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Issues:
1. Whether the contract between the assessee and Hindusthan Steel Ltd. was a single indivisible contract or several contracts? 2. Whether the profits made on the sale of plant equipment under the agreement were taxable in India? Analysis: Issue 1: The case involved the interpretation of an agreement between the assessee and Hindusthan Steel Ltd. regarding the supply of plant and equipment. The assessee contended that this part of the agreement should be treated as a separate contract not taxable under the Income Tax Act, 1961. The Assessing Officer (AO) and the Appellate Authority Commissioner (AAC) held that there was only one contract between the parties, considering the entire agreement as a single indivisible contract. The Tribunal also upheld this view, stating that the agreement was not separable into distinct contracts. The Tribunal referred questions of law to the High Court regarding the nature of the contract. Issue 2: The second issue revolved around the taxability of profits from the sale of plant and equipment under the agreement. The assessee argued that since the title to the plant and equipment passed at a Canadian Port under the f.o.b. contract and payments were made outside India, the profits should not be considered as accruing in India. However, the revenue contended that the agreement was a single contract, and payments were spread over time based on work progress. The Tribunal found that the profits were taxable in India. The High Court noted the relevant provisions of the Income Tax Act, emphasizing that income received or deemed to be received in India, as well as income accruing or arising in India, are both liable to taxation for non-residents. In conclusion, the High Court declined to answer the questions referred, emphasizing the importance of determining the income received or accruing in India under the Act. The Court directed the Tribunal to re-examine the matter in accordance with the law, allowing for further hearings and fresh evidence if necessary. The assessments were to be based on yearly receipts and expenses, not lump sum amounts. The judgment was a comprehensive analysis of the tax implications of contracts involving non-residents and the importance of correctly applying the provisions of the Income Tax Act to determine tax liability.
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