TMI Blog2010 (9) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... lity till much after the relevant assessment years, i.e., 1993-94, 1994-95 and 1995-96. The said reversal by the Com-missioner of Income-tax (Appeals) attained finality only on May 17, 1999, when the order of the Income-tax Appellate Tribunal rejecting the reference application of the Department under section 256(1) was served upon the assessee - Held that: that the deduction under section 35AB was liable to be allowed in the relevant assessment years and the refund, consequent upon the reversal of the Assessing Officer's TDS orders under section 195 by the CIT (A), became liable to be added under section 41 only on and after May 17, 1999 when such reversal order attained finality to the knowledge of the assessee - Decided in the favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de paragraph 13.5 of the said agreement. 6. After approval of the said technical collaboration agreement by the appropriate authorities, the assessee applied under section 195(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act" for short) to the Assessing Officer (hereinafter referred to as "the AO"), for grant of per-mission to remit the said consideration without deduction of tax at source. 7. The Assessing Officer passed orders directing the assessee to deduct TDS under section 195(2) of the Act directing the assessee to deduct TDS while remitting the payments to ESW. 8. As a result the assessee paid certain amounts by way of income-tax on the remittances and also paid some further amounts by way of "research ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Department under section 256(1) by the Income-tax Appellate Tribunal were served upon the assessee on May 17, 1999, that is to say in the financial year relevant to the assessment year 2000-01. Thereupon the assessee credited the refunded amounts in its audited accounts drawn up for the said financial year ending March 31, 2000 corresponding to the assessment year 2000-01 in accordance with section 41 of the Act. 12. The following questions of law have been raised in these appeals : (1) Whether deduction under section 35AB was permissible only in respect of the remittances made by the assessee to ESW or it was permissible in respect of the income-tax paid by the assessee on the said remittances in terms of the collaborat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore the word "consideration" would include the entire obligation of the assessee, with-out which the assessee would not be able to acquire the know-how. On the facts of this case the obligation of the assessee under the agreement with ESW extended not merely to remitting the amount of two million DM to ESW, but also extended to payment of taxes which would include the income-tax as well as the research and development cess. It seems quite obvious that if the assessee had not paid the tax or the research and development cess, and had merely made payment of the two million DM to ESW, the latter would not be obliged to part with the know-how in view of the terms of the collaboration agreement. Therefore, payment of these taxes is as integr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quoted below : "41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,- (a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of compensation upon furnishing of security bond for refund of the compensation in the event of appeal being allowed did not accrue and the land owner did not have the absolute right to the compensation till the appeal had been decided. The Supreme Court held that the right to such income in the nature of compensation would arise or accrue only after final determination of the appeal and therefore it was not liable to tax till such final determination. Subsequently the Income-tax Act has been amended to take care of such situations in accordance with the law laid down by the Supreme Court. 19. Another case cited at the Bar in the same context is the decision of the Allahabad High Court in the case of J. K. Synthetics Ltd. v. O. S. B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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