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Issues Involved:
1. Whether the payment of 8500 US Dollars to the foreign company constitutes "fees for technical services" or "other income." 2. Whether the rate of tax of 65% should be applied to the gross income or net income. 3. Whether the order passed by the Dy. CIT(Asst.) under Section 195 was rectifiable under Section 154. Issue-wise Detailed Analysis: 1. Nature of Payment: "Fees for Technical Services" or "Other Income" The assessee, M/s Escorts Ltd., argued that the payment of 8500 US Dollars to M/s Rambaudi Industriale, Italy, for the erection and commissioning of a machine should be considered as "fees for technical services." The Department, however, treated it as "other income" and taxed it at 65%. The CIT(A) upheld the Department's view, stating that the issue was beyond the scope of "mistake apparent from record" under Section 154. The Tribunal noted that this issue involves a matter of dispute and is not amenable to rectification under Section 154, thus upholding the CIT(A)'s decision. 2. Rate of Tax: Gross Income vs. Net Income The primary contention was whether the 65% tax rate should be applied to the gross income or the net income. The Tribunal emphasized that under the Income-tax law, income liable to tax must be computed in accordance with the provisions of the Act, which means net income should be considered. Section 195(2) allows the payer to apply to the Assessing Officer to determine the appropriate proportion of the sum chargeable to tax. The Tribunal concluded that the rate of 65% should be applied to the net income after allowing for any deductible expenses. The Tribunal directed the Dy. CIT(Asst.) to allow the assessee an opportunity to adduce evidence regarding the expenses incurred and to apply the tax rate to the net income. 3. Rectification under Section 154 The assessee filed an application under Section 154, arguing that the tax should only be on the net income, not the gross income. The Dy. CIT(Asst.) rejected this application, except for canceling the 5% surcharge. The CIT(A) upheld this decision, stating that Section 154 has limited jurisdiction and cannot be invoked for issues involving long-drawn reasoning or where two opinions are possible. The Tribunal agreed, noting that the determination of whether the payment was for "fees for technical services" or "other income" involves a dispute not suitable for rectification under Section 154. Conclusion The Tribunal allowed the appeals in part, directing the Dy. CIT(Asst.) to reassess the tax liability by considering the net income after deducting allowable expenses. The Tribunal did not delve into the nature of the gross income but focused on ensuring that the tax rate of 65% is applied to the net income, as per the provisions of Section 195(2).
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