TaxTMI 
TaxTMI 
1984 (5) TMI 37
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....nnection with the assessee company's desire to manufacture Zig Zag Sewing Machines in India. It was agreed between the parties that the Italian company shall assist the assessee-company in their project on the terms and conditions contained in the said agreement. The Italian company were to supply the know-how which included all inventions, processes, patent, engineering and manufacturing skill and other technical information. The assessee-company was to pay a sum of U.S. Dollars 20,000 as a consideration for the sale and transfer of the technical know-how. The assessee-company was also to pay royalty to the Italian company at the rates mentioned in cl. 4 of the agreement. In pursuance of the said agreement the assessee-company in order to make the payments to the Italian company applied to the ITO on February 3, 1967, for a tax clearance certificate contending that no tax was deductible from payments to the Italian company, which was a non-resident company. The ITO passed an order on February 28, 1967, under s. 195(2) of the Act determining the net Indian portion of the profits of the assessee-company at the rate of 33 1/2% of the payments other than royalty to the non-resident co....
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....nder s. 195(2) of the Act inasmuch as there is no other provision in the Act under which the ITO could act. The order of the ITO specifically states that it was passed under s. 195(2) of the Act and the assessee company contested this order on merits only. Section 248 of the Act provides for an appeal against the order passed under s. 195 of the Act. In support of his contention, Shri Wadhera relied upon a decision of the Allahabad High Court in Rattan Lal Ved Prakash v. CIT [1983] 144 ITR 135. The case pertained to s. 3(4) of the Act. Under this section, the assessee cannot change its previous year once having exercised the option, without the consent of the ITO and upon such conditions as the ITO may think fit to impose. In this case, the assessee did not file any application under s. 3(4) of the Act but filed a return for the changed period after having voluntarily effected a change in his previous year after a settlement with the CIT and the ITO acting on the return, passed an order of assessment. It was held that the consent of the ITO under s. 3(4) of the Act could be implied for the change in the previous year though no formal application was made by the assessee and ther....
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....terest, not being " Interest on securities ", or any other sum, not being dividends, chargeable under the provisions of this Act, shall, at the time of payment unless lie is himself liable to pay any income-tax thereon as an agent, deduct income-tax thereon at the rates in force. Omitting the provisos to this sub-s. (1), sub-s. (2) roads as under: " Where the person responsible for paying any such sum chargeable under this Act (other than interest including interest on securities dividend and salary) to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Income-tax Officer to determine, by general or special order, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable ". Thus, relying on the decision of the Calcutta High Court mentioned above, Shri Sharma contends that an application under s. 195(2) of the Act pre-supposes that the person responsible for making payment to a non-resident is in no doubt that tax is payable in respect of some part of the am....
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.... The application of sub-section (2) pre-supposes that the person responsible for making the payment to the non-resident is in no doubt that tax is payable in respect of some part of the amount to be remitted but is not sure what should be the portion so taxable or the amount of the tax to be deducted. If these conditions are satisfied and the person responsible for making the payment applies to the Income-tax Officer, then the question of Income-tax Officer making an order under section 195(2) arises. In this case can it be said that the Khemkas (agents) made an application to the respondent No. 1 under section 195(2) ? The admitted facts are that the Khemkas applied for sanction of the Reserve Bank to remit a certain amount to their non-resident principals and that the Reserve Bank wanted a clearance certificate from the Income-tax Department that no tax was payable in respect of the amount sought to be remitted. By its letter dated the 1st April, 1965, the Khemkas wrote to the respondent Income-tax Officer to confirm that no income-tax was payable on freights for import discharged in Calcutta as the freights are deemed to have been earned by the shipping company abroad in respect....