1992 (10) TMI 30 - HC - Income Tax

Summary

Issues involved:
Challenge to the order of the Income-tax Officer under section 115A of the Income-tax Act, 1961 regarding remittance treated as "fees for technical services" and tax deduction dispute.

Judgment Details:

Nature of Payment Dispute:
The Income-tax Officer concluded that the payment made to the seller for services rendered by its experts is not salary, not exempt under specific sections, and is income by way of 'fees for technical services'. The petitioner contended that the payment should be considered as salary or exempt under section 9(1)(vii) of the Act.

Background of the Dispute:
The petitioner, a public limited company, entered into an agreement with a foreign company for technical assistance in setting up a plant. The agreement outlined payments to be made, including a specific amount per man-day spent by experts, which is the subject of the dispute.

Interpretation of Income Tax Provisions:
The petitioner argued that the payment should be considered as "salary" under section 10(6)(vii) for non-resident technicians. However, the court found that the payment made to the seller, not the technicians directly, does not fall under the "Salary" category.

Exemption Claim under Section 10(6)(viia):
The petitioner claimed exemption under section 10(6)(viia) for services rendered by technicians approved by the Government of India. The court rejected this claim as the payment was made to the seller, not the individual technicians.

Exclusion under Explanation 2 to Section 9(1)(vii):
The petitioner argued that the payment should be excluded under Explanation 2 to section 9(1)(vii) as it was for construction work. The court directed the matter back to the Income-tax Officer for further examination based on evidence of the nature of services rendered by the technicians.

Conclusion:
The court set aside the impugned order and remitted the matter to the Income-tax Officer for reconsideration based on the observations made in the judgment. No costs were awarded in the case.

Judge's Separate Opinion:
K. C. JAGADEB Roy J. concurred with the judgment.