TMI Blog1991 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 195 thereof ?" Brief facts of the case are that the respondent-assessee is a private limited company incorporated in India. The assessee-company carried on some business in collaboration with Messrs. Wilhelm Ruppmann, Industries ofenbau, Stuttgart W, Gutenbergstr. By an agreement entered into on January 1, 1963, it was agreed that the foreign collaborators would grant to the Indian company during the term of the agreement (a) the exclusive right to manufacture the licensed equipment in India, (b) the exclusive right to sell the licensed equipment in India under the trade name "Wesman Ruppmann" and such sale to be effected by the agency agreed upon, (c) permit licensees to export the licensed equipment freely outside India, except to countries where the licensors have similar licence arrangements. Clause 5 of the agreement provided for payment to the licensors of the following sums: "(a) A payment of 5 per cent. towards the cost of detailed working drawings in terms of clause 3(b). The payment for these drawings shall be admissible in those cases where new drawings are supplied by the licensors abroad, i.e., from their or their associated works, design off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not agree with the submissions of the assessee-company and disposed of the said applications, vide order dated September 5, 1964, under section 195(2) of the Income-tax Act, 1961, directing the assessee-company to deduct tax at 65% on the entire sum proposed to be remitted. The assessee-company preferred an appeal to the Appellate Assistant Commissioner. It did not dispute the assessability of the royalty at 5% mentioned in clause 5(b) of the agreement aforesaid. It, however, challenged that the whole of the sum of 5% specified in clause 5(a) was not chargeable to income-tax in India. In regard to the same, the assessee submitted that there was no liability to deduct tax in terms of the order of the Income-tax Officer as, in its opinion, (a) the services, if any, enumerated under clause 5(a) of the agreement were performed outside India and the payments were also being made outside India so that the amount paid was not chargeable to tax under the Indian statute, (b) there was a bar to assessment under the Income-tax Act, 1961, in terms of the Agreement for Avoidance of Double Taxation between India and the Federal German Republic referred to above, and (c) in the alternative, sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's cross-objection on the said issue automatically succeeded. In regard to the second issue, the Tribunal came to the conclusion that the amount brought to charge by the Income-tax Officer was not exempt under the Double Taxation Avoidance Agreement between India and the Federal Republic of Germany, vide articles 3(1) and 16 of the Agreement. The assessee's cross-objection was thus partly allowed. At the instance of the Commissioner of Income-tax, West Bengal-I, the Tribunal referred the abovementioned question for the opinion of the High Court. The High Court followed its earlier judgment dated August 12, 1970, in Income-tax Reference No. 31 of 1970 (CIT v. Beni Ltd.) and answered the said question in the affirmative and in favour of the assessee by order dated February 10, 1976. The Department filed an application for leave to appeal to the Supreme Court and the High Court, by order dated September 8,1977, certified it to be a fit case for appeal to the Supreme under section 261 of the Income-tax Act, 1961, and issued a certificate accordingly. We have heard Mr. S. C. Manchanda, Senior Advocate for the appellant, but nobody appeared for the respondent. The High Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herwise, the language of section 248 of the Act is wide enough to cover any order passed under section 195 of the Act. The case, Meteor Satellite Ltd. v. ITO [1980] 121 ITR 311 (Guj), cited in support of the above contention by Mr. Manchanda is of no relevance. It was next contended by Mr. Manchanda that the Appellate Assistant Commissioner was wrong in holding that the quantum of income could be determined in an appeal under section 248. It was also argued that the Appellate Assistant Commissioner was also wrong in allowing the expenses at 75 per cent. of the remittance. It would be proper to reproduce section 248 of the Act which reads as under : "248. Appeal by person denying liability to deduct tax. -Any person having in accordance with the provisions of sections 195 and 200 deducted and paid tax in respect of any sum chargeable under this Act, other than interest, who denies his liability to make such deduction, may appeal to the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to be declared not liable to make such deduction." It was argued by Mr. Manchanda that, under section 248, a person could deny his liability to make such deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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