1992 (4) TMI 88 - AT - Income Tax

Tribunal: Orders under Section 195 appealable, non-resident payments not taxable in India

The Tribunal held that orders passed under section 195 by the Income-tax Officer are appealable, contrary to the Department's contention. Regarding the ... Fees For Technical Services, Foreign Company, Income Deemed To Accrue Or Arise In India Issues Involved:1. Appealability of the order u/s 195 by the Income-tax Officer.2. Taxability of the amounts sought to be remitted to the NR by NMDC for assessment years 1985-86 and 1986-87.Summary:Issue 1: Appealability of the Order u/s 195The Department contended that an order passed u/s 195 by the Income-tax Officer is not appealable. However, the Tribunal disagreed, citing Section 248, which allows appeals against orders u/s 195. The Tribunal referenced the Supreme Court decision in CIT v. Wesman Engg. Co. (P.) Ltd. [1991] 188 ITR 327 and the Tribunal's decision in Dalmia Cement (Bharat) Ltd. v. ITO [1987] 20 ITD 76 (Delhi), which clarified that appeals can be made against orders u/s 195 concerning the quantum of the amount on which tax is to be deducted.Issue 2: Taxability of the Amounts RemittedThe Department argued that the amounts sought to be remitted to the NR by NMDC for assessment years 1985-86 and 1986-87 are taxable in India and that TDS was correctly directed to be deducted by the ITO. The Tribunal examined the facts and contractual terms relevant to the assessment years 1985-86 and 1986-87, distinguishing them from the facts of the earlier assessment year 1981-82.For assessment year 1981-82, the NR had two separate contracts with NMDC: one for the supply of goods and another for supervision, which was considered technical services. However, for assessment years 1985-86 and 1986-87, the contract dated 17-1-1985 was an integrated contract, including supply, erection, commissioning, and maintenance of the conveyor belt. The Tribunal found that the NR undertook the complete responsibility for these tasks, not merely providing technical advice.The Tribunal held that the payment of 1,07,000 DM was intended towards erection, commissioning, and maintenance charges, not for merely tendering advice. Thus, the payments did not fall under 'fees for technical services' as per Explanation to section 9(1)(vii). The Tribunal also referenced the Andhra Pradesh High Court decision in CIT v. Hindustan Shipyard Ltd. [1977] 109 ITR 158, which supported the view that such payments are incidental to the contract of sale and do not constitute a business connection in India.In conclusion, the Tribunal upheld the CIT(A)'s orders, dismissing the Department's appeals and confirming that the amounts sought to be remitted were not taxable in India.