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TMI Blog1992 (6) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices of the abovementioned foreign technicians. While granting the permission by letter dt.26th Sept., 1987the Reserve Bank ofIndiamade it clear that the grant of approval was not to be construed as exemption from payment of income-tax. It was described as expatriate's passage charges. Sec. 10(6A) of the IT Act provided that in the case of a foreign company deriving income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after the 31st day of March, 1976 and approved by the Central Government, the tax payable on such income is determined by s. 115A(i)(ii) of the IT Act at 30% i.e. s. 115A r/w s. 10(6A) determines the rate of tax payable on the royalties or fees for technical services received by a foreign company from the Government of India or an Indian concern under an agreement approved by the Government of India at 30%. The fees payable in the assessee's case to the foreign technicians was considered by it as fees for technical services and on that assumption tax calculated at 30% on 8500 US Dollars was paid on 18th Jan., 1988 vide chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taken as income of the foreign company M/s Rambaudi Industrale and that the gross amount of income after grossing up would work out to rupee equivalent to 26,772 US Dollars and the tax payable thereon at 65% would work out to rupee equivalent to 18,272 US Dollars and if that amount was deposited with the Government, the no objection certificate would be issued. By this order the contention of the assessee that to these payments the provisions of s. 10(6A) would apply was rejected. 2. It may be mentioned here that under s. 195 any person responsible for paying to a non-resident, any interest on securities or any other sum chargeable under the provisions of the IT Act not being salaries shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or a draft or by any other mode, deduct income-tax thereon at the rates in force. Sub-s. (2) of s. 195 provided that where the person responsible for paying any such sum to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Assessing Officer to determine by genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be incurred or was incurred out of 8500 US Dollars. Now peculiarly enough the controversy between the assessee and the Department was reduced to whether the fee of 8500 US Dollars for the purpose of levy of tax at 65% should be taken as gross income or any expenditure should be allowed therefrom and all the other controversies referred to earlier were dissolved. We have mentioned in great detail about this controversy only to appreciate the background in which the claim of the assessee was made. 4. Against this order under s. 154 an appeal was filed before the CIT(A), however, raising a ground that the Dy. CIT(Asst.) had erred in holding that the payment in this case was not in the nature of fee for technical services and that it should be taxable under the head 'other income'. The CIT(A) rejected this ground by observing: "I have carefully considered the matter. The main issue raised by the learned counsel is as to whether the remittance made by the foreign party is of the nature of "Fee for technical services" or "other income". This issue, to my mind, is clearly beyond the scope and ambit of "mistake apparent from record". Sec. 154 has a limited jurisdiction and can be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive was that even when an opportunity was given to the assessee to show the extent of expenditure incurred, or could be incurred and when that opportunity was not availed the assessee cannot lay the blame at the door of the Department, to which the reply of the learned counsel for the assessee was that no opportunity was ever given and that the assessee came to know about this aspect of the matter only when it received the order passed under s. 195. There was also some contest as to whether the tax was paid or not but finally it was resolved in favour of the assessee when it was shown that there was evidence that the tax was deducted at 30% and the challan was enclosed even along with the application made before the Dy. Commissioner (Asst.) for the issue of a no objection certificate. Another objection that arose was whether when the assessee agreed to pay the tax at 30%, could it be said that the assessee was denying its liability in toto, which appeared to be the purport of s. 195. But this point was overcome by placing reliance upon a decision of the Supreme Court in the case of CIT vs. Wesman Engg. Co. P. Ltd. (1991) 92 CTR (SC) 62 : (1991) 188 ITR 327 (SC) where the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Act, before making any deduction under this Chapter." Thus we have definitions for the meaning of the expressions "total income" and "gross total income" both of them have to be computed in the manner laid down in the Act according to the provisions made therefor. Sec. 2(37A) provided the definition of the rate of tax for the purpose of deduction under s. 195 as the rates or rate of income-tax specified in s. 115A or the rate or the rates of income-tax specified in this behalf in the Finance Act of the relevant year, whichever is applicable. Thus we have the statutory injunction to arrive at the total income, which is to be computed in the manner laid down in the IT Act and the definition of the rate or rates of tax for the purpose of deduction under s. 195. When s. 195 provided that the rate or rates of income-tax specified shall be the rate specified in this behalf in the Finance Act of the relevant year, we have necessarily to go to the Finance Act to find out the rate of income-tax. In Paragraph E rates of income-tax applicable to domestic companies are provided. Part II of the Finance Act provided the rates of deduction of tax at source in certain cases and the opening p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortion of the income liable to tax is, therefore required to be determined by the ITO at the instance of the person responsible to pay the income chargeable to tax. This responsibility is statutorily cast upon the Assessing Officer and against his decision in order that it is in conformity with the law, an appeal is provided. This is a sort of presumptive assessment. Thus when s. 195(2) clearly provided for the determination of the sum on which tax has to be deducted, it cannot be said that the rate of tax is still applicable only on the gross income. Of course it is always a matter of proof and evidence as to what is the expenditure that is to be allowed from the gross income. That depends upon the nature of proof that the assessee adduces to determine the net income. The sub-section thus enables an assessee to make an application to determine the proportion of the income liable for the deduction of tax and casts a duty upon the Assessing Officer to determine by an order appropriate proportion of such sum so chargeable when the assessee applies for it. The gross income must be modified depending upon the proof produced by the assessee. If this is clear the question would then be a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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