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TMI Blog1994 (6) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Tribunal in ITA No. 7078/Del/88 in assessee's own case for asst. yr. 1984-85, order dt.7th Dec., 1992, before us in support of the claim that the issue is covered in favour of the assessee by the said decision of the Tribunal. We have gone through the decision of the Tribunal. The Hon'ble Accountant Member and Hon'ble Judicial Member have given separate reasons for arriving at the same conclusion that the supervision charges are not assessable as fee for technical services and the same are to be assessed as commercial profits. We, respectfully following the aforementioned decision of the Tribunal, hold so. The alternative claim made by the assessee that the amount received be treated as reimbursement of expenses has not been pressed before us. 3. The second ground of appeal is that the income may be computed on completed contract basis. The assessee had completed the execution of the contract in 15 months, i.e., from22nd Jan., 1985to21st April, 1986. Relying on the Delhi High Court decision in Tirath Ram Ahuja (P) Ltd. vs. CIT (1976) 103 ITR 15 (Del), the Assessing Officer held that the income has to be computed on year to year basis. He took into account the recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of this order. We do not find any infirmity in the directions of the CIT(A) as the income from the contract concluded in the subsequent assessment year was none and the same could be assessed on year to year basis by apportionment on pro rata basis. This ground of appeal is accordingly dismissed. 8. The first ground of appeal is relating to the directions of the first appellate authority to exclude the profit on the sale of machinery out of the assessable profit of the assessee. As pointed out earlier, assessee had entered into an agreement with Maruti Udyog Ltd. on 28th of June, 1985, for setting up paint line and allied equipment at their factory located at Palam,Gurgaon Road, Gurgaon. By virtue of this agreement, assessee supplied machinery to MUL inJapanon FOB basis. 100% payment towards the cost of the machinery was paid inJapanin foreign currency. Apart from supply of machinery, the assessee-company undertook the design, engineering, supply, installation commissioning and trial run of the paint line equipment inIndia. The income derived in India in connection with the execution of the contract for which the permanent establishment was set up in India has been held to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1977) 2 SCC 250. in support of the contention that setting up of the paint line was the works contract and could not be considered as a sale of goods. As such, the profit on the sale of machinery could not be segregated. Mrs. Sinha also relied upon the decision in the case of Sacks vs. Tilley (1915) 32 TLR 148. In support of the contention that mere supply of the property and payment was not sufficient for the sale of the machinery, the acceptance by the assessee was necessary which could be done only after successful installation. Our attention was also invited to the decision in the case of Philips Head Sons Ltd. vs. Shawfronts Ltd. (1971) Lloyd's Rep 140. In support of the contention that installation of the machinery being one of the important parts of the contract, the property could not pass till it had been installed. 10. It was further contended that the contract was to be read as a whole and when that is done, it would be clear accordingly to her that supply of the machinery was part and parcel of the contract for erection of the paint line plant. The profits attributable to the supply of the machinery could not, thus, be excluded from the taxable income of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract executed on5th March, 1983, held the income attributable to the activities inIndiawas assessable as income from business. The dispute for this year is relating to the profits attributable to the supply of the machinery FOB (Japan). We are not in doubt that assessee had agreed to execute the complete project of setting up of the paint line and allied equipment plant of MUL inIndia. It is also not in dispute that the supply of machinery, its erection, installation and supervision was agreed upon by the assessee and MUL. The dispute between the assessee and the Revenue is as to whether the profits on account of supply of machinery inJapancould be attributed to the permanent establishment of a non-resident company inIndia. A perusal of the agreement between the assessee and the MUL clearly establishes the fact that supply of machinery had been agreed by the assessee-company at Japan FOB for which 100% payment was to be made by MUL in foreign currency before its shipment. We would like to refer the relevant clauses of the agreement which clearly establish that the supply of machinery by the assessee-company inJapanwas to be segregated for the purposes of ascertaining the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) Manufacture supply 49,47,066.00 (b) Erection and commissioning of Indian content 88,24,667.00 . 13,771,733 (c) Supervision charges for Japanese supervisor towards boarding, lodging, transport, telex, telephone, etc., to be paid by MUL on actuals except packet allowance which will be given on lump sum basis in advance 11,00,000,00 Total 148,71,733.00 B. Letter of Intent No. MUL/PE/52/2044, dt.22nd Jan., 1985 . Japanese content: . Equipment Yen Manufacture supply of equipment (FOBJapan) 165,336,250 Indian content: Rs. (a) Manufacture supply of equipment 8,75,511.00 (b) Erection commissioning of Indian content 9,62,000.00 Total 18,37,511.00 13. Art. 11 provides for the terms of payment in respect of design and engineering, 30% payment is provided to be made within four weeks of the signing of the contract. 65% to be paid after submission of all designs and engineering documents. 5% is withheld till expiry of two months after commissioning of the paint line. Art. 11(ii) pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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