TMI Blog1981 (7) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Indian Aluminium Company Ltd., the Tribunal was correct in holding that there was no receipt of fees by the non-resident company in India for the assessment years 1967-68 to 1969-70 ? 3. Whether, on the facts and in the circumstances of the case and on a proper interpretation of the agreement between the non-resident company and Indian Aluminium Company Ltd., the Tribunal was correct in holding that no part of the services was rendered by the non-resident company in India and in that view holding that no income accrued or arose to the non-resident company in India for the assessment years 1967-68 to 1969-70 ? 4. Whether, on the facts and in the circumstances of the case and on a correct interpretation of the agreement between the non-resident company and Indian Aluminium Company Ltd., the Tribunal was correct in holding that there was no business connection in India between the said two companies within the meaning of section 9(1) of the Income-tax Act, 1961, and in that view holding that no income could be deemed to accrue or arise to the non-resident company in India for the assessment years 1967-68 to 1969-70 ? 5. Whether, on the facts and in the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt. In this connection, the assessee pointed out to certain facts relating to this claim which we shall set out below as contained in a separate statement filed by the assessee : Units : Rs. (1) Hirakud No. II 6,74,307 (2) Alupuram Extrusion No. II 3,30,841 (3) Belur No. II 10,03,553 (4) Muri No. II 12,38,386 --------- 32,47,087 --------- Hirakud Smelter (Hirakud II): Completed in 1961 Previous plant capacity I 0,000 tons per annum new capacity additional 10,000 tons per annum. Unit housed in separate buildings; cost for this new project was approximately Rs. 22 million. This new project for the first time had facilitated to produce wirebars with special grade metal for supplying to cable manufacturers under separate commitments to Government of India. New Industrial Licence No. L/IB(1)/N-4/59 dated 10th November, 1959, received from the Government of India. Also confirmed that the new unit was formed not by splitting up or by reconstruction of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit. Also submitted that the buildings or machinery used for the new unit were absolutely new and not used previously. Also confirmed financed by additional capital, 4. From the above facts and in view of the Calcutta High Court decision in this very case (CIT v. Indian Aluminium Co. Ltd. [1973] 88 ITR 257), the Tribunal upheld the Appellate Assistant Commissioner's action in granting relief under section 84/80J. " In the aforesaid view of the matter and in view of the ratio of the decision of the Supreme Court in the case of CIT v. Indian Aluminium Co. Ltd. [1977] 108 ITR 367, the question must be answered in the affirmative and in favour of the assessee. So far as questions Nos. 23 and 4 are concerned, it would be instructive to refer to the facts as found by the Tribunal. The Tribunal observed, inter alia, as follows : " 9. Since we have to consider the chargeability to tax, we have by necessity to see section 5. Section 5 brings to charge any income which is received or deemed to be received or which is accrued or arises or is deemed to accrue or arise in India or outside India. Taking up the question of receipt first on a consideration of the evidence before us it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1950] 18 ITR 333 (Mad) and CIT v. A. S. T. F. Rodriguez Co. [1951] 20 ITR 247 (Mad), would-not apply and no income accrues on the basis of the status of the contract. There is also one other point to be considered before we finally decide about the accrual of income. The facts as given by the assessees show that the problems are sent to the Canadian company and the .Canadian company pursuant to the agreement gives its solution. Now, unless the solution or the know-how is received by the Indian company in India, there is really no service at all rendered. Merely the solution of the problems in Canada does not help the assessee unless it is also duly conveyed to India and is received by the Indian company. If it is the outlook of the Indian company to receive the information from Canada then there is no difficulty. The services are really rendered out side India. But if it is the duty of the Canadian company to see that the information are received by the Indian company in India then perhaps further consideration would arise. Prima facie on a reading of clause (1) of the agreement it would appear that it is the duty of the Canadian company in procuring and forwarding such informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gree with the Appellate Assistant Commissioner's view in the matter that the several decisions relied upon by the assessee's counsel to prove that relief should be extended to various forms of aluiminium sold in forms acceptable to different classes of customers cannot be further extended to the production of pigments made out of alumina. Here the assessee has resorted to a definite and sophisticated process of manufacturing pigments out of alumina and we cannot say that the pigment so made retains the essential character of aluminium in its primary form. We, therefore, agree with the Appellate Assistant Commissioner in the matter and hold that the assessee is not entitled to higher development rebate in respect of its machinery and plant at Kalwa or to relief under sections 80E/ 80-I in respect of the production of pigments made out of alumina. " In view of the specific finding of the Tribunal that the assessee had resorted to a definite and sophisticated process of manufacturing pigment out of alumina and the finding that the pigment was made by the assessee had not retained its essential character of aluminum in its primary form and in the background of that finding as also in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dule. The Tribunal on this aspect observed as follows : " In our opinion, the storage tanks can only be allowed depreciation at the rate applicable to general machinery and plant and not to the specialised plant and machinery on which 10% is given as they do not form part of specialised plant and machinery in the factory. We decide this point against the assessee. For the assessment years 1968-69 and 1969-70 also, our decision on this issue is the same as above. " It is true that normally a storage tank has nothing special about it and would be entitled to depreciation, as contended for by learned advocate for the Revenue, as plant and machinery at the rate of 7 per cent. But certain plant and machinery which are otherwise or normally treated as plant and machinery, if they are part of particular types of factories, as mentioned in the special rates which are dealt with in Item I I of Sch. II under Head A : Aluminium factories are entitled to special rebate at 10 per cent. Learned advocate for the Revenue contended that the expressions, " machinery plant " and " factory ", were different. That is true. But, at the same time, a machinery which is a plant and which forms an integra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n timber; it was their business to buy and sell timber, and it was a part of their business-ancillary, perhaps to take steps to insure their trade from the mischances which can be insured against, such as perils of the sea and perils of the land. They had a certain amount of fixed capital in their business, and they had a certain amount of circulating capital employed in the purchase of stock, which is enhanced again when the stock is sold. A part of that circulating capital was invested in timber. That timber might have been sold in the ordinary course of market as a matter of fact, instead of being actually sold it was burnt. Under a contract of indemnity, properly entered into for the purpose of safeguarding the possibilities of business in relation to it, a sum has been received in respect of the timber. That is once more a restoration to the actual circulating capital of a sum which had previously been invested in specie in timber. We have got to take the actual sum received which has been received in the ordinary coarse of business, plus the ordinary safeguards of business in the events' which have happened. As Mr. justice Rowlatt says: ' It seems to me that the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Canara Bank Ltd. [1967] 63 ITR 328, it would not be inappropriate to refer to the observations of Mr. justice Sethuraman at pp. 909, 910, of the report dealing with the identical contention as follows: " However, the learned counsel for the assessee relies strongly on decision of the Supreme Court in CIT v. Canara Bank Ltd. [1967] 63 ITR 328. In that case, the assessee, a bank, opened a branch in Karachi. There was devaluation of the Indian rupee on September 18, 1949. The bank had a sum of Rs. 3,97,221 at the Karachi branch belonging to its head office. Pakistan did riot devalue 'its currency. The bank did not also carry on any business in foreign currency even after it was so permitted to do. There was a finding by the Appellate Tribunal that the money had been lying idle in the Karachi branch and had not been utilised in any banking operation even within Pakistan. The State Bank of Pakistan, which corresponds to the Reserve Bank of India, granted permission for remittance on July 1, 1953, and two days later the bank remitted the amount to India. In view of the difference in values of the currencies, a sum of Rs. 1,73,817 was received in excess, and the attempt of the income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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