TMI Blog2002 (11) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case, the Tribunal was right in holding that the assessee was not liable to deduct under section 195, tax in respect of the lease money paid by the assessee to the non-resident? - 5. Whether, Tribunal was right in holding that the income, if any, of the non-resident, on account of sale of the machinery and equipments to the assessee cannot be taxed in view of the agreement for avoidance of double taxation between India and the Federal German Republic and circular dated July 23, 1969, issued by the Central Board of Direct Taxes?" - In the circumstances, we return the reference unanswered as the questions have become academic. - - - - - Dated:- 28-11-2002 - Judge(s) : S. H. KAPADIA., J. P. DEVADHAR. JUDGMENT The judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of sale of the machinery and equipments to the assessee cannot be taxed in view of the agreement for avoidance of double taxation between India and the Federal German Republic and circular dated July 23, 1969, issued by the Central Board of Direct Taxes?" Facts: The assessee, Dodsal Pvt. Ltd., Bombay, entered into a lease agreement on August 16, 1976, with a West-German company (hereinafter referred to as the "non-resident"). The lease was to commence with effect from October 1, 1976. On the same day, i.e., August 16, 1976, the non-resident also entered into a sale agreement with the assessee. Both the agreements were executed in Singapore. Under the lease, a minimum guarantee period of 18 months was fixed. In the lease, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment from the non-resident under the option agreement. Accordingly, the option came to be exercised by the assessee on March 23, 1977, i.e., prior to the remittance of the amount of US $ 4.48 lakhs. On March 17, 1977, the assessee moved the Chief Controller of Imports and Exports for waiver of the condition of re-export on payment of full import duty. The condition of re-export was waived by the Chief Controller of Imports and Exports vide order dated December 15, 1977. By letter dated November 24, 1977, the non-resident ultimately agreed to take the option price at US $ 32.38 lakhs by way of sale price instead of US $ 36 lakhs. On November 30, 1977, the assessee requested for NOC for remittance to the non-resident, of an amount of US $ 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1977-78, the Income-tax Officer passed one more set of orders on February 29, 1980, under section 163 of the Act. After reiterating the above facts, the Income-tax Officer has held that the non-resident had received the hire charges up to the date of exercise of the option and, therefore, the assessee's case also came under section 163(1)(c) and, accordingly, the assessee was treated as an agent of the non-resident under the said section. Consequently, the Department applied both, section 195(2) and also section 163(1)(c) of the Act simultaneously. Being aggrieved by the order of the Income-tax Officer under section 195(2), the assessee preferred appeals before the Commissioner Income-tax (Appeals). The appellate authority came to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eved by the decision of the Commissioner of Income-tax (Appeals), the Department carried the matter in appeal to the Tribunal. By the impugned order, the Tribunal took the view, on the above facts, that the rental income had accrued to the non-resident from the date of the commencement of the lease up to the date of exercise of the option on March 28, 1977. Accordingly, the Tribunal took the view that the lease charges payable for the period September 15, 1976, up to March 28, 1977, constituted income, which accrued to the non-resident in India and the non-resident was accordingly liable to tax. However, the Tribunal concluded that section 195(2) had no application, but the assessee was held to be an agent of the non-resident in India and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the regular assessment proceedings and not by the tentative orders under section 195(2). Therefore, the questions referred to us have become academic. Further, section 163(1)(c) of the Income-tax Act will not apply in this case as in the regular assessment proceedings, for the assessment year 1977-78, the Department has allowed the assessee to capitalise the entire amount of US $ 32,38,125.54 as cost of equipment received during the accounting year corresponding to the assessment year in question to the plant and machinery account and further the Department has allowed depreciation on that basis for Rs. 1.04 crores. Therefore, in the present case, the subsequent event, namely, the regular assessment proceedings have made the questions quot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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