TMI Blog1998 (10) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as income under section 9(1)(vii) ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that only Rs. 1,19,459 could be treated as taxable and not Rs. 1,76,116 which figure includes the incidental expenses in bringing the engineer to India ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in upholding the grossing up of income by calculating tax on tax until zero difference is arrived at and not merely restricting the grossing up of income to the tax on the net amount and no further ?" In R.C. No. 149 of 1990, the following questions are referred : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 on October 20, 1978, in R.C. No. 71 of 1990 and DM. 32,542 in R.C. No. 149 of 1990. The Income-tax Officer held that the amounts of DM. 33,000 and DM. 32,542 would be subject to taxation and advised the assessee to deduct the tax. The assessee had paid a tax of Rs. 1,19,450 and Rs. 1,20,674, respectively. The amount was remitted thereafter. The amount of DM. 33,000 paid was understood to be free of Indian income-tax. The NMDC thereafter filed the return in which it was claimed that these amounts were not taxable. The Income-tax Officer held that it was taxable since the payments were covered by section 9(1)(vii) of the Income-tax Act (for short "the Act"). The Commissioner agreed with the assessee. On appeal, the Tribunal held that the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head 'Salaries'." From the above, it is clear that any fees paid for technical services is income within the meaning of section 9 of the Act and, therefore, it is taxable. Under Explanation 2, as stated above, fee offered for technical services means any consideration paid for technical services and excludes consideration paid for any construction, assembling, mining or like project undertaken by the recipient. In other words, any fees paid for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, income and accordingly it is taxable. As regards the third question, the Tribunal held that the technical fee has to be grossed up. The assessee relying on a judgment of this court in CIT v. Superintending Engineer [1985] 152 ITR 753 contended that the Tribunal is wrong in grossing up of the technical fee. While learned counsel for the Revenue contended that under section 2(24)(iva) of the Act, any sum paid by the representative assessee in respect of any obligation which, but for such payment, would have been paid by the beneficiary, is to be added to the income and, therefore, the tax paid by the NMDC is to be added to the income and tax is to be calculated by grossing up the said income. In support of this contention, he r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the net payments made had to be grossed up to determine the tax following the Mysore High Court in Tokyo Shibaura Electric Co. Ltd. v. CIT [1964] 52 ITR 283. The assessee has questioned the correctness of the grossing up in principle and the AAC as well as the Income-tax Appellate Tribunal upheld the view that the payments made had to be grossed up. We have perused the orders in all the three cases to find out on what basis the grossing up has been made. There is no guidance in the orders of the Income-tax Officer as to how the figure was arrived at. It is not known whether the Income-tax Officer adopted the system of grossing up by working out tax on tax until he arrived at a 'O' figure. If that was the basis followed, we do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and the tax actually payable is to be paid by the employee. While according to the judgment of this court in CIT v. Supertending Engineer [1985] 152 ITR 753 the amount of tax payable by the non-resident should be added to the net payment and on that amount the tax deductible at source is to be determined. The said judgment was again followed by justice B.P. Jeevan Reddy (as he then was) and Justice Y. Bhaskara Rao in CIT v. Barium Chemicals [1989] 175 ITR 243 (AP). It is also true that the Orissa High Court and the Delhi High Court have expressed a similar view. At this stage, we point out that at the time when the judgment of this court in CIT v. Supertending Engineer [1985] 152 ITR 753 and the judgment of the Orissa High Court in CIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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