Commissioner of Income Tax vs Basf Ag. West Germany

T.D. Sugla J.

This is an application u/s 256(2) of the Income Tax Act, 1961. The question sought to be raised are :

"(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the order passed by the Commissioner of Income Tax u/s 263 of the Income Tax Act ?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the receipt by way of service fees by the assessee from BASF (India) Ltd., constitute ''industrial or commercial profits'' and, therefore, not taxable in India under the provisions of the Double Taxation Avoidance Agreement between India and the Federal German Republic ?"

It is pertinent to note that the Tribunal had cancelled the order of the Commissioner of Income Tax passed u/s 263 of the Income Tax Act, 1961, in this case on two grounds, namely :

(i) Section 9(1)(i) of the Income Tax Act was not applicable in view of the Supreme Court decision in the case of Carborandum Co. v. CIT [1976] 108 ITR 335, and

(ii) The assessee had no permanent establishment in India and, therefore, the benefit under the article of agreement for avoidance of double taxation between India and the Federal Republic of Germany was available to the assessee.

However, the Department has raised only one question regarding the applicability of the provisions of the Double Taxation Avoidance Agreement. It is evident that even if this question is answered in favour of the Department the result of the appeal will not be altered. The question is thus academic. No useful purpose will be served in directing the Tribunal to state the case. Rule is, accordingly, discharged with no order as to costs.