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TMI Blog1987 (6) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ped the know-how for the manufacture of high grade edible guar gum, industrial guar gum and their derivatives and had also been operating commercial plants under such know-how. That agreement was for obtaining from Unipektin exclusive right to use the know-how for the manufacture of these gums. The assessee company intended to construct edible guar gum and industrial guar gum plants inIndia. Unipektin was to prepare the know-how inSwitzerlandand deliver the same to the assessee inSwitzerland, as per the schedule agreed upon in article 6 of the Agreement. The assessee was to pay to Unipektin inSwitzerlanda total sum of Swiss Fr. 3,50,000 by an irrevocable confirmed letter of credit drawn in favour of Unipektin on the Swiss Bank nominated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered the services as per Article 4.5 of the Agreement. The case of the assessee was that the remittance of Sw. Fr. 78,500 was not taxable being no payment towards technical know-how or any income of the non-resident and that it represented actual expenses incurred by the Unipektin for the technicians who visitedIndia. However, the Income-tax Officer did not accept the above contention of the assessee. He held that the amount in question represented income by way of fees for technical services payable by the assessee in terms of section 9(1)(vi) and to which accordingly section 115A was attracted. He accordingly held that the assessee had to deduct tax at 40% amounting to Rs. 1,53,537 on 78,500 Sw. Fr. (Rs. 3,83,863). 3. The assessee the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the department was entitled to agitate at any time and particularly as no investigation into facts was necessitated for adjudicating them. On the merits of these grounds, he submitted that section 195(2) does not envisage a case where the assessee claims that no portion of the sum to be remitted is liable to tax at all and that it only envisages disputes about the appropriate proportion of the sum which would be chargeable to tax. In this connection, reliance was placed by him on the decision dated 21-4-1986 of Calcutta Bench ' B ' in the case of Graphite Vicarb India Ltd. v. ITO [1986] 18 ITD 58. On the other hand Shri C.S. Aggarwal, the learned counsel for the assessee strongly opposed the entertainment of these additional grounds of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary to adjudicate upon the additional grounds. However, since on both the sides, submissions had been made even on merits, we think that it will be proper to examine the grounds on merits also. Firstly, the right of appeal not only arises to the appellant from the exercise of the power by the impugned authority but also from the jurisdiction which the authority purported to exercise. In the present case the Income-tax Officer purported to pass an order under section 195(2). Section 248 expressly provides that any person having in accordance with the provisions of sections 195 and 200 deducted and paid tax in respect of any sum chargeable under this Act, other than interest, who denies his liability to make such deduction, may appeal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is clear from the collaboration agreement that there were two separate payments contemplated thereunder. The first payment was for Sw. Fr. 3,50,000 for technical know-how and the second payment was under Articles 3.3 4.5 of the said agreement which contemplated the securing by the assessee at its own cost from Unipektin, deputation of Unipektin experts in India for process check-up of the plant erection, supervision of the starting up and supervision of the test runs. It is for this later category that the assessee intended to remit 78,500 Sw. Fr. The question of the remittance of Sw. Fr. 3,50,000 is not in dispute before us. So far as the remittance of 78,500 Sw. Fr. is concerned, Unipektin had written to the assessee on 10-12-1981 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial Development, Ministry of Industry, Govt. of India, in its letter dated28-7-1983. We are of the view that since the amount in question represented the reimbursement to Unipektin of the wages etc. of the foreign technicians, it was in the nature of payment of salary. Therefore, such a payment fell within the excepted category of income of the recipient chargeable under the head " Salaries " within the meaning of Explanation 2 to section 9(1)(vii). For the same reason, the foreign technicians were entitled to claim deduction in respect thereof under section 10(6)(vi). In the case of CIT v. Atlas Steel Co. Ltd. [1987] 164 ITR 401, it was held by the Hon'ble Calcutta High Court that if the part of the agreement relating to know-how is disti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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