1986 (1) TMI 177 - AT - Income Tax

Summary

Issues:
Whether the assessee is entitled to exemption under section 10(6)(vi) of the Income-tax Act, 1961 for amounts remitted to Wean United of USA.

Analysis:
The main issue in this case was whether the assessee was entitled to exemption under section 10(6)(vi) of the Income-tax Act, 1961 for amounts remitted to Wean United of USA. The Income Tax Officer (ITO) initially held that the assessee was not entitled to exemption and directed tax to be deducted at source on the remittances. However, the Commissioner (Appeals) disagreed with the ITO's decision. The Commissioner held that Wean United was acting as a conduit for passing on remuneration to Mr. George Sweet, and therefore, the remuneration was not paid to Wean United but through it to Mr. George Sweet. The Commissioner directed the ITO to issue a no-objection certificate for the remittance without tax deduction under section 195(1) of the Act.

The departmental representative argued that the payment was made to Wean United and not directly to Mr. George Sweet, asserting that there was a business connection between the assessee and Wean United, making the assessee ineligible for exemption under section 10(6)(vi). On the other hand, the counsel for the assessee contended that the payment was for services rendered by Mr. George Sweet, and as all conditions for exemption were met, the assessee should be entitled to the exemption. The counsel emphasized that there was no direct agreement between the assessee and Wean United, and supported the Commissioner's decision.

Upon considering the submissions, the Tribunal found that Wean United had agreed to depute their engineer, Mr. George Sweet, for supervision and commissioning of the plant. While the payment was made to Wean United, it was clear that Mr. George Sweet was sent to India for specific services. The Tribunal noted that there was a business connection between the assessee and Wean United, and therefore, the assessee was not entitled to exemption under section 10(6)(vi) as the payment was not directly to Mr. George Sweet. The Tribunal reversed the decision of the Commissioner (Appeals) and upheld the ITO's order to deduct tax at source on remittances to Wean United.

In conclusion, the Tribunal allowed the appeal, ruling that the assessee was not entitled to exemption under section 10(6)(vi) for amounts remitted to Wean United of USA, as the payment was not directly made to Mr. George Sweet. The Tribunal held that tax should be deducted at the prescribed rate on such remittances, reversing the decision of the Commissioner (Appeals) and restoring the ITO's order.