2011 (4) TMI 1297 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of the amount received for outright supply of technical documentation.
2. Interest charged u/s 234A and 234B.
3. Adoption of the rate of conversion of foreign currency.
4. Taxability of the amount received for procurement services.

Summary:

1. Taxability of the amount received for outright supply of technical documentation:
The main issue was whether the amount of DM 7,15,000 received by the assessee from M/s. Madras Fertilizers Ltd. for the outright supply of technical documentation was taxable. The Tribunal observed that similar issues had been decided in favor of the assessee in earlier years, concluding that the payments were not covered within the expression of "royalty" u/s 9(1)(vi) of the Income Tax Act. Consequently, the Tribunal deleted the addition made by the Assessing Officer and confirmed by the CIT(A) for A.Y. 1991-92. Similar conclusions were drawn for the assessment years 1992-93, 1993-94, 1994-95, and 1996-97, leading to the dismissal of the revenue's appeals for these years.

2. Interest charged u/s 234A and 234B:
The assessee challenged the interest charged u/s 234A and 234B. The Tribunal directed the Assessing Officer to allow consequential relief for interest charged u/s 234A. For interest charged u/s 234B, the Tribunal followed the decision of the Hon'ble Bombay High Court in Director of Income-tax (International Taxation) vs. N.G.C. Net Work Asia (313 ITR 187), which held that no advance tax was payable by the assessee when the entire income was liable to deduction of tax at source. Consequently, the interest charged u/s 234B was deleted.

3. Adoption of the rate of conversion of foreign currency:
The revenue challenged the CIT(A)'s direction to adopt the rate of conversion of foreign currency as on the date of receipt of payment by the assessee instead of the exchange rate as per Rule 115 of the I.T. Rules, 1962. The Tribunal upheld the CIT(A)'s order, relying on the judgment of the Hon'ble Supreme Court in Chawgule & Co. v. CIT (218 ITR 384), which affirmed that Rule 115 could not be invoked for sale proceeds credited to the bank account in Indian rupees.

4. Taxability of the amount received for procurement services:
The revenue contended that the amount of Rs. 8,28,30,293 received by the assessee for procurement services was taxable u/s 9(1)(vii) as "fees for technical services." The Tribunal referred to its earlier decision in the assessee's case and the case of "Linde A.G. v. Income tax Officer" (62 ITD 330), concluding that procurement services were commercial activities and not technical services. Therefore, the amount received was not taxable in India as it represented business profits exempt under the Double Taxation Agreement.

Conclusion:
The assessee's appeal for A.Y. 1991-92 was partly allowed, and the revenue's appeals for A.Y.s 1991-92, 1992-93, 1993-94, 1994-95, and 1996-97 were dismissed. The order was pronounced in the open court on April 27, 2011.