1983 (2) TMI 14 - HC - Income Tax

Summary

Issues:
Evaluation of services rendered by a foreign company in India for tax purposes.

Analysis:
The judgment pertains to two references made by the Revenue against separate orders of the Tribunal regarding the assessment year. The foreign company, in collaboration with an Indian company, submitted a return admitting receipt of technical fees but claimed it was not taxable as it was earned for services rendered outside India. The ITO evaluated services and fixed 50% of the fees as income accruing in India. The AAC reduced it to 35%, leading to appeals by both the assessee and the Revenue. The Tribunal first considered the Revenue's appeal and upheld the 35% estimate. Later, in the assessee's appeal, the Tribunal reduced the evaluation to 20%. The issues revolved around the evaluation of services rendered in India for tax purposes.

The Tribunal's decision was based on evaluating the services rendered by the foreign company in India. The Revenue contended that the services should be evaluated at 50%, as done by the ITO. However, the Tribunal, after assessing the nature of services based on the collaboration agreement, determined the evaluation at 20%. The court found that the Tribunal's evaluation was factual and not a question of law. The decision was upheld as it was based on a factual assessment of the services rendered in India. Therefore, the court answered the question in favor of the assessee and against the Revenue.

The court highlighted that in previous years, the assessee had conceded that certain services were rendered in India, albeit insignificantly. The Tribunal's evaluation of services at 20% was consistent with its decision in earlier years. The Revenue's argument that services should be evaluated at 50% was dismissed as the Tribunal's evaluation was based on the nature of services rendered. The court emphasized that the Tribunal's decision was factual and not a legal question, thereby upholding the evaluation of services at 20%.

In conclusion, the court affirmed the Tribunal's evaluation of services rendered by the foreign company in India at 20% for tax purposes. The Revenue's contention that services should be evaluated at 50% was dismissed as the Tribunal's decision was factual and based on the nature of services. The court answered the questions in favor of the assessee and against the Revenue, returning the second reference unanswered.