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TMI Blog2011 (3) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... greement overrides the provisions of the Act, need not be gone into - Hence, the revenue has not been able to dispute the fact that there is no challenge to the finding that certificate issued to the assessee u/s 195(2) was never cancelled and in absence thereof, the assessee could not be treated as assessee in default. - I.T.R. No.162 of 1996 - - - Dated:- 9-3-2011 - MR. JUSTICE ADARSH KUMAR GOEL, MR. JUSTICE AJAY KUMAR MITTAL, JJ, Ms. Urvashi Dhugga, Sr. Standing Counsel for the applicant. Mr. Pankaj Jain, Advocate for the asessee. ADARSH KUMAR GOEL, J. 1. Income Tax Appellate Tribunal, Chandigarh has referred for opinion of this Court following questions of law, arising out of its order dated 21.2.1995 in I.T.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said payment attracting tax. According to the assessee, the said payment was by way of Dearness Allowance as per the said agreement and thus, was not taxable income of the recipient. Further stand of the assessee Company was that it had filed application under Section 195(2) of the Act and the requisite No Objection Certificate was granted permitting non deduction of tax at source. In the order of assessment, the Assessing Officer held that payment of Dearness Allowance was merely a device for avoidance of tax. In fact the said payment represented royalty or fee for technical services, on which, the recipient was liable to pay tax and the assessee was required to deduct tax at source. On appeal, the CIT(A) upheld the plea of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttance made by the assessee company to meet out of pocket expenses of the engineers was either royalty or fees for technical services. If at all the any surplus money was left with the Japanese Co. The revenue did not collect any information to come to the conclusion that the Japanese Co. did not retain part of the receipt and that surplus became the commercial profit of the Japanese Co. In the absence of any evidence on record, the revenue s plea regarding surplus in the hands of the Japanese Co. it is found to be without basis. Moreover, we have already seen that commercial profits could be treated to be income if the Japanese Co. had permanent establishment in India vide Article III(1) of the Govt. Agreement. In the light of the clear pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but no recourse was taken to cancel that certificate as required in subsection (4) of the said section. Instead action 201 of the Act was taken deeming the assessee to be a defaulter in respect of the tax. It is contended that the assessee could not be treated/deemed to be an assessee in default in respect of tax u/s 201(1) of the Act unless the certificate granted under sub-section (2) of section 195 was cancelled by the AO under sub-section (4) of that section. The Ld. Counsel has, therefore, vehemently agued that the order of the AO was invalid and unsustainable. We find force in the argument and the revenue has not been able to show as to why no action was taken u/s 155(4) of the Act before deeming the assessee to be an assessee in defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee points out that the Tribunal has recorded a clear finding that the certificate granted under Section 195(2) was never cancelled under Section 195(4), in absence of which the assessee was not required to deduct tax at source and could not be treated as assessee in default. On the said finding, no question of law has been claimed or referred. If the assessee was not required to deduct tax at source and could not be declared assessee in default, question whether the payment was in the nature of fee for technical services or in the nature of reimbursement for the expenses incurred or whether Double Taxation Avoidance Agreement overrides the provisions of the Act, need not be gone into. 5. Learned counsel for the revenue has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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