TMI Blog1987 (6) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... collaboration agreement dated 2-12-1977 with Swiss company Unipektin A.G. Unipektin had developed the know-how for the manufacture of high grade edible guar gum, industrial guar gum and their derivatives and had also been operating commercial plants under such know-how. That agreement was for obtaining from Unipektin exclusive right to use the know-how for the manufacture of these gums. The assessee company intended to construct edible guar gum and industrial guar gum plants in India. Unipektin was to prepare the know-how in Switzerland and deliver the same to the assessee in Switzerland, as per the schedule agreed upon in article 6 of the Agreement. The assessee was to pay to Unipektin in Switzerland a total sum of Swiss Fr. 3,50,000 by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he effect that the technicians mentioned therein had visited India during June ';82 and May ';83 and had rendered the services as per Article 4.5 of the Agreement. The case of the assessee was that the remittance of Sw. Fr. 78,500 was not taxable being no payment towards technical know-how or any income of the non-resident and that it represented actual expenses incurred by the Unipektin for the technicians who visited India. However, the Income-tax Officer did not accept the above contention of the assessee. He held that the amount in question represented income by way of fees for technical services payable by the assessee in terms of section 9(1)(vi) and to which accordingly section 115A was attracted. He accordingly held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds of appeal first. Shri K.S. Yadav. the learned Departmental Representative submitted that these grounds were legal grounds which the department was entitled to agitate at any time and particularly as no investigation into facts was necessitated for adjudicating them. On the merits of these grounds, he submitted that section 195(2) does not envisage a case where the assessee claims that no portion of the sum to be remitted is liable to tax at all and that it only envisages disputes about the appropriate proportion of the sum which would be chargeable to tax. In this connection, reliance was placed by him on the decision dated 21-4-1986 of Calcutta Bench ';B'; in the case of Graphite Vicarb India Ltd. v. ITO (1986) 18 ITD 58 . On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 253(2). Therefore, we are of the view that the assessee is right in objecting to the admission of the additional grounds. In view of this finding, it is not necessary to adjudicate upon the additional grounds. However, since on both the sides, submissions had been made even on merits, we think that it will be proper to examine the grounds on merits also. Firstly, the right of appeal not only arises to the appellant from the exercise of the power by the impugned authority but also from the jurisdiction which the authority purported to exercise. In the present case the Income-tax Officer purported to pass an order under section 195(2). Section 248 expressly provides that any person having in accordance with the provisions of sections 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are therefore, of the opinion that even on merits the department cannot succeed on these additional grounds. 7. This takes us to the ground of appeal as originally raised on behalf of the department. It is clear from the collaboration agreement that there were two separate payments contemplated there- under. The first payment was for Sw. Fr. 3,50,000 for technical know-how and the second payment was under Articles 3.3 4.5 of the said agreement which contemplated the securing by the assessee at its own cost from Unipektin, deputation of Unipektin experts in India for process check-up of the plant erection, supervision of the starting up and supervision of the test runs. It is for this later category that the assessee intended to remit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment in question did not fall under section 115A. It was explained that the amount also did not constitute deemed income under section 9. The position was also explained by the assessee to the Department of Industrial Development, Ministry of Industry, Govt. of India, in its letter dated 28-7-1983. We are of the view that since the amount in question represented the reimbursement to Unipektin, of the wages etc. of the foreign technicians, it was in the nature of payment of salary. Therefore, such a payment fell within the excepted category of income of the recipient chargeable under the head Salaries within the meaning of Explanation 2 to section 9(1)(vii). For the same reason, the foreign technicians were entitled to claim deduction in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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