TaxTMI 
TaxTMI 
2002 (11) TMI 73
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the assessee to Mannesmann-Export AG, Dusseldorf, West Germany (non-resident), for the period from October 1, 1976, to March 23, 1977, did not get merged in the purchase price on the exercise by the assessee of the option to purchase? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee, was an agent of Mannesmann-Export AG, Dusseldorf, West Germany (non-resident) under section 163 of the Income-tax Act, 1961?" Questions referred at the instance of the Department: 3. Whether, the Tribunal was right in holding that the provisions of section 163 and section 195 are mutually exclusive? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ement, which was a sale/option agreement under which the assessee could exercise the option to purchase the machinery and equipment on or before March 31, 1977. Under that agreement it was stipulated that in the event of the assessee exercising the option to buy the equipment, the price payable by the assessee to the non-resident will be US $ 36 lakhs, less 90 per cent. of the accrued lease charges. The assessee bought the entire machinery and equipment vide invoices dated September 23, 1976, to April 12, 1977. The first instalment of remittance of US $ 9.92 lakhs was sent by the assessee to the non-resident with the approval of the Reserve Bank of India dated September 18, 1976. The second permission for remittance of US $ 4.48 lakhs was g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt in India and, therefore, the non-resident was taxable in India in respect of that income. Ultimately, on April 3, 1978, the Income-tax Officer passed an order under section 195(2) in which it has been held that the income had accrued to the non-resident in India up to March 28, 1977, when the option was exercised by the assessee and, therefore, up to that date, the income arising from lease rent was taxable. That the agreement for avoidance of double taxation between India and West-Germany did not save the rental income from taxation. Accordingly, the assessee was directed to deduct the tax at the appropriate rate from 12.5 per cent. on each remittance including on the amount of US $ 14.40 lakhs. The Income-tax Officer, however, made it ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st Germany. Being aggrieved by the order of the Income-tax Officer under section 163(1)(c), the assessee had also preferred appeals to the Commissioner Income-tax (Appeals). Those appeals were also decided by the Commissioner of Income-tax (Appeals) in favour of the assessee for the assessment year 1977-78, and for the assessment year 1978-79. In this connection, the appellate authority found that in the regular substantive assessment proceedings, the Department had allowed the assessee to capitalise the entire cost at US $ 32.38 lakhs and had allowed depreciation/investment allowance claimed by the assessee at appropriate rates under the Act. The Department had allowed the deduction in the relevant assessment years accordingly. In the lig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e-tax Officer in regular assessment proceedings. In the present case, the orders passed by the Income-tax Officer under section 195(2) state that the orders are provisional in nature and that they are subject to modifications in the regular assessment proceedings. In the present case, as stated above, in the regular assessment proceedings, the assessee has been given deduction on account of depreciation/investment allowance by the Department calculated on the cost of US $ 32,38,125.54. Therefore, in the regular assessment proceedings, the Department has conceded that the aforestated amount of US $ 32,38,125.54 in entirety constituted sale price. Therefore, in the present case, the order passed by the Tribunal on section 195(2) has become ac....