COMMISSIONER OF INCOME TAX vs F. A. C. T. LTD.

K. S. PARIPOORNAN, J. :

At the instance of the Revenue the Income Tax Appellate Tribunal (in short the Tribunal) has referred the following two questions of law for the decision of this Court :

"1. Whether, on the facts and in the circumstances of the case, the reassessment under s. 147 of the IT Act is valid ?

Whether, on the facts and in the circumstances of the case, the Tribunal is justified in confirming the order of the CIT(A) and holding that there was no business activity of the foreign company in India in respect of which the income could be said to have accrued or earned in India ?"

The respondent is a public limited company. It entered into a collaboration agreement with M/s. Davy Power Gas Inc., U.S.A. for designing and constructing certain chemical plants. For this purpose the foreign collaborator was to receive an agreed lump sum for technical know how or fee. Apart from this, for deputing technicians of India, the company had to pay remuneration to foreign technicians. A portion of this remuneration was payable in India in rupees. The question is whether income arose or accrued to the non-resident. The Tribunal considered the matter for the asst. yrs. 1972-73, 1973-74, and 1974-75, which came up before this Court in IT Ref. Nos. 446 to 451 of 1985. The relevant Tribunal appeals are ITA Nos. 243 to 248 (Coch)/1977-78. The Tribunal decided the matter in favour of the assessee. But in the references, this Court held that the Tribunal had failed to pose the proper question from a proper angle or perspective. This Court declined to answer the question referred by the Tribunal and directed the Tribunal to decide the appeals afresh.

Two references relate to the asst. yrs. 1976-77 and 1977-78. In the appeals the Tribunal has relied on its earlier decision in ITA Nos. 243 to 248 (Coch)/1977-78 and held that there was no business activity of the foreign company in India in respect of which the income could be said to have accrued or earned in India. In this view, the assessee was held not liable to file any return in the representative capacity. Counsel for the Revenue submitted that the earlier decision, relied on by the Tribunal in these two decisions has not been accepted by this Court in the decision reported in Commissioner of Income Tax Vs. Fertilisers and Chemicals Travancore Ltd., and so the very foundation on which the Tribunal rendered the decision in these two cases has become non est. We are of the view that in so far as the earlier decision relied on by the Tribunal, rendered in ITA Nos. 243 to 248 (Coch)/1977-78, has been set aside or not accepted by this Court in IT Ref., Nos. 446 to 451 of 1985, the appellate order passed by the Tribunal in the present cases cannot be upheld. We decline to answer the questions referred to this Court by the Tribunal, but, at the same time, direct the Tribunal to restore the appeals to file and dispose of the same in accordance with law and the decision of this Court in Fertilisers and Chemicals Travancore Ltd.s case (supra).

The references are disposed of as above.