TMI Blog2005 (10) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... are that the assessee-company filed its return of income on 29-11-1994 declaring total income of Rs. 93,00,558. The return was processed under section 143(1)(a). Subsequently, notice under section 148 was issued on 19-1-1998 in order to examine the taxability of assessee's income under section 44D and reassessment framed under section 143 read with section 147 on 31-3-2000. This order is the subject-matter of the present appeal. Subsequently, the DIT issued a notice under section 263 of the Act on 7-3-2002 proposing action under section 263 on the following grounds: "In this case, assessment was completed under section 143(3) read with section 147 on 31-3-2000. During the year under consideration, the assessee-company had shown receipts from three Indian companies namely Essar Gujarat, Damodar Valley and Worldwide Personnel Inc. The assessee had also claimed losses from Indian Airlines, Mathon Gas Turbine and Indian Petrochemicals. The Assessing Officer had disallowed die losses claimed in respect of the above projects. However, the Assessing Officer had treated the receipts from Essar Gujarat, Damodar Valley and Worldwide Personnel Inc. as business income and not fees for techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 1987-88, the expenditure under the above heads amounted to Rs. 22,07,1 27 as against the receipts of Rs. 31,15,337 and thus the ratio was over 70 per cent. The ld. DIT also observed that the percentage ratio in respect of assessment years 1994-95 and 1997-98 is only 25.41 per cent and 45.60 per cent respectively. On the basis of these facts, the ld. DIT held that Assessing Officer's order was erroneous and prejudicial to the interest of the revenue. He also referred to the Supreme Court decision in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83. He, therefore, set aside the assessment directing the Assessing Officer to make fresh assessment in accordance with the directions issued by him regarding bringing to the charge of tax the relevant income under section 44D. 3. In the backdrop of the above-mentioned facts, the ld. counsel appearing for the assessee forcefully argued before us that the ld. DIT was wholly unjustified in assuming jurisdiction under section 263 of the Act. It is contended that the Assessing Officer's order is neither erroneous nor prejudicial to the interest of the revenue. While framing the assessment, the Assessing Officer has ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as business receipts and not as fees for technical services. The ld. counsel submitted that the Assessing Officer has only followed the orders of the Tribunal and, therefore, the ld. DIT has no jurisdiction to invoke his powers under section 263 of the Act. He relied on the Calcutta High Court decision in the case of Russel Properties (P.) Ltd v. A. Chawdhury. Addl. CIT [1977] 109 ITR 229 for the proposition that the order passed by the ITO following the decision of the Appellate Tribunal cannot be held to be erroneous and such an order cannot be revised under section 263. For the same proposition, the ld. counsel relied on the Allahabad High, Court decision in the case of K.N. Agrawal v. CIT [1991] 189 ITR 769, wherein it was held that the orders of the Tribunal and the High Court are binding upon the Assessing Officer. He cannot ignore such orders and, therefore, where the Assessing Officer follows the decision of the Appellate authorities, it cannot be said that his decision is erroneous and such decision cannot be revised under section 263. Similar view was expressed in the Orissa High Court decision in the case of CIT v. Orissa State Financial Corporation [1993] 203 ITR 747. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was drawn to the decision of the ITAT in its own case for assessment years 1981-82 and 1982-83, wherein it was held as under: 'In the absence of precise agreements, the question as to whether or not services rendered by the company falls within the definition of the term 'fees for technical services' may be determined by having regard to the working of profit on the respective projects submitted by the company and those projects in respect of which the company has incurred a reasonable amount on 'purchased labour' and/or on purchased material' would primarily be in the nature of repair contracts and not merely technical services and accordingly they would be outside the mischief of section 44D.' My attention was also drawn to a recent decision of the ITAT in the assessee-company's own case for assessment year 1987-88, which decision has been accepted by the department and not carried further to the High Court, wherein following the aforesaid order of the Hon'ble Tribunal, it was held that the income earned by the company on contracts with such Indian concerns were outside the scope of provisions of section 441) of the Act, as it had incurred a reasonable amount on purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X
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