2004 (1) TMI 25 - HC - Income Tax

Installment of a lump sum payment for technical services received by the assessee a German company - Assessing Officer had treated this payment as royalty and subject to tax. The CIT (Appeals) and the Tribunal reversed this and held the same not to be royalty but business income and the same was exempt as the assessee had no permanent establishment in India - It may be noted that the Revenue was aware of the order made by the Tribunal for the AY 1990-91 and the same was recorded not only by the Tribunal but by the CIT (Appeals) also. Therefore it is too late to say that the Revenue could not challenge that order as it was not aware of the same - It cannot be said that the Tribunal has committed a serious error while deciding the appeal.

Summary

Issues:
Assessment of lump sum payment for technical services received by a German company as royalty or business income for the assessment year 1994-95. Consistency of decision-making by the Revenue based on earlier judgments for the assessment year 1990-91.

Analysis:
The High Court judgment pertains to an appeal regarding the assessment of a lump sum payment for technical services received by a German company for the assessment year 1994-95. Initially, the Assessing Officer treated the payment as royalty subject to tax. However, both the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, Delhi Bench "B", New Delhi, ruled in favor of the assessee, considering the payment as business income exempt from tax due to the lack of a permanent establishment in India.

Regarding the earlier two instalments, the Commissioner of Income-tax (Appeals) had also sided with the assessee. A subsequent challenge to this decision for the assessment year 1990-91 was dismissed by the Tribunal, which held the payment to be business income, not royalty. The Revenue did not appeal this decision for a significant period until the appeal for the assessment year 1994-95 was decided. The High Court emphasized the need for the Revenue to maintain consistency in its decisions, noting that the Commissioner of Income-tax (Appeals) and the Tribunal had merely followed the earlier order for the assessment year 1990-91.

The Revenue argued that it did not receive the order for the assessment year 1990-91, hence could not appeal it. However, the High Court rejected this argument, stating that the Revenue was aware of the Tribunal's decision for the earlier year, as it was recorded by both the Tribunal and the Commissioner of Income-tax (Appeals). Therefore, the High Court found no serious error in the Tribunal's decision and dismissed the appeal, upholding the order made by the Appellate Tribunal.