Tribunal ruling on tax appeals for multiple assessment years: Department's appeal dismissed, assessee's partially allowed.

The Tribunal dismissed the department's appeal for A.Y. 1995-96, partly allowed the assessee's cross-objection for statistical purposes, and allowed the assessee's appeals for A.Y. 1989-90, 1993-94, 1994-95, and 1996-97. The AO was directed to compute business profits without applying Section 44D read with Section 115A, verify the set-off of brought forward unabsorbed depreciation, and examine the charging of interest under Section 234B.

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Issues Involved:
1. Validity of reopening assessments under Section 147/148 of the Income Tax Act.
2. Classification of maintenance service charges as business income or fees for technical services.
3. Application of Indo-US Double Taxation Avoidance Agreement (DTAA) and its precedence over domestic law.
4. Set-off of brought forward unabsorbed depreciation.
5. Charging of interest under Section 234B.

Issue-wise Detailed Analysis:

1. Validity of Reopening Assessments under Section 147/148:
The assessee contested the reopening of assessments for the years 1989-90, 1993-94, and 1994-95 under Section 147/148, arguing it was based on a mere change of opinion without new evidence. The AO initiated proceedings after noticing that the nature of income was "fee for technical services" during the assessment for A.Y. 1995-96. The CIT(A) upheld the AO's action, stating that since the original assessments were summary in nature under Section 143(1)(a), no opinion was formed initially, and thus, the question of change of opinion did not arise. The Tribunal, referencing the Supreme Court decision in ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., confirmed that intimation under Section 143(1)(a) is not an assessment order, and hence, reopening under Section 147 was valid.

2. Classification of Maintenance Service Charges:
The core issue was whether the maintenance service charges received from the Department of Science & Technology should be classified as business income or fees for technical services. The AO treated these as fees for technical services under Section 44D read with Section 115A, while the assessee argued they should be classified as business income under Article 7 of the Indo-US DTAA. The CIT(A) for A.Y. 1995-96 ruled in favor of the assessee, but for A.Y. 1996-97 and other years, the CIT(A) upheld the AO's view. The Tribunal, relying on the Indo-US DTAA, held that the maintenance charges did not qualify as fees for technical services under Article 12(4) of the DTAA, and thus, should be taxed as business profits under Article 7, allowing for the deduction of related expenses.

3. Application of Indo-US DTAA:
The Tribunal emphasized that the provisions of the DTAA take precedence over domestic law if they are more beneficial to the assessee. It was noted that the maintenance services did not meet the DTAA's definition of fees for technical services, which requires the service to "make available" technical knowledge, experience, skill, know-how, or processes. The Tribunal referenced decisions like Boston Consulting Group P. Ltd. and Essar Oil Ltd., affirming that if receipts do not fit the DTAA's definition, they cannot be taxed under Section 44D of the Act.

4. Set-off of Brought Forward Unabsorbed Depreciation:
The assessee requested the set-off of brought forward unabsorbed depreciation for A.Y. 1996-97. The Tribunal remanded this issue back to the AO for verification and consideration in accordance with the Income Tax Act, instructing the AO to provide the assessee with a reasonable opportunity to present necessary details.

5. Charging of Interest under Section 234B:
The issue of charging interest under Section 234B was deemed consequential and was remanded to the AO for examination while computing the business profits as directed. The AO was instructed to apply the provisions of Section 234B appropriately after giving the assessee an opportunity to be heard.

Conclusion:
The Tribunal dismissed the department's appeal for A.Y. 1995-96, partly allowed the assessee's cross-objection for statistical purposes, and allowed the assessee's appeals for A.Y. 1989-90, 1993-94, 1994-95, and 1996-97, directing the AO to compute the business profits without applying Section 44D read with Section 115A and to verify the set-off of brought forward unabsorbed depreciation.

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