had already attained finality up to the High Court.

The Court further noted that although the Revenue had informed that appeals against earlier judgments were pending before the Supreme Court, no stay had been granted. The High Court reiterated that in National Petroleum Construction Company v. DIT (383 ITR 648), it had conclusively held that the assessee did not have a fixed place PE, installation PE or dependent agent PE in India under Article 5 of the India–UAE DTAA, and consequently no income could be attributed to India.

Applying the principle of consistency and judicial discipline, the Court held that no substantial question of law arose for consideration in the present appeals.

Important Clarification

The Court clarified that where an issue of Permanent Establishment has been conclusively decided in favour of an assessee for earlier assessment years and there is no material change in facts or law, the Revenue cannot re-agitate the same issue in subsequent years, particularly in the absence of any stay by the Supreme Court.

Final Outcome

All three appeals filed by the Revenue were dismissed. The Delhi High Court upheld the orders of the Income Tax Appellate Tribunal and held that National Petroleum Construction Company did not have a Permanent Establishment in India for Assessment Years 2018–19, 2019–20 and 2020–21, thereby deciding the matter in favour of the assessee and against the Revenue.

Link to download order - https://www.mytaxexpert.co.in/uploads/1769678932_THECOMMISSIONEROFINCOMETAXINTERNATIONALTAXATION2VsNATIONALPETROLEUMCONSTRUCTIONCOMPANY.pdf

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