TMI Blog1994 (11) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... company, i.e., Office Cherifier Des Phosphate, Casablanca of Morocco (OCP). The company is a supplier of fertilizers intermediates to various concerns in private as well as public sector in India. As per the agreement the company agreed to pay a sum of Rs. 40,000 per month as a consultancy fee. In the profit loss account for the accounting period which was from 1-1-1986 to 31-12-1986 the assessee showed Rs. 4,03,298 as receipt of fees from OCP, Morocco. In addition, the assessee also received a sum of Rs. 7,98,717 by way of advances from M/s. OCP in pursuance of the agreement. The latter amount was to be adjusted against the expenses to be incurred by him in execution of the work carried on, on behalf of the company. The full details of the remittances received from M/s. OCP with the copy of the agreement dated 14-3-1986 were produced before the Assessing Officer. The Assessing Officer added the entire amount of Rs. 7,98,717 as the assessee's income on the ground that for similar work done by the assessee for M/s. Jyotsna Holding Pvt. Ltd. where he was once an employee, much larger amounts were paid by OCP, and that as per duties assigned, the assessee cannot be held to be a cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement as entered into by the assessee with Moroccan company cannot be accepted at its face value. It was not denied that prior to doing the work on his own, the assessee was an employee of Jyotsna Holding (P.) Ltd. drawing remuneration of Rs. 8,000 per month. Jyotsna Holding (P.) Ltd. was earning considerable amount of income from the said contract. Since for the same work Jyotsna Holding (P.) Ltd. was earning substantial income, there were basis for doubting the amount received under the garb of advances which was in fact his income. On scrutiny of the accounts it was found that in assessment year 1987-88 while the amount received was Rs. 7,98,717, the expenditure incurred was only to the tune of Rs. 1,76,582. It is hard to believe that any party could have paid amount in advance for meeting the unknown expenses for the next several years as is the case. This is further confirmed by absence of a provision in the contract for advances as received by the party. The expenses were to be incurred not only with the prior agreement, the same had to be on the basis of 'Justificative vouchers'. The telex vide which the advances for reimburseable expenses were confirmed was dated 2-5-1990, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n mutual agreement at, a later stage." In pursuance of this contract, the assessee's account was credited from 21-4-1986 to 26-12-1986 with an amount of Rs. 11,61,064.59 which included 'advance for reimburseables' of Rs. 7,98,700. This is as per copy of the certificate of foreign inward remittances of Indian Overseas Bank, Delhi. This certificate is dated 11-2-1987. The assessee was in receipt of further amount of Rs. 9,19,547.32 (From January 1987 to September 1988), as per the certificate of Foreign Inward remittances of Indian Overseas Bank dated 14-12-1988. As per the latter document, the aforesaid amount did not include any amount of reimburseable expenses. Here we may as well refer to the third document which is dated 24-1-1990 vide which the payments till 27-12-1989 were shown at Rs. 8,02,928.35. Thus out of the total amount received till 27-12-1989, the bifurcation of the advances for reimburseable expenses are as under:-- Period Total amount Reimburseable Remuneration advance for expences 21-4-1986 to Rs. 28,83,534 Rs. 9,57,783 Rs. 19,25,751 27-12-1989 The expenses incurred till December, 1989 as per the monthly analysis sheet worked out to Rs. 9,33,932. (Paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tailed. As regards former, we may refer to the observations of their Lordships of Calcutta High Court in the case of Prankrishan Das v. Controller of Estate Duty AIR 1968 Cal. 469 at 499 :-- " Now the golden rule of construction is to ascertain the intention of the parties to the instrument, after considering all the words, in their ordinary and natural sense. To ascertain this intention, a court has to consider the relevant portion of the document as a whole and also to take into account the circumstances under which the particular words were used. Very often the status and the training of the parties using the words have to be taken into consideration. It has to be borne in mind that very many words are used in more than one sense and that sense differs in different circumstances. Again, even where a particular word has to a trained conveyancer a clear and definite significance, and one can be sure about the sense in which conveyancer would use it, it may not be reasonable and proper to give the same strict interpretation of the word, when used by one who is not so equally skilled in the art of conveyancing." Thus the 'intention' of the parties has to be gathered from the who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited. 7. What emerges from the above facts is that the expenditure was to be incurred on behalf of OCP and not on its own account. In this context, we may refer to the decision of Calcutta High Court in the case of CIT v. Dunlop Rubber Co. Ltd. [1983] 142 ITR 493. In the aforesaid case, the assessee a non-resident English Company which had a world net work of subsidiaries and associated companies, maintained in the United Kingdom (London) extensive technical research establishments. Agreement was entered into between the assessee-company and its Indian subsidiary which provided that the assessee-company shall on its request would be provided with information, processes and inventions which could be used by it in connection with the manufacture of similar goods. As per clause 5 of the agreement, all costs and expenses incurred by the assessee-company in connection with the communication of the information, processes and inventions or giving of any advice or assistance provided for by the assessee-company to the Indian company shall be paid by the Indian company. The Indian company was also to pay a proportionate part of the cost and expenses incurred by the assessee-company in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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