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TMI Blog2005 (6) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... uest was made to the Hon'ble President to refer the matter to a Special Bench under section 255(4) of the Income-tax Act, 1961 (the Act). The President, I.T.A.T after considering the facts and circumstances of the case, decided to constitute a Special Bench. The following question was referred to the Special Bench: Whether, on the facts and in the circumstances, the revenues earned by the appellant from supply of equipment and software to Indian Telecom Operators were taxable in India? 2. It may be relevant to mention that the revenue had earlier opposed the constitution of a Special Bench. The Revenue further opposed joining of Ericsson and Nokia as parties before the Special Bench. However, subsequently the learned counsel appearing for the revenue Shri G.C. Sharma, Sr. Advocate agreed that a Special Bench may be constituted and the above mentioned two assessees may also join as parties. 3. Before the hearing started on 19th July, 2004, Mr. M.S. Syali, the learned counsel for Motorola, referred to the assessee's application dated Nil (received in the office of the Tribunal on 26-5-2004) and requested the Bench that he be permitted to argue on the validity of the notice is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culars, and (b) Where time allowed under section 139(1) had expired and no return was filed by the assessee, the notice under section 142(1) could call for a return to be filed by the assessee. 6. Shri M.S. Syali then referred to the decision of the Hyderabad Bench of the Tribunal in the case of Dr. Vijaykumar Datla v. Asstt. CIT [1996] 58 ITD 339 and of the Delhi Bench in the case of Sheraton International Inc. v. Dy. CIT [2003] 85 ITD 110. Shri Syali pointed out that the Hyderabad Bench while deciding the matter had taken all the relevant provisions of the law into consideration. The decision of the Delhi Bench of the Tribunal, on the other hand, was per incuriam as the decision of the Hon'ble Supreme Court and the relevant statutory provisions were not discussed. Shri Syali at the same time added that both the Benches agree that some period of limitation has to be read in the statutory provision and it is not possible to hold that the notice under section 142(1) could be issued at any time. Shri Syali referred to the decision in the case of K. Iswara Bhat v. CAIT [1993] 200 ITR 238 (Ker.) to contend that even in the absence of a time limit prescribed by law, any proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t he can issue notice under section 142(1) or a notice under section 148 and if he exercises one of these two options, there is no illegality about the same. 7. Criticising the approach of the CIT(A) as above, Mr. Syali submitted that in the case of Dr. Vijaykumar Datla, the Hyderabad Bench did consider section 139(2) and that too in extenso and he drew our attention to the relevant parts of the order. Secondly, he submitted that the judgment of the Hon'ble Supreme Court in the case of Narsee Nagsee Co. clearly notes that the provisions of the Business Profits Tax Act which were before them are in pari materia with the provisions of the Indian Income-tax Act, 1922. Thirdly, it was submitted that it was irrelevant that Dr. Vijaykumar Datla was an order by the Hyderabad Bench which was not the jurisdictional Bench insofar as the present case is concerned, because there is no judgment of any High Court taking a view contrary to the view taken by the Hyderabad Bench in Dr. Vijaykumar Datla's case. Lastly, Mr. Syali contended that the theory of concur rent jurisdiction was rejected by the Hon'ble Supreme Court in the case of Narsee Nagsee Co. and further he added that the ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of sections 142(1) and 143(2) to contend that just as the Assessing Officer (A.O.) cannot make an assessment under section 143(3) after the expiry of 12 months, similarly no notice could be issued under section 142(1) after the end of the assessment year. After the end of the assessment year, only notice under section 148 could be issued as by that time it becomes a case of escaped assessment. The decision in the case of Sheraton International Inc. overlooked the two limbs of section 142(1) namely: (a) calling for the return and (b) calling for the details. It was submitted that these were two different powers with different attributes governing different situations. It was submitted that in principle, a notice under the section has to be issued during the assessment year which position has been confirmed by the courts. Later on limb (a) was incorporated in section 139(2) which now stands substituted by the provisions of section 142(1) and hence the question arises as to why the earlier position cannot be implied into the new provisions. 9.1 On the basis of certain observations of the Calcutta High Court in Sultan Ali Gharami's case, Mr. Syali contended that on the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian company. 9-11-1999 Notice under s. 142(1) served on the assessee. 24-1-2000 Return of income filed by the assessee showing nil income. 28-3-2000 Assessment made under s. 143(1) It may be noted that all these dates fell in the financial year 1st April, 1999 to 31st March, 2000. 11. Mr. Dastur, the learned counsel for the assessee (Ericsson) prefaced his arguments regarding the validity of the notice under s. 142(1) with what he called the basic postulate, which according to him was that we should avoid any interpretation which would result in the overlapping of the provisions of s. 142(1) and s. 148 over the same period of time. The reason according to him was that if this overlap is allowed, then the AO will be in a position to discriminate between different assessees and may even choose to issue notice under s. 148 instead of s. 142(1), since that would give him more time to complete the assessment. In this connection he referred to s. 153(2) which provides for the limitation of two years from the end of the financial year in which the notice under s. 148 was served, to complete the reassessment. If such a discrimination is allowed, the result in the present case would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Harakchand Makanji Co. vs. CIT (1948) 16 ITR 119 (Bom). 15. The second alternative putforth by Mr. Dastur, which he characterised as the narrower view, is like this. Notice under s. 142(1) can be issued upto one year from the end of the relevant assessment year, i.e., in this case notice can be issued only upto 31st March, 1999 and not thereafter. The reason is based on the provisions of s. 139(4). This section gives an assessee the right to file a voluntary return upto a period of one year from the end of the assessment year. In the present case, such a right is available to the assessee upto 31st March, 1999. As long as it is open to the assessee to file a voluntary return under s. 139(4), it cannot be said that the assessee has not filed any return of income and, therefore, Expln. 2(a) to s. 147 which enables a reassessment to be made in a case where no return of income has been furnished by the assessee, cannot be invoked. In other words, a notice under s. 148 cannot be issued on the footing that the assessee has failed to file the return, so long as the assessee still has time to file a voluntary return under s. 139(4). In this situation, it cannot be said that as on 31st Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation is that the notice calling for the return cannot be issued after the assessment. Sec. 147 has no impact on this aspect of s. 142(1) and it should not be permitted to control or limit the field of operation of s. 142(1) or the power of the AO to issue a notice thereunder. 17. It was in the above background that Mr. Sharma proceeded to putforth his analysis of s. 142(1). He emphasized that s. 142(1) commences with the words for the purpose of making an assessment , which, according to him can only be read as the determination of the total income. In the determination of the total income, it is open to the AO, as a first step, to compel the assessee to file a return of income where it is not filed under s. 139(1). He pointed out that the words before the end of the relevant assessment year , which were there in s. 139(2) were omitted w.e.f. 1st April, 1989, on which day s. 142(1) was introduced, and to read into s. 142(1) the condition that the notice calling for return thereunder should be issued before the end of the relevant assessment year, would be to ignore the fact that words to that effect which were present in the omitted s. 139(2), do not find a place in the newly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by s. 142(1)(i), w.e.f. 1st April, 1989. It is in this background that we have to approach the question. (b) The ratio of the Hon'ble Supreme Court judgment in Narsee Nagsee Co. (supra) is that the AO cannot have a concurrent power to proceed under s. 11 of the Business Profits Tax Act and s. 14 of the same Act. Therefore, the AO cannot have a concurrent power to act under s. 142(1) and s. 148 of the 1961 Act. (c) The marginal note to s. 142 is Inquiry before assessment . This marginal note was appropriate before 1st April, 1989, because s. 142 before that date provided only for issue of notices by the AO calling upon the assessee to produce the account books and other relevant information in support of the return or on points on which the AO required clarification. This was the kind of inquiry contemplated by s. 142 prior to 1st April, 1989. The marginal note, therefore, was appropriate. However, when the section underwent a change w.e.f. 1st April, 1989, whereby cl. (i) was introduced giving the AO the power to call for a return of income and s. 139(2) was omitted w.e.f. the same date, the marginal note was not suitably changed and it continued to be Inquiry before assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t may be treated as made under s. 144 of the Act (best judgment). He pointed out that this is not a case of the AO quoting a wrong section of the Act. In essence and substance, the order is one passed only under s. 143(3), since otherwise the notice issued under s. 143(2) and the production of material and evidence makes no sense. The AO did not purport to act under s. 144 at all and the argument that he only quoted the wrong section is, therefore, not available to the Revenue. On the question as to why the assessment cannot be deemed to have been made under s. 144, it was contended that firstly, there was no notice to make the best judgment assessment under the first proviso to s. 144 and secondly, in order to apply the second proviso, there should have been a valid notice under s. 142(1), which in this case was not there. Therefore, since the procedure laid down in s. 144 had not been followed, there was no question of treating the assessment as a best judgment assessment. Mr. Dastur also relied on the judgment of the Calcutta High Court in the case of Sultan Ali Gharami (supra) to contend that there can be no waiver of a statutory condition and in the present case even on facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part-Ill contained the distinguishing features between the provisions of three Acts, namely, 1922 Act, the Business Profits Tax Act and the 1961 Act. Apart from the written submissions he also contended that the assessment cannot be quashed, even assuming that the notice issued under s. 142(1) was beyond the period of limitation. He pointed out that at any rate this point was not raised by the assessee before the AO but was raised only before the CIT(A). The assessee, according to Mr. Sharma, led the Department to believe that the notice as well as the return were valid, participated in the proceedings, permitted the AO to make an assessment under s. 143 and thereby prevented the AO from making a best judgment assessment under s. 144 and by doing all this, an advantage was gained by the assessee. Once the assessment was completed, the assessee filed an appeal and it was only in this appeal that it took the point that the notice issued by the AO is beyond the period of limitation and, therefore, the assessment was null and void. This should not be permitted. He relied strongly on the authorities referred to by him in part-II of his written submissions dealing with the principle of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concurrent jurisdiction to the AO in the sense that he can issue a notice either under s. 142(1) or under s. 148 in respect of the same period. (e) Without prejudice to the above Mr. Dastur contended that the period of one year from the end of the assessment year, i.e., 31st March, 1999, in this case should be considered as the period of limitation for issue of notice because s. 139(4) gives the assessee a right to file a voluntary return before that date. Till that period expires, income cannot be said to have escaped assessment. 26. It was contended that the provisions of cl. (i) of s. 142(1) were different from the provisions of cls. (ii) and (iii) of s. 142(1) insofar as the later two clauses were procedural in nature, the breach of which was curable, if no notice had been issued. However, so far as cl. (i) was concerned, it was a substantial provision bestowing jurisdiction on the AO to call for the return from the assessee and the breach of this provision would render the assessment null and void. In substance, the contention was that there could be different limitation periods in the same section for issue of different notices. This is not strange or unknown and as an illus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the assessee. Mr. Dastur also made parawise comments vis-a-vis the written submissions filed by Mr. G.C. Sharma on this question. 28. We have given careful thought to the submissions advanced before us by the parties. We have also examined the relevant statutory provisions of the Indian IT Act, 1922 (old Act) as also of the IT Act, 1961 (new Act) to which our attention was drawn. We have also considered the case law cited before us. It is an admitted position that no time is prescribed under s. 142(1)(i) to issue notice. However, both the Benches of the Tribunal, i.e., Hyderabad Bench in the case of Dr. Vijay Kumar Datla (supra) and Delhi Bench in the case of Sheraton International Inc. (supra) agreed that some reasonable time-limit has to be read into the provision. Notice under the above provision calling for a return cannot be issued any time at the whims and fancies of the AO. Even Delhi Bench held that some time-limit has to be read and held that notice under the above provision could be issued till the date of the completion of the assessment. Therefore, the proposition that notice is to be issued within a reasonable time having regard to the scheme of the Act is not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been assessed at too low a rate, or have been the subject of excessive relief under this Act the ITO may, in any case in which he has reason to believe that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars thereof, at any time within eight years, and in any other case at any time within four years of the end of that year, serve on the person liable to pay tax on such income, profits or gains, or, in the case of a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-s. (2) of s. 22, and may proceed to assess or reassess such income, profits or gains and the provisions of this Act shall, so far as may be, apply accordingly, as if the notice were a notice issued under that sub-section. (2) The AO shall, before issuing any notice under this section, record his reasons for doing so. 30. It is evident from the above that the basic scheme relating to assessment of income is that under the old Act, after 1939, the ITO was required to give a notice under s. 22(1) by publication calling for returns in the prescribed form to persons whose total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Narsee Nagsee Co. (supra), their Lordships of the Hon'ble Supreme Court, while considering a case under the Business Profits Tax Act (BPTA), held that notice issued under s. 11(1) of BPTA more than four years after the close of the charging period, was bad in law as profits had escaped assessment within the meaning of s. 14 of the aforesaid Act which was applicable to the case. Without applying the above section, notice issued under s. 11 was held to be beyond time and without jurisdiction. Secs. 11 and 14 of the BPTA were held to be similar to ss. 22(2) and 34(1) of the old Act. No time-limit was provided in s. 11 of BPTA also. Their Lordships (as per the majority) made the following observations (at p. 315) relating to the scheme of assessment : As the tax under the Act is charged, levied and paid on the taxable profits of a chargeable accounting period but assessment is in respect of the financial year in which the Act operates it is not an unreasonable inference that notice for the chargeable accounting period must issue in the financial year following that period. .................... Similarly in the financial year 1949-50, notice would have to be given in that y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nent observations and noted the decision of the Privy Council in the case of CIT vs. Ved Nath Singh (1940) 8 ITR 222 (Rangoon), to the following effect (at p. 331 of 40 ITR) : We are of opinion that s. 34 is applicable to cases in which either no assessment at all has been made upon the person who received the income, profits or gains liable to assessment, or, where an assessment has been made in the course of the year, but some portion of the income, profits or gains of such assessee for some reason or other has not been included in the order of assessment; such income is income which has 'escaped assessment' in the year, and falls within the ambit of s. 34 of the Act. His Lordship further observed as under (at p. 331 of 40 ITR) : These cases arose before the amendments of 1939 and in those days there was no provision for a general notice such as is now issued under s. 22(1). Even in those days, the return asked for the particulars of the total income during the previous year. Thus, at the end of the assessment year it was not possible to issue a notice for a back period beyond the previous year. By the force of s. 22(2), it could be said at the end of any assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. S.K. Dutta, J., came to the same conclusion as the learned Chief Justice but he relied on a judgment of the Calcutta High Court in Commr. of Agrl. IT vs. Sultan Ali Gharami (1951) 20 ITR 432 (Cal), in which a dissent had been expressed from the Bombay judgment in Harakchand Makanji Co. vs. CIT (1948) 16 ITR 119 (Bom), on the question as to when proceedings relating to assessment could be regarded as having commenced. According to the learned Judge, if no return is made in response to a public notice under s. 19(1) of the Act and no individual notice is served under s. 19(2), there would be no pending proceedings and it would be a case of escaped assessment. But this would be so only after the expiry of the financial year. In other words, after the publication of the notice under s. 19(1), there would be no escapement of income till the end of the financial year. Once the financial year is over and no return has been made in response to a notice under s. 19(1) and no individual notice has been served under s. 19(2), a case would arise of 'escaped assessment for the financial year'. (Underlined, italicised in print, by us to emphasize). 32.3 On appeal, after considering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Palkhiwala and Vyas in Law Practice of Income-tax, 9th Edition. With reference to the provisions of s. 147, the learned authors have observed as under at p. 1826 : Nature and basis of assessment under this section The proceedings taken under this section must be deemed to relate to the original assessment proceedings which commenced with the return filed under s. 139(1) or the issue of a notice under s. 139(2) (now deleted) calling for return of income. If a particular income was not included in the total income of the relevant year of account, it can be brought to charge only by taking proceedings under this section and by including it in the total income of any other of account. (sic) 33.1 It can further be seen from the foregoing discussion that even when no time-limit was prescribed under s. 22(2) of the old Act, yet Courts held, having regard to the scheme of assessment, that the notice was to be served before the end of the assessment year, otherwise, income would escape assessment at the end of the assessment year. What was implicit in the old Act was made explicit in the new Act. The judicial interpretation was given statutory recognition and in s. 139(2) of the new Act, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as inserted w.e.f. 1st April, 1989, particularly the words before the end of the relevant assessment year were not in line with the basic scheme of the Act as it authorized the ITO to call for a return as per cl. (i) after the end of the assessment year . As per the settled law, the scheme of the Act, as noted above, was that income would be treated as having escaped assessment , if neither the return was filed under sub-s. (1) nor any notice under sub-s. (2) of s. 139 was issued before the end of the assessment year. In the cases of such escaped assessment, the AO was required to issue notice under s. 148 of the IT Act. However, the clause as inserted also authorized the AO to call for a return after the close of the assessment year. 33.5. The provision as inserted was found to be not workable and problematic. Accordingly, the change in the said provision was made w.e.f. 1st April, 1990, just one year after its insertion. In the changed provision, there is no time-limit for issuing notice except that it has to be after the time provided in sub-s. (1) of s. 139 is over. The AO cannot issue notice and call for the return as he could do under s. 139(2) or s. 22(2) of the old Act eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) where an assessment has been made, but' (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. 34.1 Explanation 2 to s. 147 would not make any difference as the said Explanation starts with the words the following shall also be deemed to be cases where income chargeable to tax has escaped assessment. The word also in the above Explanation is relevant and signifies that cases of deemed escaped assessment as per Expln. 2 are in addition to the cases of escaped assessment as per the main provisions of the section. The said Explanation, therefore, cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affect the conclusion that income escapes assessment at the end of the assessment year if neither any notice is issued to the assessee nor the assessee filed any return as per sub-s. (1) of s. 139 before the end of the year. In the case of CIT vs. Ranchhoddas Karsondas (1959) 36 ITR 569 (SC), as per the headnote, it was held as under : A return showing income below the taxable limit submitted voluntarily in answer to the general notice under s. 22(1) of the IT Act is a good return; it is a return such as the assessee considers represents his true income. A return in answer to a general notice under s. 22(1) of the IT Act can, under s. 22(3), be filed at any time before assessment and for this there is no limit of time. Where in respect of any year a return has been voluntarily submitted before assessment, the ITO cannot choose to ignore the return and any notice of reassessment and consequent assessment under s. 34 ignoring the return is invalid. Here, reference can also be made to the Full Bench decision of the Karnataka High Court in the case of Kareemsons (P) Ltd. vs. CIT (1992) 103 CTR (Kar) 247 : (1992) 198 ITR 543 (Kar). It provides a good illustration to explain the scheme. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of s. 139(4) suggest that notice in terms of s. 142(1)(i) has to be issued before the time prescribed under the above sub-section. Thus, more than one provision can operate simultaneously without in any manner affecting the machinery/scheme of the assessment. From the mere fact that the assessee can file a return as per the enabling provisions of sub-s. (4) of s. 139, it does not follow that no income can be said to have escaped assessment until the period prescribed under s. 139(4) is over. The filing of the return would halt action of the AO as explained above. 36.1 From the above discussion, one may carry the impression that the Revenue's contention that both the notices, i.e., under ss. 142(1)(i) and 148 can be issued simultaneously; both the provisions can operate simultaneously and discretion is vested with the AO to utilize any one of them. This is erroneous and cannot be accepted. Firstly, it is directly opposed to the decision of the Hon'ble Supreme Court in the case of Narsee Nagsee Co. (supra). We have noted that this contention was raised and was specifically rejected by the Supreme Court. Secondly, whereas no conditions are prescribed for issuing notice un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint of time. Thus, this section fully supports the contention that at the end of the assessment year income would escape assessment and notice under s. 148 will have to be issued. If that is the case, there can be no question of calling for a return under cl. (i) of sub-s. (1) of s. 142 after the end of the assessment year without issuing notice under s. 148. The position in the case of escaped assessment is totally different and the same is required to be tackled under s. 148 of the IT Act. It is, therefore, clear that a notice after the end of assessment year cannot be issued under s. 142(1)(i) of IT Act. All the provisions are required to be read together and given a harmonious construction. This is well-settled law. 38. In the case of Sheraton International Inc. (supra), the Delhi Bench of the Tribunal took a view different from one taken by the Hyderabad Bench in the case of Dr. Vijay Kumar Datla (supra). The Bench held that the notice under s. 142(1)(i) can be issued at any time so long as the AO has jurisdictional power to proceed with the assessment of the assessee. In other words, it could be issued before the time expired for making of an assessment . The decision was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was earlier exercised under s. 139(2) of IT Act for initiation of assessment proceedings, cannot be exercised after the end of the assessment year without recourse to s. 147/148 of the Act. The question of making an assessment would arise only if some proceedings have been initiated and are pending. Only then, the question of exercising the powers for the purpose of making an assessment would arise. The power for initiation of proceedings as per the scheme of the Act is very different from the power of making an assessment. Therefore, the contention that the power of making an assessment or reassessment can only be exercised after initiating the assessment or reassessment proceedings is well taken. It is further rightly contended that there is no good reason why the decision of the Supreme Court in the case of Narsee Nagsee Co. (supra) should not be applied and why the AO should be held to be entitled to issue notice under s. 142(1)(i) where he is required to issue notice under s. 148 r/w s. 147 treating it to be a case of escaped assessment. If income has escaped assessment, the AO has to issue notice under s. 148 after satisfying the conditions of s. 147 of IT Act recording rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment and the CIT(A) has no powers to cancel the same. He also referred to the later judgment of the Supreme Court in CIT vs. Sant Ram Mangat Ram Jewellers (2004) 186 CTR (SC) 115 : (2003) 264 ITR 564 (SC) and submitted that in this judgment, the Supreme Court did not consider it fit to reconsider the earlier judgment in Anjum M.H. Ghaswala (supra) even in the light of the Expln. 1 to s. 234B which was introduced after the earlier judgment. In short, the submission of Mr. Sharma was that the interest under these sections has to be compulsorily levied. 42. On behalf of Ericsson, Mr. Dastur submitted the following facts : The return in the case of Ericsson was due to be filed on or before 31st Oct., 1997. The notice under s. 142(1) was issued on 20th Aug., 1999, and in response thereto, the assessee filed the return on 24th Jan., 2000. In the assessment order passed under s. 143(3) of the Act, the only remark made by the AO at the end of the order, so far as the levy of interest is concerned, was charge interest . The AO did not even mention the specific section under which interest is to be charged, whether it is under s. 234A or s. 234B and so on. In the assessment form ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. (2000) 164 CTR (SC) 200 : (2001) 247 ITR 209 (SC) as is further clear from the judgment of the Full Bench of the Patna High Court in Smt. Tej Kumari vs. CIT (2000) 164 CTR (Pat)(FB) 201 : (2001) 247 ITR 210(Pat)(FB), where the effect of the Supreme Court judgment has been explained. Mr. Dastur pointed out that this is not a case of dismissal of a SLP but a case of civil appeal being dismissed on merits and on the basis of the judgment of the Supreme Court in V.M. Salgaocar Bros. (P) Ltd., Etc. vs. CIT (2000) 160 CTR (SC) 225 : (2000) 243 ITR 383 (SC), the judgment of the Patna High Court got merged with the judgment of the Supreme Court. 43. Mr. Dastur distinguished the case of Kalyankumar Ray vs. CIT (1992) 102 CTR (SC) 188 : (1991) 191 ITR 634 (SC) on the ground that it is applicable only to a case where there is a specific direction in the assessment order but the calculation thereof is left to be made by the office in Form No. ITNS-150 and there are observations to this effect at p. 637 of the Report. He also pointed out that this judgment is being erroneously invoked by the Department in cases of levy of interest under s. 234A, etc., whereas in fact that judgment has nothi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Settlement Commission which was in question before the Supreme Court and not the modality of charging interest. The effect of the judgment of the Supreme Court is that even the Settlement Commission is obliged to levy interest in its order of settlement, which also means that the specific section under which the interest is levied is to be mentioned and it should also be shown that the conditions precedent for levying such interest have been fulfilled. In this judgment the earlier judgment of the Supreme Court in the case of Ranchi Club Ltd. (supra) was not adverted to, which itself shows that the two judgments operate in different fields. In this connection, Mr. Dastur also pointed out on the basis of the judgment of the Supreme Court in the case of CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC) and certain other decisions that a judgment should not be read out of context and a sentence or a word therefrom cannot be picked up without having regard to the controversy before the Court, the context, etc. A decision which is directly on the point should be followed in preference to a decision which may have only an indirect impact on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid. 47. Mr. Dastur also put forth his submissions on the merits of the levy of interest under s. 234B. This section is attracted where the advance tax is not paid by the assessee despite there being an obligation to pay the advance tax. The question, according to Mr. Dastur, is whether there was an obligation upon the assessee to pay advance tax in the present case. He drew our attention to s. 209 of the Act and the steps involved in computing the advance tax. According to cl. (d) of sub-s. (1) of s. 209, the income-tax has to be computed on the current income of the assessee. From such tax, the tax deductible at source will have to be reduced. Particular attention was drawn to the fact that the tax need not be actually deducted at source and it is sufficient if the tax is deductible under the various provisions of the IT Act such as s. 195, etc. under which the payer of the income is liable to deduct tax. In the present case, according to the assessee, the tax is deductible under s. 195 of the Act, though according to the payer of the income (the Indian companies), there was no liability to deduct tax because the amount did not represent income chargeable to tax under the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of the mention of the specific section under which it is charged, Mr. Sharma contended that it is implicit in such a direction that the levy will be only in accordance with the provisions of the Act and the relevant Rules and, therefore, even such a direction constitutes a valid levy of interest. He pointed out in this connection that s. 234B itself fixes the liability of the assessee to pay interest as well as the period on which interest is leviable. According to Mr. Sharma, the application of mind on the part of the AO is reflected by the assessment order itself and the view which the assessee may take regarding his liability to pay advance tax is not relevant at all. The assessee cannot assume that no advance tax is payable by him. The AO will charge interest on the basis of his own findings in the assessment order regarding the quantum of assessment. He submitted that the word mandatory means that it is automatic and no discretion is left with the AO not to levy interest. 50. Referring to the authorities, Mr. Sharma cited the judgment of the Punjab Haryana High Court in Vinod Khurana vs. CIT (supra) and submitted that in this judgment, both Kalyankumar Ray's judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be better to reproduce paras 10.1 and 10.2 of the circular [p. 37 of 182 ITR (St)] : Payment of mandatory interest to replace various interests and penalties' 10.1 The old provisions in the IT Act, which gave the assessing authorities discretionary powers to charge interest and also to levy penalties for the same default, were found to be rather complicated. These were contained in the following sections of the Act : (i) Sec. 139(8) relating to levy of interest for late filing or non-filing of return of income. (ii) Sec. 215 relating to levy of interest for underpayment of advance tax. (iii) Sec. 216 relating to levy of interest for deferment of instalments of advance tax. (iv) Sec. 217 relating to levy of interest for non-payment of advance tax. (v) Sec. 271(1)(a) relating to levy of penalty for failure to file the return of income or to file it in time. (vi) Sec. 273 relating to levy of penalty for failure to file the statement/estimate or for filing an untrue statement/estimate of advance tax payable. (vii) Sec. 140A(3) relating to levy of penalty for failure to pay tax on self-assessment. 10.2 With a view to simplify the aforesaid provisions and also to remove the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an indicator of the fact that so far as the interest falling due by virtue of default in furnishing a return of income, default in payment of advance tax or interest for deferment of advance tax are concerned, Part F of Chapter XVII has been obligated with the duty of levy of interest, as also to make the necessary changes in the payment of interest dependent on the change that may occur consequent to the order of settlement under s. 245D(4). At p. 9, the position was summed up in the following words : If the scheme of levy of interest is thus to be analysed on the anvil of the provisions referred to hereinabove, it shows that the interest contemplated under ss. 234A, 234B and 234C is mandatory in nature and the power of waiver or reduction having not been expressly conferred on the Commission, the same indicates that so far as the payment of statutory interest is concerned, the same is outside the purview of the settlement contemplated in Chapter XIX-A of the Act. At p. 13 of the Report, the Supreme Court contrasted the earlier and new provisions relating to the levy of interest in the following words : Secs. 234A, 234B and 234C in clear terms impose a mandate to collect interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation to specify the particular section under which it is charged. 55. Mr. Dastur, learned counsel for the assessee, agreed that the judgment of the Supreme Court in the case of Ghaswala (supra) was rendered by a five-Judges Constitution Bench of the Supreme Court, whereas the earlier judgment of the Supreme Court in CIT vs. Ranchi Club Ltd. (supra) was rendered by a three-Judges Bench of the Supreme Court and also that the judgment in Ghaswala (supra) was rendered on 18th Oct., 2001, which is later than the judgment in Ranchi Club Ltd. (supra) which was rendered on 1st Nov., 2000, but would submit that the issue in Ghaswala's case (supra) is not the same as in Ranchi Club Ltd. (supra). He would further say that the judgment of the Supreme Court in Ranchi Club Ltd. (supra) is a direct judgment on the question before us, which cannot be modified or understood in the light of a judgment which only touches the issue before us indirectly. This contention, according to him, would also equally apply vis-a-vis the earlier judgment of the three-Judges Bench of the Supreme Court in the case of Kalyankumar Ray vs. CIT (supra). 56. It is, no doubt, true that in CIT vs. Anjum M.H. Ghaswal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the interest has been charged is seen mentioned in the assessment form, which is Form No. ITNS-150, copies of which have been filed before us. In these forms, it is seen that the specific sections as well as the amounts of the interest charged have been mentioned. In the case of Kalyankumar Ray (supra), the question was whether the assessment Form No. ITNS-150 can be treated as part of the assessment order. The question arose before the Supreme Court this way. In that case, the assessment order (where the total income was computed) itself did not contain the calculations of the income-tax. These calculations were made in Form No. ITNS-150. The contention advanced before the Supreme Court was that s. 143(3) mandates that there should be an order in writing determining the sum payable by the assessee on the basis of the assessment and since the assessment order proper did not in itself contain the calculations or the determination of the tax payable by the assessee, the entire assessment order should be held to be void and annulled. The contention of the Department, based on the punctuation in s. 143(3), was that an order in writing was required only for the assessment of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment order itself, but can be done separately in Form No. ITNS-150 subject to the condition that the said form is signed or initialed by the ITO to indicate that the calculations have his approval. If Form No. ITNS-150 is to be treated as part of the assessment order, it follows that if the specific section under which interest is charged is mentioned in that form, it satisfies the requirement that the interest must be charged in the assessment order itself and should specify the section also. 58. The argument before us on behalf of the assessees however, was that the above judgment of the Supreme Court is not a direct decision on the question whether a specific order by the AO, mentioning the section under which the interest is charged, is required for the validity of the levy. It was pointed out that the question before the Supreme Court was not about the validity of the charge of interest, but whether the calculations of the tax have to be made in the assessment order itself and, therefore, the principle laid down in the judgment cannot be extended to cover everything in the assessment form. In addition, it was also argued that the judgment was rendered in disposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;156. Notice of demand - When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the AO shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable.' From the bare reading of s. 156, it is clear that notice of demand claiming interest can be issued only when there is order in the assessment order levying interest. Except in the cases of the assessee, Tej Kumari Devi (C.W.J.C. No. 2732 of 1995 and C.W.J.C. No. 2780 of 1995) there is no order in any of the assessment orders levying interest under any of the ss. 234A, 234B or 234C. To use the expression 'charge interest, if any' or 'charge interest as per rules' cannot be read to mean that the AO has passed orders 'charge interest under all the aforesaid sections'. The order to charge interest has to be specific and clear, as for that matter any order to charge any tax, penalty or fine. It is different thing as in the case of Tej Kumari Devi where there is an order levying interest but it left the calculation to the office. The assessee must be made to know that the AO after applying his mind has ordered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must specify not only that interest is charged, but also under which section it has been charged. 62. With respect, we are unable to give effect to the argument that the judgment of the Supreme Court in the case of Kalyankumar Ray (supra) is not applicable to the question before us and that the judgment of the Supreme Court in the case of Ranchi Club Ltd. (supra) is to be applied. We may first refer to the judgment of the Supreme Court in the case of Ranchi Club Ltd. (supra). No doubt, it has been rendered in a civil appeal. However, the earlier judgment of the Supreme Court in the case of Kalyankumar Ray (supra), rendered by a Bench of equal strength, does not appear to have been brought to the notice of the Supreme Court in Ranchi Club Ltd. (supra). The judgment in Kalyankumar Ray's case (supra) does not appear to have been brought to the notice of the Ranchi Bench of the Patna High Court also whose judgment was upheld in appeal by the Supreme Court. The ratio on the basis of which the judgment in Kalyankumar Ray's case (supra) was rendered, in our humble understanding, is that Form No. ITNS-150, if it has been signed or initialed by the same AO, has to be read as part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order. The Tribunal deleted the interest charged on the ground that no speaking order was passed. The Tribunal's order was upheld by the Calcutta High Court. In CIT vs. Namdang Tea Co. India Ltd. (supra), the Gauhati High Court held that the levy of interest under s. 216 was not mandatory, but was discretionary and if there was underestimation of advance tax on account of bona fide reasons, they shall be taken into account by the AO and he could refrain from charging interest if he is satisfied as to the bona fide of the reasons. The AO was found to have charged interest on the assumption that the interest was mandatory. This assumption was held by the High Court to be erroneous. Thus, the first judgment of the Calcutta High Court cited above proceeded on the basis that the levy of interest has to be in the assessment order itself, whereas the second judgment of the same High Court cited above laid down that a speaking order has to be passed for levying interest under s. 216. In that case, even the details of the calculations were not mentioned in the assessment order. In the case before the Gauhati High Court, it was held that the levy of interest under s. 216 was dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted purpose, it can be said that it is desirable that the AO indicates the specific section under which the interest is charged. In other words, the appellate authorities can only examine whether there has been a default or not. If there is a default and the same is established to have been committed, the interest cannot be cancelled. On the other hand, if the assessee succeeds in establishing that there is no default, the levy of interest must be struck down. The rights of the assessee are certainly prejudiced if he is not told as to why he has to pay interest. That prejudice can be removed if the assessment order contains a mention of the specific section so that the assessee can know what precisely is the default allegedly committed by him according to the IT authorities and he can thereafter take steps to show that no such default has been committed. But to say that the levy must be struck down as invalid merely because the assessment order does not mention the section under which it is charged appears to us to go contrary to the ratio laid down by the Supreme Court in Ghaswala's case (supra) that the character of the interest under ss. 234A to 234C is mandatory in nature. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court in Ranchi Club Ltd. (supra) in which the Supreme Court upheld the judgment of the Patna High Court. We have also referred to the Full Bench judgment of the Ranchi Bench of the Patna High Court in Smt. Tej Kumari Ors. vs. CIT Ors. (supra), a judgment rendered on 22nd Sept., 2000, after the judgment of the Supreme Court in CIT vs. Ranchi Club Ltd. (supra) rendered on 1st Aug., 2000. The question referred to the Full Bench for consideration was firstly, whether the interest under ss. 234A and 234B r/w Expln. 4 is liable to be charged on the returned income or assessed income. Another question which was referred for consideration by the Full Bench was whether in the absence of a specific order of the assessing authority, interest could be charged and recovered from the assessee. The final decision of the Full Bench is as under (at p. 218) : (i) The decision rendered by the Division Bench in Ranchi Club Ltd. (1996) 131 CTR (Pat) 368 : (1996) 217 ITR 72 (Pat) and having been affirmed by the Supreme Court in Civil Appeal No. 10360 of 1996 [see CIT vs. Ranchi Club Ltd. (2000) 164 CTR (SC) 200 : (2001) 247 ITR 209 (SC)], has correctly decided the issues which are the subject-matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order on the only ground that it did not contain a recital to the effect that the Governor of Haryana was satisfied that it was necessary or desirable to place the employee under suspension. Thereafter, the Supreme Court proceeded to hold as under : We find it difficult to agree with the said view of the Tribunal. The mere fact that the impugned order of suspension does not contain a recital that the Governor was satisfied that it is either necessary or desirable to place respondent No. 1 under suspension does not, in our opinion, render the said order invalid. The law is well-settled that in cases where the exercise of statutory power is subject to the fulfilment of a condition then the recital about the said condition having been fulfilled in the order raises a presumption about the fulfilment of the said condition, and the burden is on the person who challenges the validity of the order to show that the said condition was not fulfilled. In a case where the order does not contain a recital about the condition being fulfilled, the burden to prove that the condition was fulfilled would be on the authority passing the order if the validity of the order is challenged on the ground t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing analogy from this judgment, we can say that where the section under which the interest is charged is not mentioned or where no reasons are given for the levy, all that can be done, when the levy is challenged, is to call upon the AO to support the levy with reasons and show the default committed by the assessee, so that the assessee gets an opportunity to contest the levy. But the levy itself cannot be struck down as invalid. 65. The contention that the judgment of the Supreme Court in Kalyankumar Ray's case (supra) was rendered while dismissing a Special Leave Petition under art. 136 of the Constitution and not in a civil appeal as in the case of Ranchi Club Ltd. (supra) and, therefore, it is not a binding judgment under art. 141 of the Constitution of India is, with respect, not acceptable. In Daryao vs. State of U.P. AIR 1961 SC 1457, it was held that if the SLP is dismissed in limine without passing a speaking order then such dismissal cannot be treated as creating a bar of res judicata. It was further held that in the absence of a speaking order, it would not be easy to decide all the factors which weighed in the mind of the Court and that makes it difficult and unsafe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf of the assessees in support of the contention that a judgment of the Supreme Court rendered under art. 136 of the Constitution does not amount to declaration of the law since it was not rendered in a civil appeal, the Supreme Court noted its earlier judgment in the case of Supreme Court Employees' Welfare Association vs. Union of India AIR 1990 SC 334 in which the distinction between the dismissal of an SLP in a summary manner without giving reasons and by a non-speaking order, on the one hand, and dismissal by giving reasons and by a speaking order, on the other hand, was brought out. At p. 392 (of 243 ITR), the following paragraph from the judgment of the Supreme Court in the case of SC Employees' Welfare Association (supra) has been extracted : Different considerations apply when a SLP under art. 136 of the Constitution is simply dismissed by saying 'dismissed', and an appeal provided under art. 133 is dismissed also with the words 'the appeal is dismissed'. In the former case it has been laid down by this Court that when a SLP is dismissed this Court does not comment on the correctness or otherwise of the order from which leave to appeal is sought. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simpliciter, it cannot be said that there has been a declaration of law by this Court under Art. 141 of the Constitution. Thus, in the very judgment cited before us by the assessees, the distinction between an SLP being dismissed without reasons and an SLP being dismissed by giving elaborate reasons has been recognized. The former is not binding under Art. 141 of the Constitution whereas the latter is. 66. We must notice one more judgment of the Supreme Court on the effect of dismissal of an SLP by a speaking order in G. Kunhayammed Ors. vs. State of Kerala Anr. (2000) 162 CTR (SC) 97 : (2000) 245 ITR 360 (SC). At p. 375 of the report, the Supreme Court laid down the law in this regard as under : A petition for leave to appeal to this Court may be dismissed by a non-speaking order or by a speaking order. Whatever be the phraseology employed in the order of dismissal, if it is a non-speaking order, i.e., it does not assign reasons for dismissing the SLP, it would neither attract the doctrine of merger so as to stand substituted in place of the order put in issue before it nor would it be a declaration of law by the Supreme Court under Art. 141 of the Constitution for there is no la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. The contention advanced before us on behalf of the assessees was that the judgment of the Supreme Court in Kalyankumar Ray's case (supra), though it gave reasons for its conclusion, was nevertheless a judgment passed under Art. 136 of the Constitution of India and, therefore, it cannot be considered to be of equal force as that of a judgment rendered by the Supreme Court in a civil appeal, albeit without reasons, in which case the judgment of the High Court merges with that of the Supreme Court. In the light of the distinction made by the Supreme Court in the case of Kunhayammed Ors. (supra) between the theory of merger, on the one hand, and the binding nature of the declaration of the law under Art. 141, on the other hand, we are unable to accept the contention on behalf of the assessees as correct. In other words, even in an order dismissing the SLP under Art. 136 of the Constitution and thereby exercising its discretionary power, the Supreme Court in a given case could give reasons and such reasons if they contain a declaration of the law, would be binding on all the Courts and Tribunals in India and, thereafter, no Court or Tribunal will have the liberty of taking a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered as mandatory in nature as held by the Supreme Court in Ghaswala's case (supra), it does not relieve the AO of the obligation to specify the section under which the interest is charged and to mention the same clearly in the assessment order. This condition, i.e., the particular section under which it is charged being mentioned, is satisfied in the cases before us by the assessment forms, i.e., Form No. ITNS-150 in which the particular section (i.e., ss. 234A and 234B) has been mentioned, the amount of interest calculated is shown and the forms also having been initialed and dated by the same AO, who computed the total income in the assessment order. 69. With regard to the judgment of the Punjab and Haryana High Court in Vinod Khurana vs. CIT Anr. (supra), it was submitted that the decision was based on the judgment of the Supreme Court in Kalyankumar Ray's case (supra), without appreciating the true import and effect of the judgment of the Supreme Court. For the reasons already stated by us, we are unable to uphold the submission. 70. It was then argued that the judgment-decree theory propounded by the Patna High Court in Ranchi Club Ltd. (supra) has not been conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sibly leave them to the office staff. All these examples certainly drive home the point taken, to the extent that reasons have to be spelt out for the levy of interest. But, we cannot accept the contention that if reasons are not furnished, the levy should be struck down as invalid. To repeat, since the levy is mandatory, the moment default has occurred the liability arises. If the AO has not furnished the reasons all that can be directed is to establish the default and an opportunity should be afforded to the assessee to show that there is no default. We have earlier referred to the judgment of the Supreme Court in State of Haryana vs. Hari Ram Yadav (supra) where it was held that a suspension order cannot be quashed merely because the satisfaction of the Governor has not been recited in the suspension order, because the condition precedent is that the satisfaction should have been reached as a matter of fact and not that the satisfaction should have been recited in the order. Similarly, it is the occurrence of the default as a fact that gives rise to the liability to pay interest; if the reasons are not recited in the assessment order, it only affects the procedural aspect'th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest under s. 234B. They run as follows. Sec. 234B is attracted only where advance tax is not paid despite an obligation to pay. But, there is no obligation. The steps involved for determining the liability to pay advance tax are outlined in s. 209. Under s. 209(1)(d), the tax estimated to be payable on the current income shall be reduced by the amount of tax which would be deductible or collectible at source during the previous year under any provision of the Act. Even if the assessee is answerable in respect of the income (which is in dispute in the appeal), it is entitled not to pay the advance tax because the tax is deductible by the payer, though not actually deducted by him. If tax is not so deducted, the Department is entitled to treat the payer as in default under s. 201(1). The Department is also entitled to recover interest from him under s. 201(1A). Therefore, the Department cannot seek to recover the interest from the assessee and enjoy a double advantage. The interest is essentially compensatory in nature and no double advantage can be permitted. 72. In support of the above arguments, reliance was placed on the following orders of the Tribunal : 1. Sedco Forex Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be computed on the basis of the tax determined on regular assessment and not on the basis of the tax payable on the basis of the return. The CIT(A) has also held that since there is no direction in the assessment order to charge interest, on the basis of the aforesaid judgment of the Supreme Court, interest has to be deleted. We have already seen that such a view cannot be accepted. We have given reasons therefor. With regard to s. 234B, here also, the view of the CIT(A) is on the basis of the judgment of the Supreme Court cited above. This view of the CIT(A), for the reasons already stated, cannot be upheld. The CIT(A) has also examined the merits of the assessees claim that they are not liable to pay the advance tax and in the absence of any liability there is no default and hence no interest is chargeable under s. 234B. On this aspect, no strong grounds have been made out on behalf of the Department to doubt the correctness of the view taken by the Delhi and Mumbai Benches of the Tribunal in the orders cited supra. The language of s. 209(1)(d) of the Act supports the assessees contention. All the payments made to the assessees are tax deductible at source (even assuming that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal in the case of V.V. Industries vs. Asstt. CIT (supra). In this order all the judgments of the Supreme Court, namely, CIT vs. Ranchi Club Ltd., Kalyankumar Ray vs. CIT and CIT vs. Anjum M.H. Ghaswala (all cited supra) have been considered as also the judgment of the Punjab Haryana High Court in the case of Vinod Khurana (supra), and it was held that in the absence of any direction in the assessment order in charging the interest and any indication in the notice of demand about the figure of interest, the levy cannot be upheld. A reading of para 13 of the Tribunal's order shows that there was not even an observation or a direction for charging interest in the assessment order. Para 17 of the Tribunal's order shows that even in the notice of demand, there was no mention of any interest figure. The Tribunal has noted in this paragraph that nothing was brought to their notice about any calculation sheet having been provided to the assessee since no copy thereof was filed by the assessee, nor was the assessment record produced before them for verification despite a specific direction to that effect. Para 19 of the order of the Tribunal shows that the judgment of the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee based on the judgment for the reasons stated by us earlier and in the light of the judgments of the Supreme Court in the cases of Kalyankumar Ray (supra) and Anjum M.H. Ghaswala (supra). 78. To summarise the findings as regards the appeals before us, we hold that : (a) the issue relating to levy of interest under s. 234A is restored to the AO in all the three cases with the direction contained in para 74 of our order; (b) with regard to levy of interest under s. 234B, the same is held rightly deleted by the CIT(A) in all the three cases. 79. As regards the legal question posed before the Special Bench, we hold that the levy of interest under ss. 234A to 234C cannot be held to be invalid merely on account of there being no specific direction in the assessment order or on the ground that the section under which the interest is levied is not specified in the body of the assessment order, provided that the assessment Form in ITNS-150 contains a specific reference to the section under which the interest is charged; the calculations are shown under the relevant columns and the said form is signed as initialed by the same AO who signed the assessment order and is also dated. 80. We now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 154 ITR 148 (SC) and thwart the object of the parties in splitting a single transaction into three parts. Mr. Sharma in this connection strongly relied on the overall agreement which is a tripartite agreement entered into on the same day as the other three agreements between the assessee, the cellular operators and the installation contractor which provided for proper co-ordination of the supply and installation contracts. According to him, this overall agreement clearly showed that all the transactions constituted a single integrated transaction. 82. With reference to s. 9(1)(i) of the Act, Mr. Sharma submitted that the connection between the cellular operators in India and the assessee constituted a business connection since what links them with each other is the purchase of the GSM cellular system. In this regard he pointed out that the Indian company which is a party to the business promotion agreement is a hundred per cent subsidiary of the assessee-company and, therefore, there is a direct business connection and, therefore, the income directly arose to the assessee in India. According to him, whatever is the tax implication of the connection, it was certainly a business co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then art. 7 of the DTAA is attracted and profits to the extent they are attributable to the PE are taxable, in India. With this preface, he referred to the relevant articles in the DTAA starting with art. 5, wherein he emphasized on the word through to submit that if the operations are carried out through a PE in India, the business profits would be taxable in India. He further submitted that even if the operations are partly carried out through a PE in India, then also business profits would be taxable. 84.2. Advancing his arguments further, it was submitted that a fixed place means an identifiable place from which business is carried on. It was submitted that carrying on of business was not a single act but a series of activities and this very concept was also reflected in art. 7 of the DTAA. He then referred to art. 5.2 of the DTAA and pointed out that it was an inclusive definition and the exclusions were provided in art. 5.3 and it is for the assessee to show that it falls within the exclusionary Article. He referred to cl. (k) of art. 5.2 which included a site in the definition of PE and submitted that the site where the work was carried out by the assessee becomes a PE in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all between the assessee and the cellular operator for installation. The agreement with the cellular operator was only for the supply of the system. He further clarified that the assessee in the present case, namely, Ericsson Radio Systems AB (ERA for short) is a subsidiary of a Swedish company called LME . Another subsidiary of LME, namely, Ericsson Telephone Corpn. India AB (EFC for short) had a branch in India upto June, 1996, i.e., for a period of three months and with this branch the assessee had marketing agreements for that period of three months. There is another Indian company known as Ericsson Communications Ltd. (ECI for short) which acted as marketing and installation contractor for nine months. This company is also stated to be a subsidiary of LME. In a nutshell, for the first three months, the assessee had a marketing agreement with EFC and for the remaining nine months, it had an agreement with ECI. The installation contract was between ECI and the cellular operators. It was also pointed out that EFC and ECI both were assessed to tax in India for the income earned by them respectively from the marketing and installation contracts. Thus, on this ground it was contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious clauses of the supply contract. Our particular attention was drawn to cl. 13 of the contract to show that the title and risk in the GSM system was to pass outside India at Sweden, when they were delivered to the carrier at Swedish port. He referred to the relevant provisions of the Sale of Goods Act, 1930, to show that the intention of the parties should govern as to when the title and risk passed in the goods. The time and place when the title and risk in the goods passed can be inferred from the terms of the contract, conduct of the parties and the surrounding circumstances as per s. 19(2) of the Sale of Goods Act. However, in the present case, there was no necessity for such an inference as the agreement itself was very specific as to when the title and risk were to pass. It was pointed out by him that the project manager referred to in the supply contract was situated outside India and the project manager referred to in the installation contract was to be at the site in India. Referring to cl. 18 of the contract, it was submitted by Mr. Dastur that the acceptance test did not determine the passing of the property in view of cl. 13 of the contract. Mr. Dastur referred to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the terms of the agreement were very restrictive in nature and indicated the parameters within which the branch (EFC) had to operate. 85.5. Mr. Dastur thereafter made a reference to the overall agreement which has also been entered into on 2nd July, 1996, between the assessee, ECI and JTM. The preamble to the agreement stated that the primary purpose of the overall agreement was to ensure better co-ordination between the parties and the security of the cellular operators. The overall agreement, it was contended, was a sort of memorandum of understanding but no consideration was payable thereunder. Such an agreement, according to Mr. Dastur, would have most probably been entered into even if the installation of the equipment was to be done by an Indian company. In response to a query from the Bench as to whether JTM had a right under the overall agreement to terminate the installation contract, Mr. Dastur answered in the affirmative and drew our attention to cl. 25.1.1 and cl. 25.1.2 of the installation contract. This clause provided for termination of the two contracts, namely, the supply contract and the installation contract separately which was a pointer to his earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y carried out in India; (d) The installation of the equipment, though in India, is not carried out by the assessee. The income from the installation contract has been taken into account in the case of the installation contractor having assessed in its hands. (e) The marketing and business promotion activity which is carried on in India is not carried out by the assessee but is carried out either by the branch (EFC) or by ECI, the Indian company, which are entities separate from the assessee. The income from this activity has been assessed in their respective hands. Therefore, it was contended by Mr. Dastur that since no operations were carried out in India by the assessee, no income accrued to it either under s. 5(2) or no income was deemed to accrue to the assessee under s. 9(1) of the Act. 86. Turning to the DTAA between India and Sweden, Mr. Dastur drew our attention to art. 7 thereof which provided for the determination of the business profits. Under this Article, the business profits of a foreign enterprise are taxable in India only if that enterprise has a PE in India. Further, even if the foreign enterprise has a PE in India, the business profits that are taxable in its hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits accrued in India on sale of machinery outside India even though it might be part of the business connection. In this case, the test of predominance of the object of the contract was adverted to. In CIT vs. Energomach Exports (1999) 151 CTR (Kar) 71 : (1998) 232 ITR 448 (Kar), the Karnataka High Court held that no business connection can be inferred merely because the foreign company deputed its employees in connection with the contract for supply of equipment. The highlight of this decision is that there were two agreements, one for supply and installation of the equipment, and another entered into on the same day for deputing employees to supervise the installation of the equipment. But despite this, no business connection was found to be established. In CIT vs. Gulf Oil (Great Britain) Ltd. 1975 CTR (Bom) 142 : (1977) 108 ITR 874 (Bom), the Bombay High Court held that even if the foreign company acts through its subsidiary in India, no business connection could be inferred. Mr. Dastur laid much stress on the judgments of the Madras High Court in CIT vs. Anamallais Timber Trust Ltd. (1950) 18 ITR 333 (Mad) and Annamalais Timber Trust Co. vs. CIT (1961) 41 ITR 781 (Mad). I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, there is no need to draw such an inference because cl. 13 of the supply contract expressly stated that both title and risk in respect of the GSM cellular system passed at the same time at the Swedish port. In support of this contention, Mr. Dastur drew our attention to ss. 18 and 26 of the Sale of Goods Act and also to the INCOTERMS, 1990. 86.5. The next point urged by Mr. Dastur was that Mr. G.C. Sharma, who argued the appeal on behalf of the IT authorities was wrong in construing the supply contract, the installation contract and the overall agreement together and drawing the conclusion that the intention of the parties, as manifested on a combined reading of all the three documents together, is that the assessee should execute a works contract for the cellular operators, the works contract being the setting up of the GSM cellular system. His preliminary objection was that this is a new case made out by the Department at the stage of the Tribunal which should not be permitted. Nevertheless, he proceeded to meet the objection on merits. He pointed out firstly that the AO himself has not made a single assessment combining the profits of the supply contract and the installation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee can be assessed. 86.7. With reference to the argument of Mr. Sharma, the learned counsel for the Revenue, to the effect that the assessee has attempted to disintegrate the composite works contract into three parts, namely, the supply contract, the installation contract and the business promotion agreement and thereby adopted a game plan to evade taxes lawfully due to the Indian Government, Mr. Dastur protested that there was no such attempt on the part of the assessee to evade any taxes payable in India under the IT Act. He submitted that the profits of the installation contract as also the profits under the business promotion agreements have suffered tax, though in the hands of separate entities and this itself showed that there was no attempt to evade any taxes. Strong reliance was placed by him on the judgment of the Supreme Court in Union of India Anr. vs. Azadi Bachao Andolan Anr. (2003) 184 CTR (SC) 450 : (2003) 263 ITR 706 (SC). He pointed out that in this case, the ruling of the Supreme Court in McDowell's case (supra) has been considerably watered down and it has been held that so long as a transaction is legally valid, its economic effects are not to be looked in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dastur prefaced them by pointing out that the double tax treaties jointly constitute a separate regime of taxation and that they should not be construed as a proviso to the IT Act or as an exemption provision. In his submission, the burden is still on the AO under the double tax treaty and it is for him to prove, even under the treaty, that a particular receipt is taxable. It is only thereafter that the burden would shift to the assessee to point out to any provision of the treaty under which the receipt does not become taxable. 87.2. With the above preface, Mr. Dastur proceeded to put forth the following submissions with reference to the double tax treaty between India and Sweden. A copy of the entire treaty is placed at p. 83, onwards of the paper book No. 1. He briefly took us through the relevant clauses of the treaty which have an impact on the controversy arising in the present appeals. He first referred to art. 7 which speaks of business profits. Under this article, the business profits of the Swedish enterprise are taxable in India only if it has a PE in India. The importance of having a PE is that even if a sale is completed in India and is, therefore, taxable under the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to conclude contracts; and (iv) The mere authority to negotiate contracts on behalf of the assessee would not amount to an authority to conclude contracts. The term conclude , according to Mr. Dastur, means that the agency PE should be authorized to take independent decisions with regard to the business of the assessee. 87.3. Referring to p. 64 of the paper book No. 1 (marketing and business promotion agreement), Mr. Dastur pointed out that under this agreement, ECI cannot bind the assessee in any manner whatsoever and if that is so, it cannot be said that ECI had the authority to conclude any contract in India for the assessee. A person who does not have authority to bind another can never be considered the agent of the latter. In this connection, he pointed out that in the written submissions filed by Mr. G.C. Sharma, the learned counsel for the Department, it has been stated that the assessees employees have come to India to negotiate the contract. If it is the Department's case that it is the employees of the assessee who had come to India to negotiate the contract, it cannot be postulated that ECI was habitually exercising the authority to conclude the contracts. Mr. Dast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a judgment of the Andhra Pradesh High Court in which it has been held that PE postulates the existence of a substantial element of an enduring or permanent nature of a foreign enterprise in another country which can be attributed to a fixed place of business in that country. It should be of such a nature that it would amount to a virtual projection of the foreign enterprise of one country into the soil of another country. In connection with art. 5.1 of the DTAA with Sweden, Mr. Dastur referred to the OECD Convention, extracts from which were filed in the case law paper book. The commentary says that in order to constitute a fixed place PE, there should be a distinct situs in India and that the word fixed refers to a distinct place with a certain degree of permanence. It further says that the foreign enterprise should be able to walk into the place of its own right and not by permission. In this connection, Mr. Dastur pointed out that the fact that the assessee's employees from Sweden at times sat in the office of the ECI, while in India, does not satisfy this condition, namely, that they should be able to walk in and use the premises of their own right and not by permission. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oreign enterprise do not automatically become a PE in India. This was with reference to the possible argument that ECI which is another subsidiary of LME of which the assessee-company is also a subsidiary, could be construed as a PE in India of the assessee. Though the article speaks of a direct subsidiary of the foreign enterprise and not to a subsidiary of the holding company of the foreign enterprise, this argument was addressed by way of an answer to the possible argument. 87.9 Turning to the order of the CIT(A), Mr. Dastur assailed the conclusion of the CIT(A) that since the supply contract was entered into in India, income accrues to the assessee in India within the meaning of s. 5(2)(b) and s. 9(1) of the IT Act. He referred to the detailed written submissions filed by the assessee before the CIT(A), a copy of which is placed at p. 36 of paper book No. 2, in which the assessee has challenged the incorrect facts and assumptions made by the AO in connection with the existence of a fixed PE of the assessee in India. He submitted that the ultimate decision of the AO that the assessee has a fixed PE in India is also a mere assumption not based on any facts, which has been rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat ECI is carrying out some of the business activities of the assessee in India and could hence be described as a fixed place PE of the assessee. 88.3 Mr. Dastur then took up for consideration the judgment of the Italian Court of Cassation, a copy of which has been placed at p. 55 of the case law paper book filed by Mr. G.C. Sharma. He pointed out that whatever has been observed by the Court in connection with cl. 5.5 of the Italian-German DTAA already exists in cl. 5.6 of the Indo-Sweden DTAA and the question for consideration would be whether this clause of the Indo-Sweden agreement is applicable to the present case and that the conditions mentioned therein have been satisfied. It was thus contended that a mere reference to the Italian judgment would not advance the case of the Revenue and that it is further required to be factually established that the conditions necessary for applying cl. 5.6 of the Indo-Sweden DTAA are present. This exercise, it was contended, has not been done by the Department. Referring to the written submissions filed by Mr. Sharma titled Ericsson in which submissions have been made on the basis of the Italian Court's decision vis-a-vis group PE, Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his provision may be arrived at by the following formula : He further submitted that while applying the rule, the provisions of s. 44C are not to be applied. 90.1 Mr. Dastur referred to the Circular No. 23, dt. 23rd July, 1969 (pp. 82a to 82d of the paper book No. 1). It says that in the assessment of profits occurring through an agency PE, allowance shall be made for the expenses incurred, including the agent's commission in making the sales. If the commission fully represents the value of the profit attributable to the agent's services, it should prima facie extinguish the assessment. Based on this circular, it was contended that even if 10 per cent is assessed as profits arising to the assessee for signing contracts in India, on the basis of the judgment of the Madras High Court in Annamalais Timber Trust (supra), the ECI having been paid commission of 18 per cent; the assessment would get extinguished. 91. Before concluding his arguments on this issue, Mr. Dastur submitted that the case of Ericsson arises out of the facts which are different from the facts in the case of Motorola, which was also heard by the Special Bench and, therefore, the broad claim of Mr. G.C. Shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the hardware and the software. Thus, there are cross-references between the supply contract and the installation contract and one has to be necessarily read with the other. He also drew our attention to the scope of the contract which refers to the system being installed on a turnkey basis which means that the entire project is a turnkey project. According to Mr. Sharma, a turnkey project cannot be disintegrated into a supply contract and installation contract and both have to be treated as an integrated whole. He also pointed out that under the contract, the amount was not payable immediately and the payment was linked with the progress of the work. If the price is linked with the progress of the work, it is a clear pointer to the fact that it is a works contract or a turnkey project. There was also reference to interface in the supply contract at many places, which meant that there has to be a connection between the supply and the installation contracts. Clause 17 of the supply contract referred to project which again meant the whole contract including the installation. Clause 18.1 stated that the acceptance test shall be done by the installation contractor. According to Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omotion agreement, Mr. Sharma made a brief submission that this took in the rendering of services by way of promoting sales but agreed that it was not for concluding the sales as the Indian company (ECI) did not have the authority under this agreement to conclude the sales on behalf of the assessee. 97. Mr. Sharma thereafter contended that if all the three contracts are to be treated as one integrated whole or as referring to a turnkey project, the question would arise as to where did the income therefrom accrue. According to him, the income accrued in India because of two reasons : (i) the works were executed in India and (ii) the contracts were all signed in India. In support of this plea he strongly relied on the judgment of the Supreme Court in the case of 20th Century Finance Corpn. (supra) and reiterated his submission that the place of execution of the contracts determined the situs of the sale and consequently, the place of accrual of the income. 98. Mr. Sharma, the learned counsel for the Department, next submitted that there was a business connection in this case and nothing but the business connection as indicated by all the agreements. He explained that the business con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the signing in India to be an operation carried out in India. However, in the present case, it is not a simple contract as in the cited case but there are number of contracts and complex operations are to be performed in India and, therefore, a simple 10 per cent of the income cannot be attributed to the business operations in India. 100.1 The second case cited by the assessee was Hindustan Shipyard Ltd. (supra). He submitted that the facts in this decision were completely different from the facts of the present case. 100.2 As regards the judgment of the A.P. High Court in Bharat Heavy Plates Vessels Ltd. (supra), Mr. Sharma submitted that this case is of no assistance to the assessee but, on the contrary, assisted the Revenue on the point of business connection. 100.3 As regards CIT vs. Energomach Exports (supra), a judgment of the Karnataka High Court cited on behalf of the assessee, Mr. Sharma submitted that unlike in the cited case, in the present case, the assessee is interested in the installation contract as well as in the companies to whom installation and marketing contracts were given and, therefore, there is business connection. 100.4 With regard to Dy. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e attributed with particular reference to the CBDT Circular No. 23, dt. 23rd July, 1969. Mr. Sharma submitted that it is not applicable to the present case because (i) there was no agent in India, and (ii) the contracts were signed in India. As regards the CBDT Instruction No. 1829, dt. 21st Sept., 1989, he submitted that this was also not applicable to the present case because (a) the instruction applies only to power projects, (b) the instruction is only an administrative act of the IT Department, and (c) the AO is not bound by it. Decision 103. We have very carefully considered the questions of business connection and PE . The assessee-company is incorporated in Sweden and is a 100 per cent subsidiary of Telefonaktiebolaget L.M. Ericsson (LME for short). It is one of the leading suppliers of telecommunication equipment comprising of both, hardware and software. There is another company by the name Ericsson Telephone Corporation India AB, also incorporated in Sweden and a subsidiary of LME. It has a branch in India and for short, this company will be referred to as EFC. There is a third company by the name of Ericsson Communication Ltd. (ECI for short) and this was incorporated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive of the assessee also. Further, according to the AO, the assessee itself had told the various customers that it had a full-fledged presence in India and such a presence, according to the AO, was not possible without a fixed place of business. This was substantiated by the fact that the contracts were signed in India, the responsibility to supply the equipment upto the ports in India, replacement of defective parts, guarantee of successful completion of installation work, etc. were of the assessee and hence it had a fixed place PE in India. The assessee tried to meet all the contentions of the AO without any success. 105. The CIT(A) considered the elaborate submissions of the assessee and discussed the issues at length. He observed that all the agreements were entered into India and were to be governed by Indian laws. After considering the various clauses of the agreements, he observed that it was not a case of single sale or not a case of a series of unconnected sales. The agreement was to put in place the GSM system for the use of the cellular operators. The agreement took into account that contractors will install the equipment and software and their tests will determine the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the assessee had signed agreements in India with the installers and cellular operators in India for setting up the GSM system in India for the latter, prior to which a number of activities had been carried out in India, the contractors worked for the promotion of assessees equipment in India; assessees employees came to India for long stays, the contractor's activities were wholly devoted to the business of the assessee and therefore, the assessee had business connection in India, through and from which income is deemed to accrue or arise to it. 107. With regard to the issue whether the assessee had a PE in India, the CIT(A) observed that it cannot be said that various concerns were formed purely with a view to avoid or evade tax in India. They were not mere paper companies having no business purpose in India and hence, the assessee and the contractors were held to be separate persons and that the office of the contractors cannot be taken to be the office of the assessee, particularly in view of the fact that the AO was not able to specify as to which and how many employees of the assessee stayed in India for full year and used the contractor's office for conducting ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts leading to this controversy were that the petitioners carried on business of leasing diverse equipments. According to them, they entered into master lease agreements with the lessee. The master lease agreement provided that orders for individual equipment will be placed by the petitioners at the instance of lessees and that the equipment to be leased will be dispatched by the manufacturers or suppliers concerned to the locations specified in the lease. The petitioners disbursed the value of equipment to the suppliers and, at the instance of the petitioners, the suppliers delivered the equipment to the lessees at the specified locations for use. According to the petitioners, one transaction of transfer of right to use goods was subjected to sales-tax by more than one State. Some States levied tax on the petitioners, merely because the goods were found to be located in their States at the time of execution of contract which had taken place outside the State. Some States levied tax when the goods were delivered in their States for use in pursuance of agreement of transfer executed outside their States and some States taxed such transactions of deemed sales on the premise that agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the States, under the Constitution, to levy sales-tax; (2) deemed sales; (3) leasing transactions where the events in the entire chain took place in various States. In the present case, we are concerned with actual sales and the accrual of the income therefrom. Viewed in the above backdrop, the judgment in the case of 20th Century Finance Corpn. (supra) cannot help the Revenue and cannot help us also to resolve the controversy which is before us. Consequently, the repeated emphasis of the CIT(A) that income accrued in India because the contracts were signed in India, cannot be accepted because this conclusion is based on a judgment [20th Century Finance Corpn. (supra)] which has no applicability to the facts of the case. As a matter of fact, the issue will have to be approached on the basis of the provisions of Sale of Goods Act to which we shall advert a little later. Before that, it would be pertinent to deal with the works contract theory put forward by Mr. Sharma on behalf of the Revenue. In connection with this argument, Mr. Sharma heavily relied on the judgment of the Supreme Court in the case of Hindustan Shipyard Ltd. (supra). 114. In this case, the assessee was engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act and hence the situs of the sale was where the contract was executed, which in this case was India. It is quite ironical that the Revenue, in order to prove that the contract in the present case was a works contract, has relied on the judgment in which the claim of the assessee that it was a works contract, was negatived by the Court. Be that as it may, we appreciate the purport of Mr. Sharma's argument that it is the real intention of the parties which matters and not mere recitals in the agreement. Secs. 18 to 24 of the Sale of Goods Act (SOG Act for short) contain rules for ascertaining the intention of the parties in this regard. Let us examine them. 116. Sec. 18 of the SOG Act provides that no property in the goods is transferred to the buyer unless and until the goods are ascertained. It is nobody's case here that the goods in question were unascertained goods. Sec. 19(1) of the SOG Act provides that in case of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. Sec. 19(2) provides that for the purpose of ascertaining the intention of the parties regard shall be had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsible for his part of the job. But obviously, each contractor will be interested in the successful implementation of the entire project. Certain projects are so specialised that the main equipment, for it are not available off the shelf. They may have to be tailor-made for the customer, but the one who makes the equipment would obviously be interested to see that it is ultimately commissioned to the satisfaction of everyone. It is in this sense that the word 'turnkey' is used in both the agreements, albeit loosely. But, there is no reason to conclude that all agreements should be construed as one to regard it as a works contract. 118. Then, the price payable under each agreement, terms of payment and performance guarantee to be provided by each contractor are according to their respective responsibilities under the agreement. As per cl. 12 of the installation contract, it is the responsibility of the installation contractor to perform the installation. The supply contractor is in no way connected with the installation plan. JTM' undertakings under both the agreements are materially different. We are told that the project manager under the installation contract is to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract, still it may continue with the installation contract and vice versa. This indicates that all the contracts need not be considered as one whole contract nor does it indicate that it is a works contract. Further, in case of supply contract, if any notice is required to be sent, the same will have to be sent at the Swedish address of the supply contractor. On the other hand, in case of installation contract, the notice will have to be sent to the Indian address of the installation contractor. 119. Having considered the main clauses of the two agreements, we come to the most important clause of title and risk. Clause 13.1 provides that the risk of loss and damage to the system, the spare parts, the testing equipment and the documentation, shall pass to JTM when delivered to the carrier at the port of shipment in Sweden to the city of India. Clause 13.2 provides that the title to hardware, spare parts and test equipment shall pass to JTM when delivered to the carrier at the port of shipment in Sweden. Reverting back to the provisions of SOG Act, the basic rules regarding transfer of property in goods are contained in ss. 20 to 24. Sec. 20 provides that where there is an uncondi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operators were completed outside India. 120. From the analysis of the various clauses in the two contracts, we have also concluded that all agreements put together cannot be termed as works contract. At this juncture, we may refer to the marketing agreement as well which was entered into between the assessee and the Indian branch of Ericsson Telephone Corporation India AB (EFC) for a period of three months and between the assessee and Ericsson Communications (P) Ltd. (ECI) for the remaining period of nine months. On perusal of both the agreements, we find that the Indian counterpart (be it EFC or ECI) is to render services to the Swedish company, i.e., the assessee, only on broad lines, viz., (a) promotion of the products of the assessee in India, and (b) provision of information on business opportunities in India for the assessee in relation to its products. Further, it is specifically provided, inter alia, that the Indian counterpart has no role to play as a mediator between the assessee and any Indian buyer; it cannot bind the assessee in any manner while promoting its products in India and that the final terms of contract for sale of products with an Indian buyer will be decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-ordinated manner. Clause 2 of the agreement provides that the supply contractor shall have overall responsibility. Clause 5.5 of the agreement provides that in the event that the installation contractor terminates his contract, the supply contractor shall locate the new installation contractor. Clause 6 of the agreement provides that the overall agreement shall prevail over the other contracts. Mr. Sharma had stressed on all these points to contend that nothing more was required to show that it was a works contract. In our view, nothing turns on the overall agreement. It needs to be appreciated that the arrangement by way of an overall agreement is nothing new and has been invoked in such contracts. When different entities are working for the ultimate commissioning of the project, the Indian buyer, or for that matter any buyer, needs to be instilled with confidence that the project will ultimately take off and be on stream as desired. For this, an overall responsibility needs to be fixed. Ultimately, the installation contractor has to install the equipment supplied by the supply contractor. In that case we see no reason as to why the two should not work in a co-ordinated manner. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . yrs. 1997-98 to 2001-02 are placed on record. Intimation under s. 143(1)(a) in the case of EFC for the asst. yr. 1997-98 is also placed on record. In the assessment order for the asst. yr. 1997-98 in case of ECI, it is mentioned that the company is engaged in the business of telecommunications. It is further mentioned that the company is involved, inter alia, in the assembly, installation and construction of telephony networks and also in providing different information technology (software) solutions. Moreover, its income in respect of the installation contracts is assessed in its hands. Further, evidence that it is an independent entity is reflected from the assessment order for the asst. yr. 1998-99, wherein it is mentioned that the company has set up a unit in software technology park at Bangalore and has claimed its income of Rs. 91,39,921 as exempt under s. 10A of the Act. Thus, in view of these facts, there is no reason to treat the three contracts as one works contract. 123. In the final analysis, we hold that : (a) the three companies, viz., Ericsson Radio Systems AB (ERA, the assessee), Ericsson Telephone Corporation (India) AB (EFC), through its branch in India and Eri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of all the reasons and hence we will deal with those reasons also, but briefly. Before proceeding, it may be mentioned that we have kept in mind the basic contention of Mr. Dastur that DTAA is only an alternative tax regime and not an exemption regime. Therefore, the burden is first on the Revenue to show that the assessee has a taxable income under the DTAA and then the burden is on the assessee to show that its income is exempt even under DTAA. 125. Article 5 of the DTAA explains the expression Permanent Establishment (PE). The AO has partially reproduced this article in his order to the extent considered necessary by him. However, it appears that he has reproduced the said article from the new treaty which came into force from 25th Dec., 1997. For the purposes of this appeal, since the accounting year ended on 31st March, 1997, we shall be referring to the earlier treaty which was entered into vide Notification No. GSR 380(E), dt. 27th March, 1989, and which is given at p. 83 of assessee's paper book-1. The AO has held as follows : 1. That there is a dependent agent PE in the form of EFC (for 3 months). 2. That there is a dependant agent PE in the form of ECI (for 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t establishment means a fixed place of business through which the business of an enterprise is wholly or partly carried on. The thrust of the AO's contention has been that since the employees of the assessee and/or LME came to India frequently and since the Indian company (ECI) provided facilities to these employees, the office of ECI constituted a fixed place of business for the assessee. The OECD Commentary on double taxation refers to a fixed place as a link between the place of business and a specific geographical point. It has to have a certain degree of permanency. It is emphasized that to constitute a fixed place of business , the foreign enterprise must have at its disposal certain premises or a part thereof. Phillip Baker in his Commentary on Double Taxation Conventions and International Tax Law (third Edn.) states that the nature of the fixed place of business is very much that of a physical location, i.e., one must be able to point to a physical location at the disposal of the enterprise through which the business is carried on. On the other hand, possession of a mailing address in a State without an office, telephone listing or bank account'has been held not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine, an oil or gas well, a quarry or any other place of extraction of natural resources, (g) a warehouse in relation to a person providing storage facilities for others, (h) premises used as a sales outlet or for receiving or soliciting orders, and (i) an installation or structure used for the exploration of natural resources. Out of the above, there is neither any finding nor even an allegation that the assessee has any of the above locations in India, except perhaps, the one mentioned in item (h), i.e., premises used as a sales outlet or for receiving or soliciting orders. This allegation is on the basis of the marketing agreement entered into by the assessee with ECI. However, while dealing with the issue of business connection earlier, we have already held that nothing really turns on it. ECI has no authority to conclude any contract on behalf of the assessee and none of its actions can bind the assessee. When such is the arrangement, it cannot be said that the premises of the ECI were being used by the assessee for its business or that it really did some business from the said premises. Therefore, under art. 5.2 also, it cannot be said that the assessee had a PE in India. 130 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prise shall be deemed to have a PE in that other country. As mentioned, art. 5.5 speaks of a person other than an independent agent. Hence, first it would be necessary to determine whether ECI is an independent agent for which we shall have to go to art. 5.6 of the DTAA. Article 5.6 provides that if a broker, commission agent or any other agent is working for a foreign enterprise in the ordinary course of his business, then such an independent agency shall not constitute a PE for the foreign enterprise. However, if the activities of such an agent are devoted wholly or almost wholly for the foreign enterprise or for enterprises subject to the same common control, then such an agent shall be considered a dependant agent. However, in such a case, provisions of cl. 5.5 will apply. 132. Even though in para 122 we have held that all the three companies are of independent status notwithstanding that they belong to the same group, if we assume for the sake of argument that ECI is subject to the same common control as the assessee as both are subsidiaries of LME and that all its activities are devoted to the assessee, yet it will not become an agency PE for the assessee because (a) it has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to satisfy the proprieties, would be reserved to someone from the enterprise's headquarters in the other contracting State. Such a formal split-up of business responsibilities, on the one hand, and legal authority, on the other, is considered to constitute a case of tax circumvention where substance should prevail over form. A PE should, therefore, be deemed to exist irrespective of what the formal arrangements were. In the present case, there is no finding that either EFC or ECI was instrumental or even participated in the negotiations with the cellular operators. Thus, even the conduct of the parties, on which Dr. Klaus Vogel lays emphasis, does not go to suggest in any way that EFC or ECI could be impressed with a stamp of PE for the assessee in India. The AO has laid much stress on a number of employees of the assessee coming to and staying in India for long periods and making use of the facilities of EFC and ECI. However, as found by the CIT(A), there are no details to support this claim of the AO. In the absence of any details, it cannot be held that the assessee had a PE in India. 133. In the case of CIT vs. Hindustan Shipyard Ltd. (supra), the Andhra Pradesh High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of their residential buildings, making travel arrangements, providing facilities like telephone, telex, accounting, secretarial and other assistance. To achieve this, the assessee-company entered into an agreement with an Indian company called Mekaster Consultants (P) Ltd. (MCPL), on 5th April, 1983, for providing what are described as support services to the French engineers. MCPL was, however, not authorized or empowered to transact any business in the name or on account of CIT Alcatel. In consideration of the support services, MCPL was to receive a lump sum of Rs. 60 lacs for the calendar year 1983. Thereafter, the lump sum was to be revised twice a year by mutual agreement to reflect the volume of the services actually rendered. The attempt of the Department was to treat MCPL as the PE of the assessee-company in India and inter alia, to tax the profit arising from the sale of equipment made to the Government of India, though the same was delivered in France, FOB French port. 136. Almost identical arguments were advanced by the Department in that case as they are advanced before us, viz., (a) all the agreements should be seen as only one agreement, (b) it was like a works contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the payment made for the entire equipment. In support of this argument, attention was drawn to p. 22 of paper book No. 1 which is the supply agreement which defines the word systems as including the software also. In fact, it says that the system includes hardware and software forming the entire GSM mobile telephone system . It was submitted that the payment for the software was not similar to a pharmaceutical company obtaining a formula and paying royalty for the same. In recital No. 2 of the agreement at p. 20 of the paper book No. 1, the software is referred to as application software . This only means that the hardware and software constitute one integrated telephone system. It was clarified that the word license was used in connection with the payment for software only because the software was given to the assessee with certain restrictive conditions and from the mere use of that word, it cannot be inferred that the payment was similar to a license fee and hence royalty. The software was given to the assessee in perpetuity and so long as the system was to be operated by the assessee, the software would also be operated as part of the system. 140. In support of the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved under the Policy on Computer Software Export, Software Development and Training, 1986 of the Government of India. 141.1 Clause (v) of Expln. 2 to s. 9(1)(vi) says that royalty means consideration for the transfer of all or any rights (including the granting of a license) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes, for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films. The AO's stand, relying on the second proviso to s. 9(1)(vi), is that the software supplied by the assessee along with the hardware is not covered by any scheme approved under the Policy on Computer Software Export, Software Development and Training, 1986 of the Government of India and, therefore, the payment made by JTM would be considered as royalty under the main provision. The argument of Mr. Dastur, the learned counsel for Ericsson is two-fold. It is firstly, contended that computer software is protected by the copyright law of India and s. 2(o) of the Copyright Act, 1957, defines literary work to include computer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rience. It is pointed out firstly, that the definition of royalty in the DTAA is narrower than the one given in the IT Act as the term similar property is absent in the definition given in the DTAA. 141.3 The second difference between the IT Act and the DTAA so far as definition of royalty is concerned is that as per the DTAA, the consideration is for use or right to use and does not mention any lump sum consideration as is mentioned by the Act. The argument is that under the DTAA, it follows that the amount of royalty would vary with the use whereas in the case of a lump sum consideration, it is not linked with the use and is payable irrespective of whether it is used or not. One may not use it because of various reasons such as new technology replacing the old, etc. Nevertheless, the lump sum consideration would be payable. Another argument advanced on the basis of phraseology of art. 13.3 of the DTAA is this. The article refers to consideration for the use or right to use any copyright of literary, artistic or scientific work (underlining, italicized in print, ours). The word of is not found between the word copyright and the words which follow, namely, literary, artistic or sci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of it. (iii) Assuming the first two submissions noted above are not correct, the third submission is that the question for consideration would be whether the assessee has given any copyright or transferred any right in a copyright or has given the use of copyright or whether the assessee has supplied a copyrighted article. 141.7 According to Mr. Dastur it has to be first ascertained as to under which part of the Expln. 2 to s. 9(1)(vi) should the payment be settled. His submission was that if at all, the payment has to be slotted under cl. (v) of the Explanation, which specifically deals with such a payment. In this regard, he contended that if the payment falls within a specific provision, that provision must be applied and only if it does not fall thereunder, can the general provision be resorted to. Accordingly, he contended that where the Explanation contained a specific slot for copyright the clauses which applied to similar property cannot be said to include copyright. Therefore, if at all, only cl. (v) of Expln. 2 can be invoked. 141.8 In support of the general proposition that where there is a specific provision dealing with a particular type of payment, the general provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem and the payment was not a consideration for any of the items mentioned in cls. (i) to (v) of Expln. 2. The third proposition was that, assuming that the purchase of software was to be considered separately, then could it be said that the payment was for transfer of any right in. a copyright or that, was it for any license in respect of a copyright. At this juncture, he gave an illustration of a publisher who gives to another person a right to print copies and sell. According to Mr. Dastur, this would amount to granting of license and will fall under s. 9(1)(vi) of the Act. But if software is given, not per se as software but to make hardware work, then the consideration paid cannot be said to be for software alone. In that case, the payment would not amount to royalty. Reiterating his argument, it was submitted that as per the agreement, there was really no separate transaction for software. The purpose was to acquire the whole system for a lump sum price and that software was specified separately in the Annexure only for the limited purpose of paying customs duty. In support of this contention, Mr. Dastur relied on the decision of the Supreme Court in the case of CIT vs. Mugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferring to cl. 20 of the said agreement, it was claimed that JTM had a ' non-exclusive right which was different from an exclusive right mentioned in s. 14 of the Copyright Act. Clarifying this provision, it was submitted that whereas Ericsson had an exclusive right, JTM did not have. In other words the essence of copyright is with the holder thereof (Ericsson in the present case) who can do anything with respect to it in the public domain whereas the licensee of the copyright (JTM in the present case) cannot do so. As per cl. 20.4(b) of the supply agreement, JTM cannot store or make copies of the software except for backup purposes. Sec. 14(a)(i) of the Copyright Act permitted a holder of the copyright to store or make copies for reproduction. Sec. 52(1)(aa) of the Act permitted the licensee of the copyright .to store or make copies of the software only for backup or archival purposes, which would not be considered as an infringement of the copyright. Reading these provisions together, the position that emerges is that merely because JTM could store or make copies of the software only for backup or archival purposes, it cannot be said that it has got the copyright in the soft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Dastur next referred to the opinion expressed by the Internal Revenue Service, USA, extracts from which are compiled at pp. 136 to 202 of the paper book No. 2. Here also it was admitted by Mr. Dastur that the opinion is not binding but has persuasive value. In this opinion, the distinction between copyright rights on one hand and a copyrighted article on the other hand, has been brought out fully and clearly. The contention on the basis of the opinion was that in the present case what JTM and other cellular operators have obtained is only a copyrighted article in the form of a software and not copyright rights. Reliance was also placed on pp. 202 and 204 of paper book No. 2 which is the learned author Du Troit's Commentary in which similar views have been expressed. 142.3. Mr. Dastur referred to the decision of the Bangalore Bench of the Tribunal in the case of Lucent Technologies Hindustan Ltd. vs. ITO (supra) to emphasise the difference that had been brought out in the said decision between copyright and a copyrighted article. It was submitted by him that one cannot have a copyright without a copyrighted article, but one can have a copyrighted article without a copyright. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... royalty) may fall within art. 7 of the DTAA as well as Expln. 2 to s. 9(1)(vi) of the Act since lump sum consideration has been expressly mentioned in the article and the Act. However, art. 13 of the DTAA does not refer to lump sum consideration. It refers only to payment for use and since as already contended this is not a payment for use of the copyright, even this article is not applicable. 142.7. It was submitted by Mr. Dastur that by its very nature and as specified in s. 14 of the Copyright Act, it is a right, something in abstract. However, when the software is imported in chattel form, according to the Supreme Court, it is goods and attracts customs duty. According to him, then the question arises whether it can be a copyright and goods at the same point of time. According to him, the answer has to be in the negative. He pointed out that copyright is an Intellectual Property Right (IPR) which when imported in a chattel form becomes goods. In support of this contention he referred to the decision of the Supreme Court in the case of ACC Ltd. vs. Commr. of Customs 2001 (128) ELT 21 (SC) and also to the case of State Bank of India vs. Collector of Custom 115 ELT 597. 143. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion between the hardware purchased and the use of application software . (3) The word license as defined in s. 30 of the Copyright Act is a grant of authority to exercise a particular right. It gives only a limited right in the use of the copyright. The supply contract in the present case gives such an authority to JTM. There is, therefore, no need to refer to s. 14 of the Copyright Act which refers to an exclusive right being granted. (4) Referring to various clauses of the supply agreement such as cls. 20.1, 20.2, 20.5, 30.1 and 30.2, etc., Mr. Sharma submitted that all these clauses contain terms which are opposed to the concept of sale and, therefore, it cannot be said that the software was sold to JTM or other cellular operators. It was merely licensed to them and the payment therefor was rightly taxed as royalty. (5) Granting a license by the author of a copyright only means granting a limited right, i.e., for the use for the purpose for which it is given and not for anything else. (6) Any interest granted in respect of a copyright which is a proprietary right means a right to use a copyright. (7) The sale of a computer programme contained in a software is a sale of a copyri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this case. As regards the order of the Bangalore Bench in the case of Lucent Technologies (supra), Mr. Sharma submitted that it is distinguishable on facts. 148. In his reply in the appeal of M/s Ericsson, Mr. Dastur contended as R follows : (a) A license granted by Ericsson to the cellular operators will amount to a right in respect of a copyright, only if the cellular operator can exercise any of the rights mentioned in s. 14 of the Copyright Act and if the cellular operator cannot exercise such rights, then the license cannot be in respect of a copyright right. This idea is expressed in s. 30 of the Copyright Act itself. (b) In the present case, almost all the rights mentioned in s. 14 of the Copyright Act have been excluded. (c) Only if M/s Ericsson gives a right to JTM or other cellular operators to sell or hire the software, can it be said that a copyright has been given and only then can the payment therefor amount to royalty [Sec. 14(b)(ii) of the Copyright Act]. (d) It is not in all cases that one needs to have the copyrighted article with him in order to exercise a copyright right. For example, a listener of a speech can memorise a speech and reproduce it from memory i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the broad submissions made by both the sides in the case of M/s Ericsson. 149. The AO, at the outset, referred to the preamble to the agreement between the assessee and the cellular operator from which it was gathered that the assessee had licensed the software and the customer had the right to use the software. Referring to the other clauses of the contract, it is stated by the AO that the risk and title passed to the customer in the case of hardware but not in the case of software. He specifically referred to cl. 18 of the agreement and observed that the right of the buyer was restricted in the following manner : (a) Buyer can use it for own operation and maintenance of the system and not otherwise. (b) Buyer has no title or ownership rights. (c) It is a trade secret of the contractor and is subjected to confidentiality.' (d) Buyer cannot make it available to any person other than its employees. (e) It cannot make copies. (f) Buyer can neither license nor sell nor alienate or part with its possession. On account of the above restrictions, the AO held that it was not a sale as per Sale of Goods Act but it was a limited right to use the software and hence the payment for the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DTAA. The basic premise on which the CIT(A) has rested his decision is that the software supplied by the assessee was loaded on to the handset of the mobile subscriber and that the consideration for use of the said software depended upon the number of customers of the operator. This is factually wrong. Actually, the software supplied by the assessee is, what can be termed as installed capacity. In other words, the system supplied by the assessee, comprising of the hardware and the software, can handle a particular number of subscribers. If the number of subscribers go beyond the installed capacity, then the cellular operator has a right, under cl. 26 of the supply agreement, to purchase additional hardware and software. 152. Further, the finding of the CIT(A) to the effect that the software is partly loaded on to the handsets of the subscribers, has been specifically challenged by the assessee in ground No. 9. Added to this is a certificate issued by Reliance Telecom, a cellular operator, a copy of which is at p. 208 of paper book No. II, in which it has been denied that a part of the software has been loaded on to the handsets of the subscribers. It is no doubt true that this cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be of two different cellular operators, having different hardware and software supplied by two different GSM system suppliers. . 153. To illustrate the example further, let us take the case of roaming access between Bombay and Delhi. A Bombay subscriber of Hutch network (supplied by Ericsson) travelling or roaming to Delhi has a freedom to select and use any of the following networks which are operational in Delhi : Network Supplier of GSM system Airtel Ericsson Hutch Siemens and Motorola Idea Nokia. In the above example, the subscriber using the handset of any manufacturer (Samsung, Philips, Alcatel, etc.) in combination with SIM card of any manufacturer (Gemplus, Schlumberger) can select any of the accessible network of his choice while he is in Delhi for making and receiving calls. This clearly indicates that the cellular operator does not transfer or load any part of the software (comprised in the GSM system) on to the SIM card or the handset of the subscriber. This establishes that the software supplied by the assessee (Ericsson) to the cellular operator is installed on the hardware and no part of it is loaded on the SIM card or the handset of the subscriber. 154. It was furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation; (iii) to perform the work in public, or communicate it to the public; (iv) to make any cinematograph film or sound recording in respect of the work; (v) to make any translation of the work; (vi) to make any adaptation of the work; (vii) to do, in relation to a translation or an adaptation of the work, any of the acts specified in relation to the work in sub-cls. (i) to (vi); (b) in the case of a computer programme,' (i) to do any of the acts specified in cl. (a); (ii) to sell or give on commercial rental or offer for sale or for commercial rental any copy of the computer programme : Provided that such commercial rental does not apply in respect of computer programmes where the programme itself is not the essential object of the rental; (c) in the case of an artistic work,' (i) to reproduce the work in any material form including depiction in three dimensions of a two dimensional work or in two-dimensions of a three- dimensional work; (ii) to communicate the work to the public; (iii) to issue copies of the work to the public not being copies already in circulation; (iv) to include the work in any cinematograph film; (v) to make any adaptation of the work; (vi) to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement, under the title License , says that JTM is granted a non-exclusive restricted license to use the software and documentation but only for its own operation and maintenance of the system and not otherwise. This clause appears to militate against the position, if it were a copyright, that the holder of the copyright can do anything with respect to the same in the public domain. What JTM is permitted to do is only to use the software for the purpose of its own operation and maintenance of the system. There is a clear bar on the software being used by JTM in the public domain or for the purpose of commercial exploitation. 158. Secondly, under the definition of copyright in s. 14 of the Copyright Act, the emphasis is that it is an exclusive right granted to the holder thereof. This condition is not satisfied in the case of JTM because the license granted to it by the assessee is expressly stated in cl. 20.1 as a non-exclusive restricted license . This means that the supplier of the software, namely, the assessee, can supply similar software to any number of cellular operators to which JTM can have no objection and further all the cellular operators can use the software only for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llular operator cannot make copies of the software for commercial purposes. This condition is plainly contrary to s. 14(a)(i) of the Copyright Act which permits the copyright holder to reproduce the work in any material form including the storing of it in any medium by electronic means. We may also notice s. 52(1)(aa) of the Copyright Act which lists out certain acts which cannot be considered as infringement of copyright. The particular clause permits the making of copies or adaptation of a computer programme by the lawful possessor of the copy and the computer programme in order to utilize the public programme for the purpose for which it was supplied or to make backup copies purely as a temporary protection against loss, destruction or damage. Therefore, merely because the cellular operator has been permitted to take copies just for backup purposes, it cannot be said that it has acquired a copyright in the software. 160. Clause 20.4(c) makes it mandatory for the cellular operator, while making copies of the software for backup purposes, to also mark the copied software with copyright or other marking to show that the rights of the assessee are reserved. This is one more indicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o us to be correct. Mr. Dastur filed an extract from Iyengar's Copyright Act (3rd Edition) edited by R.G. Chaturvedi. The following observations of the author are on the point : (h) Copyright is distinct from the material object, copyrighted : It is an intangible incorporeal right in the nature of a privilege, quite independent of any material substance, such as a manuscript. The copyright owner may dispose of it on such terms as he may see fit. He has an individual right of exclusive enjoyment. The transfer of the manuscript does not, of itself, serve to transfer the copyright therein. The transfer of the ownership of a physical thing in which copyright exists gives to the purchaser the right to do with it (the physical thing) whatever he pleases, except the right to make copies and issue them to the public (underline, italicized in print, is ours). The above observations of the author show that one cannot have the copyright right without the copyrighted article but at the same time just because one has the copyrighted article, it does not follow that one has also the copyright in it. Mr. Sharma's objection cannot be accepted. 164. It is not necessary, therefore, to consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder a license agreement with the copyright holder, copying the program onto the computer's hard drive or random access memory or making an archival copy is an essential step in utilizing the program. Therefore, rights in relation to these acts of copying, where they do no more than enable the effective operation of the program by the user, should be disregarded in analyzing the character of the transaction for tax purposes. Payments in these types of transactions would be dealt with as commercial income in accordance with art. 7. 166. We may also usefully refer to the proposed amendments to the regulations of the Internal Revenue Service (IRS) in the USA. Again these regulations may not be binding on us but they have a persuasive value and throw light on the question before us, namely, the difference between a copyright right and a copyrighted article. These regulations have been placed at pp. 136 to 157 of paper book No. 2. The actual regulations as well as the Explanatory Note explaining the object and the purpose of the proposed regulations have also been given. In para 1 of the note titled Background , it has been stated that the proposed regulations require that a transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the benefits and burden of ownership which have been transferred. Several examples have been given below these regulations to find out whether a particular transfer is a transfer of a copyright right or a transfer of a copyrighted article. 171. The Commentary of Charl P. du TOIT on this question has been placed at pp. 202 to 204 of paper book No 2. The Commentary is titled Beneficial Ownership of Royalties in Bilateral Tax Treaties. He has opined that articles such as books and records are copyrighted articles and if they are sold, the user does not obtain the right to use any significant rights in the underlying copyright itself, which is what should determine the characterization of the revenue as sale proceeds rather than royalties. He has further opined that consideration relating to sale of software can amount to royalty only in limited circumstances. 172. For the above reasons, we are of the view that the payment by the cellular operator is not for any copyright in the software but is only for the software as such as a copyrighted article. It follows that the payment cannot be considered as royalty within the meaning of Expln. 2 below s. 9(1) of the IT Act or art. 13.3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee that since the payment is only for the copyrighted article, it cannot be considered as royalty. 175. Coming to the question of splitting of the consolidated price paid in a lump sum, we need to refer to the bill of entry for import which is placed in paper book No. 5 filed by the assessee. This bill of entry for home consumption shows that a price has been separately mentioned for the software. This was sought to be explained on behalf of the assessee that since the software was also being imported along with the hardware, there had to be a separate value placed against the software for purposes of assessing the customs duty and it is only for this limited purpose that a value was placed on the software. The argument was that from this it does not follow that the parties themselves agreed for a separate price for the software. Reference was made to the judgment of the Supreme Court in the case of CIT vs. Mugneeram Bangur Co. (supra). The ratio of this decision is that where the parties have agreed for a lump sum consideration for an undertaking as a whole, without placing separate values for each of the items which go to make up the undertaking, merely because certain v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llular equipment) and the software which is part of the hardware. A single lump sum consideration is mentioned in the contract. Therefore, there is all the more reason to hold that the lump sum payment cannot be segregated into two, namely, one for the hardware and another for the software. 177. The judgment of the Madras High Court in CIT vs. Neyveli Lignite Corpn. Ltd. (supra) also reiterates the aforesaid principle. In that case, the price paid by the assessee to the supplier was a total contract price covering all stages involved in the supply of machinery from the stage of design to the stage of commissioning. It was held that the information concerning the working of the machine was incidental to the supply, as the machinery was tailor-made for the buyer. Unless the buyer knows the way in which the machinery has been put together, the machinery cannot be maintained in the best possible way and repaired when occasion arises. It was, therefore, held that the contract cannot be split to spell out a separate payment for the information concerning the design and the working of the machine which can be treated as royalty under s. 9 of the IT Act. The ratio of this judgment applies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e asset, but the moment the information or advice is put on a media, whether paper or disc or any other thing, what is supplied becomes a chattel and customs duty is attracted. 182. Several earlier judgments have been noticed in this judgment, one of which is State Bank of India vs. Collector of Customs (supra). In this case, the State Bank had imported computer software and manuals and it was held that these were goods on which import duty was payable. There is also reference to judgments of the English and American Courts. In St. Albens City District Council vs. International Computers Ltd. (1996) 4 All ER 481, it was held that a computer programme on a disc should be regarded as goods. 183. Similarly, in Advert Systems Ltd. vs. Unisys Corpn. 925 F. 2d 670 (third Cir 1991), the Court in the United States held that computer software was goods. The following observations of the United States Court are relevant, which were approvingly cited by the Supreme Court in Tata Consultancy Services vs. State of A.P. (2004) 192 CTR (SC) 257 : (2004) 271 ITR 401 (SC) : Computer programs are the product of an intellectual process, but once implanted in a medium are widely distributed to compute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice under s. 142(1) has been issued beyond the limitation period and hence invalid. Consequently, the assessment is invalid. Ground Nos. 5, 7 to 9 : The amounts received by the assessee for the software cannot be assessed as royalty either under the IT Act or under the DTAA. Ground No. 6 : The assessee has no business connection in India and hence no income accrued under s. 9(1)(i) of the IT Act : Department's appeal (ITA No. 1798/Del/2001) Ground No. 1 : The CIT(A) was right in holding that assessee did not have a PE in India. Ground No. 2 : Consequently, the CIT(A) was also right in holding that the income from the supply of software is not taxable as business income. Ground No. 3 : The CIT(A) did not err in deleting the interest charged under s. 234B on merits. The levy of interest under s. 234A is however, restored to the AO with the directions contained in para 74. C.O. (By assessee) (No. 60/Del/2001) : Ground Nos. 1-3 : The CIT(A) was not right in holding that the assessee had a business connection in India from which income was deemed to accrue or arise in India under s. 5(2) of the IT Act in respect of the supply of GSM cellular equipment to Indian cell operators. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of office of the Indian company. It was contended that against the findings of the CIT(A) that there is no service PE or installation PE or agency recorded by the CIT, the Revenue is not in appeal and hence what survives is only whether the assessee had a fixed place PE in India. It was submitted that asst. yrs. 1995-96 and 1996-97 were the initial assessment years of the assessee for which no action was taken against the assessee. It was only for the first time during the year under consideration that the assessee was called upon to file its return of income by issue of notice under s. 142(1) of the Act. So far as the Indian company was concerned, it was stated to be an independent economic entity which had been separately assessed since its incorporation in 1989. The income returned by the Indian company included income from installation contracts and it was assessed in its hands as such. Mr. Syali referred in detail to the reasoning of the CIT(A) at p. 24 of his order to hold that there was a fixed place of PE in India. To counter this reasoning, Mr. Syali referred to the various clauses of the agreement entered into by the assessee with Sterling. The main contention by referrin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of H.E.H. Nizam's Religious Endowment Trust vs. CIT (1966) 59 ITR 582 (SC) and in the case of Parimisetti Seetharamamma vs. CIT (1965) 57 ITR 532 (SC), it was contended that though the onus was on the assessee to show that its income was exempt, the initial onus was on the Department to show that there was some income earned by the assessee. No conjectures or surmises could be permitted to conclude that the assessee had earned any income. It was also submitted that there was no negative onus on the assessee to show that there was no income. In this connection, a decision of the Supreme Court in the case of M.S. Bose vs. K.S. Gandhi Ors. (1991) 2 SCC 716 was referred to. 192. Mr. Syali's next argument was that the salaries of the expatriates were paid by the assessee (Motorola) and the perquisites were provided by the Indian company. In the assessment of the Indian company, there was no disallowance of the perquisites which gives rise to the inference that those perquisites were paid by the Indian company to the expatriates only for the purpose of its own business. It was also pointed out that the assessee furnished a list of expatriates to the AO (pp. 13 and 14 of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r coverage and services (p. 366 of paper book No. 4). The argument made out was that the guarantee given by the assessee is only for the sale of the equipment and nothing beyond and all the other warranties are those of the Indian company. These facts attract the ratio of the judgment of the Andhra Pradesh High Court and applying the ratio, it cannot be held that the foreign company projected itself in India. 194. Mr. Syali then referred to provisions of the DTAA between India and USA. According to him, two types of PE were envisaged under the DTAA'(a) where part of the enterprise was functioning in India, and (b) where there was a legally separate entity which was acting as an agent of the foreign enterprise. In the present case, according to him, there was no business at all carried out by the American company in India and as held by the CIT(A), there was no agency PE in India also. He emphasized on art. 5.3(c) of the DTAA and stated that the assessee puts its case on this article which would apply even if it is held that there is a fixed place of business. Referring to art. 7, it was contended that though the term attributed was a wider term than the term derived', yet f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 296 (AAR) in support of his conclusion. Mr. Syali pointed out that this judgment has been considered in the order of the Bangalore Bench of the Tribunal in the case of Lucent Technologies Hindustan Ltd. vs. ITO (supra). Finally, he referred to the suggestions made to revise the OECD Commentary on this aspect and it was contended that the doctrine of updated construction as referred to in the judgment of the Supreme Court in the case of CIT vs. Poddar Cements (P) Ltd., Etc. (1997) 141 CTR (SC) 67 : (1997) 226 ITR 625 (SC) should be invoked. Ground No. 4 : 196.1 This ground deals with the attribution of profits to the PE and is taken without prejudice to ground No. 2 which challenges the view of the IT authorities that the assessee has a PE in India. The argument is that even if it is held by the Tribunal that there is a PE in India, there is no material on the basis of which any income can be attributed to the PE and, therefore, nothing is taxable as the assessee's income. Reference is made to para 10 at p. 45 of the order of the CIT(A) where this issue has been dealt with by him. It is submitted that the complete accounts were placed before the AO and the CIT(A) and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income to the manufacturing activity should be greater than the attribution to the sale). (ii) Annamalais Timber Trust Co. vs. CIT (supra) (in this case only 10 per cent of the income was attributed to the PE). (iii) CIT vs. Bertram Scott Ltd. (1987) 62 CTR (Cal) 11 : (1987) 31 Taxman 444 (Cal) (10 per cent attributed to PE). 198. The learned counsel for the assessee also referred to the relevant clauses in the DTAA with Vietnam, Malaysia and Indonesia which are countries where the assessee had no operations but had appointed agents under certain agreements to whom it had paid a commission of 4 per cent to 10 per cent which may give a broad indication that nothing beyond 10 per cent can be attributed to PE, if at all. 199. Mr. G.C. Sharma, the learned counsel for the Revenue, controverted the submissions made on behalf of the assessee. We have referred in detail to his arguments while dealing with the case of Ericsson and, therefore, there is no need to reproduce them here because the arguments were substantially the same as he made in the case of Ericsson. However, only one thing needs to be mentioned specifically i.e., that Mr. Sharma pointed out that, while addressing arguments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ager which would normally be the case if the contract is on turnkey basis or is a works contract, that the employees of the assessee came to India on short visits only to supervise whether the equipment was being properly installed and from all these, it was clear that it is not possible to treat all the three agreements as a whole and conclude that it is a turnkey project or a works contract. Mr. Syali referred in this connection to page No. 295 of the paper book where the definition of GSM Cellular System does not include a works contract. The definition of subsidiary includes only that entity which provides services or materials in connection with the supply contract and has nothing to do with the separate supply contract, a copy of which is at p. 353. The IOS Agreement, a copy is at p. 360, shows that Motorola India does not refer to the assessee-company at all. All these features of the contracts would show that there is no basis for the allegation that the contract is a turnkey project or a works contract. 202. Referring to the written submissions filed by Mr. G.C. Sharma, on which considerable reliance had been placed by him while making his submissions on behalf of the Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical Ltd. AIR 1984 SC 744. It was submitted that in these judgments, several criteria were laid down to find out whether certain contracts could be regarded as constituting a works contract and none of these criteria is satisfied in the present case. It was pointed out that it has been held specifically that if there is a separate contract for transfer of title (in the equipment) for a price and property passes therein, that cannot be considered is a works contract. In the present case, according to Mr. Syali this test as satisfied and therefore, the theory of works contract should not be accepted. 206. Turning to the question of tax avoidance or evasion, a point which was raised by Mr. Sharma on behalf of the Department, Mr. Syali submitted that under ss. 91 and 92 of the Evidence Act, no oral evidence may be admitted by the Court which is contrary to the averments contained in a written document and that a written contract cannot be ignored and a different contract between the parties be spelt out by the Court. Mr. Syali in this connection referred to the following authorities : 1. Re Poly Pack International Plc (in Admn.) (1996) 2 All ER 433. 2. CIT vs. Motor Gen. Stores (P) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of Carborandum Co. (supra). He emphatically denied that the subsidiary in India (Motorola India Ltd.) was the agent of the assessee. 209. As regards the question of royalty , the only argument of Mr. Syali was that the payment was not linked at all to the number of subscribers and on this aspect as well as on other features, the facts of Motorola were the same as the facts in the case of Ericsson. 210. Coming to the aspect of attribution of income to the PE, Mr. Syali submitted that when the AO had made the attribution, he had 4 PEs in mind. However, ultimately only one PE was upheld by the CIT(A) and hence at the most 10 per cent of the sales can be attributed to Indian operations. Even that would not make the income taxable according to Mr. Syali because almost 15 per cent of commission was paid. Further, it was pointed out that as per the overall global accounts, the assessee had earned profits only to the extent of 33 per cent and hence there was no basis to adopt the rate of 42 per cent of profit in cellular products. There was no warrant for the AO to increase the profit from 33 per cent to 42 per cent. Therefore, even if 33 per cent is taken, considering the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n mind while attributing any income to the PE. According to him, r. 10 cannot go beyond the provisions of s. 9(1)(i). The CIT(A) was wrong in his interpretation of r. 10(ii). Rule 10 does not take care of the language of Expln. 2(a) below s. 9, Therefore, according to Mr. Syali, whatever is determined under r. 10(ii) has to be further apportioned to the Indian operations under the provisions of Expln. 2(a) below s. 9. It is necessary to clarify here that both the parties are aggrieved by the apportionment made by the CIT(A) by invoking r. 10(ii) whereas the Department wants apportionment made by the AO to be restored. The assessee wants that the apportionment made by the CIT(A) by invoking r. 10(ii) though correct in principle, the CIT(A) was wrong in his interpretation of the rule which does not take care of the language used in Expln. 2(a) below s. 9. 214. At this juncture, the Bench called upon the learned counsel for the assessee to explain the working of r. 10(ii) of the IT Rules by giving concrete examples so that the point made may be appreciated better. Mr. Farooq Irani, the learned counsel appearing for Motorola along with Mr. Syali, lucidly explained, with illustrations, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows : (1) Fixed place PE in the form of the Indian company namely, Motorola India Ltd. (MINL), (2) Installation PE, (3) Service PE, and (4) Dependent agent PE. Though the AO held that the assessee had PEs in India as above, on appeal, the CIT(A) has held that the assessee had only fixed place PE, within the meaning of art. 5.1 of the DTAA between India and US He has held that the assessee cannot be said to have the other 3 types of PEs as held by the AO. The Department has accepted this position and has not taken any ground against this finding of the CIT(A) in its appeal No. ITA 2516/Del/2001. Therefore, the question which remains for our consideration arises only in the assessee's appeal wherein in ground No. 2, the assessee has challenged the finding of the CIT(A) that there is a fixed place PE in India in the form of the office of MINL in India. We address ourselves to this question and proceed to consider the same in the following paragraphs. 218. Article 5.1 of the DTAA says that for the purposes of this convention the term 'Permanent Establishment' means a fixed place of business through which the business of an enterprise is wholly or partly carried on . In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is not sufficient to attract art. 5.1. Considerable emphasis was placed on the use of the word also in the above sentence of the CIT(A). In other words, what the assessee contends is that its employees should exclusively work for the assessee only so that the office of MINL could be considered as a fixed place PE of the assessee in India. 220. It is a little difficult to accept the above submission on the facts of the present case. The employees were paid salaries by the assessee-company and, therefore, prima facie it would appear that they worked only for the assessee-company in India. They have also used the office of the MINL in India to carry on the work of the assessee-company and thus there is a projection of the assessee-company in India in the office of MINL which makes the latter a fixed place PE. The fact that the employees of the assessee were paid perquisites by MINL and that these perquisites were not disallowed in the assessment of MINL from which it was contended that the Department itself accepted that the employees work for MINL is not conclusive. It seems to us that an employee is normally allowed perquisites only in the place where he actually stays and works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viewed as a projection of Ericsson's activities in India. There was also no allegation in the case of Ericsson to the effect that the employees of Ericsson worked for ECI also so that it could be said that they could, as a matter of right, enter the office of ECI and thereafter could perform some of the activities of Ericsson also. In the case of Motorola, however, the case has proceeded on the basis of an admitted position that the employees of Motorola have worked both for Motorola as well as MINL. There is no denial by Motorola that its employees had a right to enter the office of MINL in India either for the purpose of working for MINL or for the purpose of working for Motorola. This also finds support from the fact, which we consider crucial, that MINL provided perquisites to the employees of Motorola whereas Motorola paid the salaries. This arrangement creates an impression that for that part of the work carried out by the employees of Motorola for Motorola, they were paid salaries by Motorola and for that part of the work which they performed for MINL, they were paid perquisites by MINL. Such an arrangement cannot be considered to be unusual and strengthens the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness solely for the purpose of advertising, for the supply of information, for scientific research or for other activities which have a preparatory or auxiliary character, for the enterprise. The contention of the assessee is that the activities carried on by MINL for Motorola are of preparatory or auxiliary character. Reliance is placed on cls. 1 to 5 of art. 1.1 of the services agreement entered into on 1st April, 1996 between the assessee and MINL. The nature of the obligations of MINL have been elaborated in these clauses as under : Article 1 Duties of MINL 1.1. MINL undertakes the obligation to perform the following services (the 'Services') in India to MINC and its affiliated companies (hereinafter referred to jointly as 'Motorola') : (1) Engage in market survey, industry analysis, economy evaluation, development of business opportunity, investment, joint venture and technology co-operation and interface with potential business partners and with local Government agencies on industrial policy and regulations. (2) Provide product information and training to distributors and OEMs, assist distributors to provide potential equipment users with technical and price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s activities and are only basic or preparatory in nature. MINL has to perform these activities only for a period of one year. Once the agreement comes to an end there is no obligation on the part of MINL to perform the above activities. In these circumstances, we hold that the office of MINL in India is a fixed place PE of the assessee in terms of art. 5.1 of the DTAA but cannot be deemed to be so by virtue of art. 5.3(e) of the DTAA. Ground No. 2 is accordingly allowed. 225. The next ground namely, ground No. 3 relates to the characterization of the revenues relatable to the supply of software. The IT authorities have held the payment to be royalty within the meaning of s. 9(1)(vi) of the Act and have brought the same to tax accordingly @ 30 per cent on gross basis. The total value of the software has been taken in the assessment at US $ 6.33 million which converted into Indian rupees comes to Rs. 22,88,29,500. The tax thereon at 30 per cent has been computed at Rs. 6,86,48,850. 226. Basically the rival contentions are substantially the same as in the case of Ericsson which we have dealt with earlier. According to the Department, royalties have to be assessed under art. 12 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hardware in order to get connectivity. Despite the slight difference in the language or the phraseology employed by the CIT(A), there is in substance no difference to what he really wants to convey which is that the subscribers used the software supplied by the assessee. We do not see any justification to take a view different from the view taken by us in the case of Ericsson merely because of the difference in phraseology or language employed by the CIT(A) to denote the same thing, namely, that the subscriber uses the software. In the case of Ericsson, we had held that the subscriber merely gets connectivity by using the facilities provided in the handset and that finding applies equally to the present case. In this connection, we may briefly notice one or two authorities which were cited before us. The first decision is that of the Bangalore Bench of the Tribunal in the case of Lucent Technologies vs. ITO (supra). This case was cited because it has dealt with the decision of the Authority for Advance Ruling in the case of 'Y' reported in (1999) 154 CTR (AAR) 246 : (1999) 238 ITR 296 (AAR), which has been relied on by the CIT(A) in the present case. We have gone through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the judgment (pp. 57 and 58) : In the modern day world, almost every facet of one's life is linked to science and technology inasmuch as numerous things used or relied upon in every day life is the result of scientific and technological development. Every instrument or gadget that is used to make life easier is the result of scientific invention or development and involves the use of technology. On that score, every provider of every instrument or facility used by a person cannot be regarded as providing technical service. When a person hires a taxi to move from one place to another, he uses a product of science and technology, viz., an automobile. It cannot on that ground be said that the taxi driver who controls the vehicle, and monitors its movement is rendering a technical service to the person who uses the automobile. Similarly, when a person travels by train or in an aeroplane, it cannot be said that the railways or airlines is rendering a technical service to the passenger and, therefore, the passenger is under an obligation to deduct tax at source on the payments made to the railway or the airline for having used it for travelling from one destination to another. Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the service as a whole and he is not concerned with whether he gets the connectivity through the hardware or through the software or what are the technical aspects or steps involved in obtaining the connectivity. Therefore, the conclusion of the CIT(A) that the subscriber paid for the use of the software is, with respect, misconceived. 229. For the above reasons, we hold that the payment for the software cannot be taxed under art. 12 of the Indo-US DTAA as royalties. The ground is allowed. Ground Nos. 5 and 6. 230. We may now take up for consideration ground Nos. 5 and 6 of the appeal under the head accrual of income and business connection respectively. The IT authorities, with reference to these grounds, have discussed the assessees contracts with Sterling Cellular Ltd. and Usha Martin Telecom Ltd. They have not discussed the terms of the other contracts and the appeals also proceeded on the basis that these two agreements are representative of all the agreements which the assessee entered into with various cellular operators. These two agreements were made in January and March, 1995. It was common ground between the assessee and the Department before us that the agreements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry with the result that even before the title to the goods passes, the buyer can undertake the risk. The section further says that when the property in the goods is transferred to the buyer, the goods are at the buyer's risk whether delivery has been made or not. This, of course, is subject to s. 40 which deals with risk where goods are delivered at a distant place as in the present case. This section says that where the seller agrees to deliver the goods at his own risk at a place other than where they were when sold, the buyer shall normally take any risk of deterioration in the goods necessarily incident to the course of transit. So far, this is in conformity with s. 26 which says that after the property in the goods is transferred, the goods are at the buyer's risk. However, s. 40 further says that it is open to the parties to agree that even where the property in the goods has passed, the seller may undertake the risk of deterioration in the goods necessarily incident to the course of transit. This is what the parties in the present case have undertaken in the sense that though the title to the GSM equipment passed in USA, the risk continued to remain with the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the acceptance test does not mean that the sale is completed only in India. 234. On behalf of the assessee, another contention raised before us was that under s. 39 of the Sale of Goods Act wherein pursuant to a contract of sale, the seller is authorized or required to send the goods to the buyer, the delivery of the goods to a carrier whether named by the buyer or not, for the purpose of transmission to the buyer is prima facie deemed to be a delivery of the goods to the buyer. It was submitted that in the present case sub-s. (1) of s. 39 is satisfied. Our attention was drawn to the written submissions filed before the CIT(A) (dt. 15th Feb., 2001 at pp. 102 to 113 of paper book No. 1) and it was pointed out that the assessee has contended in these written submissions that the bills of lading are in the name of the customer (not the assessee) and the assessee did not reserve any right of disposal over the equipment. Further, almost 70 per cent of the price of the equipment was payable on delivery of the equipment to the carrier. Thus, substantially the contract of sale was concluded outside India. The result is that, as held by the Supreme Court in the case of Mahabir Commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that there is a business connection in India. 236. Here again it would be appropriate to distinguish our decision in the case of Ericsson with regard to business connection. In that case we have held that there is no business connection in India. The reason for our view is that the Indian company in the case of Ericsson (ECI) did not carry out any activities on behalf of Ericsson. Nor was there any evidence or finding by the IT authorities to show that ECI carried out any activities on behalf of the assessee. In the case of Ericsson, we have also held that business connection cannot arise merely because the employees of Ericsson came to India. That finding holds good in the case of Motorola also. In other words merely because the employees of Motorola visited India, it cannot be said that there is a business connection. However, the ground on which we are holding that there is a business connection in the case of Motorola is that the Indian company namely, MINL carried out several activities on behalf of the assessee and notwithstanding that those activities were of a preparatory or auxiliary character, they are sufficient to establish a business connection in India. We may also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supply of software shall be assessed as royalties . They are not so assessable, either under the IT Act or under the DTAA. Ground No. 4 : There is no scope for attributing any profits, in the absence of any PE in India. This decision is consequential to our decision in respect of ground No. 2. Ground No. 5 : The CIT(A) was wrong in holding that the sale of the GSM equipment took place in India and income accrued to the assessee in India under s. 5(2). Ground No. 6 : The CIT(A) was right in holding that there is a business connection in India under s. 9(1)(i) of the Act. However, no income can be assessed on account of the business connection because the DTAA prevails over the Act. Ground Nos. 7-8 : In view of our decisions in respect of the earlier grounds, no separate decision is considered necessary. Department's appeal (ITA No. 2516/Del/2001). Ground No. 1 : In view of our decision in the assessees appeal that there is no PE in India, this ground does not survive. It is dismissed. Ground Nos. 2 and 3 : These grounds relate to the levy of interest under ss. 234A and 234B. As held in para 74 (supra), the issue relating to s. 234A is restored to the AO with the same directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. All the other obligations which were undertaken by the assessee were all related only to the supply of equipment and not beyond. Both the title and the risk in the equipment passed simultaneously in Helsinki, Finland, i.e., outside India though the delivery of the equipment was to be in India. Dealing with cl. 6.1 and cl. 6.3 of the supply agreement, it was submitted that the IT authorities were not justified in saying that these two clauses were inconsistent with each other in the sense that the risk though professed to be transferred outside India actually was transferred only in India as the assessee was liable to bear the transport damage under cl. 6.3, it was submitted that though these two clauses may seem at first blush to be inconsistent with each other, the cl. 6.3 is actually to be construed only as a proviso or in other words only as embodying a concession made by the assessee that it would undertake only a small part of the entire risk related to the supply of the equipment namely, damage arising out of transport. This concession cannot be equated with the assumption of the entire risk in relation to the delivery of the equipment. According to Mr. Syali the underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book No. 3), in this case Mr. Syali drew our attention to the judgment of the Supreme Court in the case of Raymond AIR 1962 SC 1810 and to p. 22 of the written submissions filed by him. It was submitted that though the contract was assigned to Nokia (P) Ltd. (NPL), the assignment letter made it clear that NPL was to act as an independent contractor, however, subject to the condition that the assessee would continue to be liable for the performance of NPL. Thus, the assessee continued to be liable under the supply contract as if it was executing the same 244. According to Mr. Syali, the question whether there was a sale of goods, in the context of a works contract, has to be understood not in a popular sense but only in the legal sense as held by the Supreme Court in State of Madras vs. Gannon Dunkerly Co. (Madras) Ltd. 9 STC 353. Reference was also made to the judgment of the Supreme Court in the case of Govt. of Andhra Pradesh vs. Guntur Tobacco AIR 1965 SC 1396 where the relevant tests were laid down in para 18 and it was held in para 28 that the burden to show that it was a contract of sale and not a works contract was on the Revenue. 245. Turning to the question of PE, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the AO should have accepted the same especially when there is a presumption that certified accounts are true. Reliance was placed on the judgment of the Andhra Pradesh High Court in the case of CIT vs. Navabharat Ferro Alloys Ltd. (2000) 162 CTR (AP) 289 : (2000) 244 ITR 261 (AP), which reconciled the earlier two judgments of the same Court in the case of CIT vs. Hindustan Shipyard Ltd. (supra) and Bharat Heavy Plate Vessels Ltd. vs. Addl. CIT (supra). It was finally argued that at any rate even if separate charges are assumed to have been levied for the activity of supervision, attribution of 46 per cent to the activity is arbitrary and too high. Vendor Financing Scheme - Can notional interest be added ? 247. Ground No. 4 in the assessee's appeal for the asst. yr. 1997-98 (ITA No. 1963) is directed against the addition made for notional interest on the credit facilities extended by the assessee to the cell operators. The agreement between the assessee and the cell operators provided for the charging of interest of 18 per cent on such credit facilities. However, the assessee did not raise any invoice for the interest, nor were any entries made in the books of account for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts on the various issues that arose for consideration. He first submitted that Nokia India (P) Ltd. could not have had any expertise in installation of a GSM cellular system because it was incorporated only on 23rd May, 1995 and immediately entered into the contract with the assessee for installation. The basic issue as to whether this was a works contract in reality and truth but disintegrated for purposes of income-tax has to be answered having the background of Nokia India (P) Ltd. in mind. Skycell and Modi according to Mr. Sharma also fell clearly in this category, because the assessee first contracted with both for supply of equipment and installation thereof, but later on assigned the installation part of the contract to Nokia India (P) Ltd., the Indian company. So, according to Mr. Sharma, three basic issues arose for consideration, which are : (a) What is the business of the assessee ? (b) Whether there is a PE in India ? and (c) The computation part of the income. According to him, the business of the assessee was to set up a cellular telephone system in India and worldwide. The object was to putting up a working system and, therefore, it constituted a works contract. Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing no other business. On this point Mr. Syali for the assessee intervened to clarify that Mr. Hannu Karavirta had signed only the Indian contract with BPL. Mr. Sharma further pointed out that Mr. Karavirta assigned the contract on 31st May, 1995 and became the employee of the assignee company namely, Nokia Telecom (P) Ltd. on the very next day, i.e., 1st June, 1995, which clearly showed that the supply of the equipment and installation were all part of the same arrangement and cannot be segregated. 251.2 With regard to the contracts with BPL and Modi, the same arguments were advanced by Mr. Sharma. His broad submission was that all the contracts have to be construed in the same manner since they were all entered into at the same time. 252 Referring to the Agreement for Services dt. 19th April, 1996, a copy of which is at p. 137 of paper book No. 2, it was submitted by Mr. Sharma that the Indian company namely, Nokia Telecom (P) Ltd. could not have gained expertise in such a short time from the date of its incorporation which is 23rd May, 1995 which showed that the installation work was also to be done in truth and substance only by the assessee-company. 253. Mr. Sharma then procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O) undertook the work of collecting all the cell operators at the same place to sign the contracts on the same day, to collect information, to negotiate, etc. These facts indicated that the LO itself constituted a PE in India. Referring to the contention of the assessee that the LO was not permitted to carry out any commercial activity in India, Mr. Sharma relied upon the order of the CIT(A) and submitted that he has duly met with this argument of the assessee. Mr. Sharma also drew our attention to paras 4.18, 4.19, 6.1, 6.2 and 6.3 of the CIT(A)'s order in support of his arguments about the existence of a PE in India. 256. Coming to the question of attribution of income to the PE, Mr. Sharma referred to art. 7.3 of the DTAA between India and Finland. He submitted that under this article, the computation of the income attributable to the PE shall be in accordance with the Indian law, which includes r. 10 of the IT Rules. Rule 10 has to be r/w Expln. (a) to s. 9(1)(i) of the IT Act under which in the case of a business of which all the operations are not carried out in India, the income deemed to accrue or arise in India shall be only such part of the income as is reasonably att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Ganon Dunkerly (supra) and Guntur Tobacco (supra) have not been met by the IT Department. According to him, the judgment of the Supreme Court in 20th Century (supra) does not overrule the earlier judgments in Ganon Dunkerly and Guntur Tobacco (supra) and that they still hold the field even after the 46th amendment to the Constitution of India. Elaborating this, he drew our attention to paras 12 to 17 of the judgment of the Supreme Court in the case of 20th Century (supra) and pointed out that what was the subject-matter of consideration by the Supreme Court in this case was the expression deemed sale and that this concept of deemed sale has not been imported or incorporated into the IT Act by any amendment. Thus, he submitted that the contracts were separate and cannot be read as an integrated whole. 259. Turning to the arguments of the Revenue with regard to the agreements between the assessee with Tata and Skycell, Mr. Syali reiterated that the effect of the assignment amounted to a novation of the contracts and even factually the Indian company, which was the assignee has executed the installation and the assessee-company had nothing to do with it. He filed a chart showing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order cannot be construed as an authority supporting the contention of the Department that r. 10 is applicable in all cases. 262. With reference to the arguments of Mr. Salil Gupta, the learned Departmental Representative, Mr. Syali pointed out from p. 152 of paper book No. 3 that full details of the receivables were given to the IT authorities and that the AO could have added them and recast the P L a/c and that without doing so, he was not justified in rejecting the loss declared therein. He drew our attention to the audit report where the auditors have said that cash system of accounting was followed in order to give a true and fair view (taking into account the irrecoverable) and normally this audit report should have been accepted and acted upon. As regards the allowability of A G and R D expenses and other similar expenses incurred outside India, Mr. Syali submitted that there was no prohibition on allowing them as deductions. According to Mr. Syali, the claim was also justified because it was germane to the manufacturing activity of the assessee-company. He sought to distinguish the order of the Mumbai Bench in the case of Micoperi (supra) on the ground that in that case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India in the form of its liaison office or in the form of its 100 per cent subsidiary Nokia India (P) Ltd. (hereinafter known as NPL) ? (iii) Is there a sale of hardware by the assessee in India ? If so, how much profit can be attributed to such sale for income-tax purposes ? (iv) What is the treatment to be accorded for the payments for the supply of software, which the IT authorities have assessed as royalty? (v) Are the IT authorities right in assessing the interest income on account of vendor financing and delayed payments from the Indian telecom operators ? 268. We may straightaway clarify that in these appeals, the issue of the validity of the notice under s. 142(1) and consequent validity of the assessment made on the assessee are not in issue though the CIT(A) has decided this issue against the assessee. We are, therefore, not to decide this issue. At the time of hearing, the learned counsel for the assessee stated that the assessee does not wish to press ground No. 5 for both the years which is that the orders passed by the Departmental authorities are violative of the rules of natural justice. 269. So far as the first issue is concerned, namely, the existence of business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marketing activities for the assessee in India but for this finding, there is no evidence and none of the contracts which have been brought on record indicate that the LO has carried out any marketing activities. In para 5.2 of his order, the CIT(A) has stated that the facts and circumstances suggest that the assessee carried out business in India through its LO which was not merely preparatory or incidental in nature and that even the designing of the GSM, which was the heart of the activity, was done by the LO. Though he has not stated as much, in terms what he perhaps had in mind is that the LO had something to do with the designing activity connected to the GSM. He has made a very general statement that the assessee always had the presence of its office, meaning thereby the LO to aid it in its activities. He has not, however, referred to any material or evidence on the basis of which he has come to this conclusion. He is also not justified in rejecting the assessees argument based on the order of the Special Bench of the Tribunal in the case of IAC vs. Mitsui Co. Ltd. (1991) 39 ITD 59 (Del) to the effect that a LO, which by law is prohibited from engaging itself in any business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t day, (i.e., 1st June, 1995) became an employee of NTPL. On 1st Jan., 1996 he became the managing director of NTPL and thereafter signed the installation contract with the cellular operators on behalf of NTPL. The argument of Mr. G.C. Sharma based on these facts was that the contracts were assigned only to the assessee's 100 per cent subsidiary which was actually under the control of the assessee and though legally speaking the assignment of the contract may amount to a novation, in substance and truth it remains the same in its original form, especially when the person who signed the contract on behalf of the assessee-company became the implementers of the installation contracts in his capacity as the employee of NTPL from the very next day. It is significant to note that before 1st June, 1995, Hannu Karavirta was representing the assessee-company and had also signed the supply contract on its behalf and on or from 1st June, 1995 he became the employee of NTPL, the 100 per cent subsidiary of the assessee-company and began signing and implementing the installation contracts. It is also significant to note that in respect of Skycell and Modi the assessee contracted with them bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties. The main point brought out by them is that in respect of the services rendered by NTPL to the assessee under the marketing agreement , it was compensated on the basis of cost plus 5 per cent which means that in addition to getting the expenses reimbursed, NTPL will get 5 per cent more. It stands to reason that in respect of the. marketing activity, NTPL has no scope for incurring any loss. Nevertheless, its accounts show a book loss of Rs. 10 crores (approximately) and even if the depreciation loss of Rs. 2 crores is ignored, still the loss is around Rs. 8 crores. The question posed by the IT authorities is : where from this loss has arisen ? The answer is that such a loss has arisen only from the installation activity carried out by the NTPL. In other words, the installation charges received by NTPL from the cellular operators in India were not commensurate with the costs and expenses incurred therefor and that is the reason why such a loss has been incurred. Now the other question is how does this result in NTPL being regarded as the PE of the assessee-company. The answer is that since NTPL is a wholly owned subsidiary of the assessee in India and is consequently in a posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities which have a preparatory or auxiliary character for the foreign enterprise. In the present case (Nokia), however the activities of the Indian subsidiary of Nokia, i.e., NTPL, are not of a preparatory or auxiliary character. Therefore, art. 5.4(e) of the DTAA between India and Finland, which is similar to art. 5.3(e) of the DTAA with USA, does not apply and we cannot hold that the NTPL cannot be deemed to be the PE of the assessee. The activities of NTPL are something more than preparatory or auxiliary in nature. They do not also fall under any of the other cls. (a) to (d) of art. 5.4 of the DTAA with Finland. We felt the need to explain this aspect of the matter in order to dispel any notion that there may be a contradiction in our conclusions regarding PE between the case of Motorola and the case of Nokia. 275. The third question is whether there is a sale of hardware by the assessee in India and if so how much profit can be attributed to this activity for purposes of income-tax. The IT authorities have taken the view that the title in the goods passed in India and, therefore, the sale of the hardware took place in India. We may take up first the contract between the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even after the hardware is delivered to the cellular operators in India. Clause 8.1 is only in the nature of a warranty. This shall be clear from cl. 8.3 which says that if any defect is discovered in the hardware during the warranty period then the purchaser shall arrange, at its own cost, the returned shipment of the defective part, sub-assembly or unit (if applicable) to facilitate in New Delhi therefor designated by the supplier...... . This provision can only be consistent with the position that the property and the risk in the goods have passed outside India as otherwise Tata, the purchaser, cannot be compelled to bear the expenses of returning the defective part. 276. We may now refer to cl. 18 of the agreement under the head Project Steering Committee . This clause provides for the creation of a Project Steering Committee (PSC) for monitoring the progress of performance of the respective duties and obligations under the supply contract of the parties. It has been clarified before us on behalf of the assessee that this clause was not activated during the year and that a similar clause is absent in the other contracts. It was submitted and in our opinion rightly that this cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the acceptance test has been satisfactorily carried out is concerned, we are unable to accept the same merely on the basis of the statement made in Appendix 9 to the contract under the heading Nokia's overall responsibilities . A careful reading of p. 1183 shows that Nokia, the assessee, is bound to provide the installation tools and test equipment for the testing teams as agreed in the contract and would also be responsible for the documentation for installation of sites as agreed upon and for the installation supervision. This is obviously, because Nokia, having supplied the GSM equipment, would be in a better position and in fact, would be more interested in ensuring that the equipment is properly installed. The primary responsibility for installation is that of the installer, which is a separate company independent of the assessee and also assessed separately in respect of the installation income. By merely providing installation tools and testing equipment or the documentation for installation or supervising the installation, it cannot be said that the assessee was primarily responsible for the installation of the equipment and the title and risk in the GSM hardware conti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remain responsible for removing the defects in the equipment till the acceptance test is satisfactorily conducted. This clearly excludes the assessee-company from any kind of responsibility for malfunctioning or non-functioning of the GSM equipment or for not satisfactorily passing the acceptance test. The conclusion drawn to the contrary by the IT authorities is untenable. 280. We have perused the assessment order for the asst. yrs. 1997-98 and 1998-99. The AO has referred only to the supply contract entered into by the assessee with Tata and BPL. No other contract has been adverted to in any detail. We have found that there is no material difference between the terms of the two contracts and that is why we have also referred only to the supply contract with Tata in some detail. In fact, even the learned counsel for the assessee has referred only to the supply contract with Tata in some detail. Neither of the parties before us has referred to any other supply contract in the course of the arguments. 281. The fourth question is regarding the treatment to be accorded to the payments made to the assessee for supply of software. The AO has assessed the payments as royalties but the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee contended that though there was provision in the agreement to charge interest from the cell operators, it was never activated or acted upon by the parties, that no entries were passed in the assessees books of account for the interest, that no invoices for interest were raised against the cell operators and that in these circumstances, the interest cannot be said to have accrued at all and that the AO was not justified in estimating and adding the notional interest. Written submissions were also filed before the CIT(A) articulating the above points (p. 80 of paper book No. 1 read with p. 186 of paper book No. 2). The audited statements placed at p. 152 of paper book No. 2 were also relied upon. The CIT(A), however, rejected the assessees submissions and recorded the following findings : (a) The assessee maintained accounts on the mercantile basis as it was required to under the Companies Act, 1956, under which it was required to do so in respect of its Indian operations. (b) No evidence was filed by the assessee to show that the financial position of the cell operators was so bad that they could not pay the principal amount or the interest. (c) There was a defect in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries on business in the other State through a PE, the profits of the enterprise may be taxed by the State in which the PE is situated, but only so much of the profits as are attributable to the PE. Art. 7.2 says that the profits attributable to the PE are those which the PE is expected to make as if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a PE. Art. 7.3 says that in determining the profits of a PE all expenses incurred for the purposes of the PE, including executive and general administrative expenses are to be allowed as are allowed under the provisions of the domestic law of the Contracting State in which the PE is situated. The other sub-articles are not relevant for our purpose. We have held that the assessee has a business connection in India and, therefore, s. 9(1)(i) is attracted. We have also held that the assessee has a PE in India in the form of NTPL. The question of attribution of income can, therefore, arise under both the situations namely, where there is a business connection and where the assessee has a PE in India. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the CIT(A) was not justified in reducing the income from 40 per cent of the value of the hardware to 5 per cent of the sales to Indian parties. Actually, for the asst. yr. 1998-99, the ground should be that the CIT(A) was not justified in reducing the income to 7.9 per cent. It appears to be a mistake in drafting the ground No. 1. On the other hand, the assessee in its appeals has taken up several contentions including the contention that no income can be attributed to the PE ,at all primarily because whatever expenses that are incurred by it are compensated by the assessee on cost plus basis, that if the expenditure incurred by the PE is taken into account, then there will be no income left to be assessed, that there are several activities which do not lead to the existence of the PE and, therefore, they cannot contribute to the Revenues of the PE, that no income can be attributed to the supervision because the supervision is only an incident of the sale and does not constitute an operation by itself, that the India specific accounts were wrongly rejected by the CIT(A) and that at any rate the adoption of 5 per cent and 7.9 per cent of the sales to Indian parties is arbitrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t profit in respect of the Indian sales as the income attributable to the PE. The following steps are involved in computing the income attributable to the PE : First, the global sales and the global net profit have to be ascertained. From the accounts presented before us as well as before the IT authorities, the global net profit rate has been ascertained at 10.8 per cent and 16.1 per cent by the CIT(A), to which no objection has been taken by either side. This percentage has to be applied to the Indian sales and by Indian sales, we mean the total contract price for the equipment as a whole and not the bifurcated price which the AO has referred to in the assessment order. This will also be consistent with our view that the software and the hardware constitute one integrated equipment. The resultant figure would be the net profit arising in respect of the Indian sales. Out of this figure of net profit, 20 per cent shall be attributed to the PE to cover the three activities mentioned above. The AO is directed to compute the income of the PE as directed above. 288. Only one point remains to be noted. In the initial stages of the arguments in the case of Ericsson, Mr. Sharma, the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re does not come in the way of the Tribunal disposing of the appeal. It needs to be stated that our view is based on the fact that the assessee (Ericsson) has not admitted in MAP that it is taxable in India and its stand before us in the appeal is in conformity with its stand under the MAP. We, however, clarify that we have not examined the question as to what would happen in a case where the assessee admits its taxability under the MAP but wishes to take a completely contradictory stand in the appeal before the Tribunal. The question whether in such a case an assessee can be permitted to pursue its appeal before the Tribunal is a moot question which we leave open, to be decided in an appropriate case. We may add that in the case of Ericsson, after Mr. Dastur pointed out the stand taken by the assessee in its application under the MAP, the matter was fairly not pursued by Mr. Sharma, the learned senior counsel for the Revenue. 289. The assessees grounds of appeal are somewhat argumentative and mixed up and, therefore, we find it difficult to give our decisions ground-wise. However, we have culled out the issues and summarized them in para 267. We give our decision on those issues a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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