Commissioner of Income Tax vs Fact Ltd.

K.S. Paripoornan, J.—At the instance of the Revenue, the following two questions of law have been referred by the Income Tax Appellate Tribunal, Cochin Bench, for the decision of this court :

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in cancelling the assessment ?

Whether, on the facts and in the circumstances of the case, the regular assessment for the assessment year 1970-71 is invalid under law?"

The respondent is a public limited company. It acted as the agent of Messrs. Imperial Chemical Industries Limited of U.K. We are concerned with the assessment year 1970-71. The respondent/assessee paid Rs. 14,65,810 to the non-resident company in the year ending March 31, 1970, for the technical services rendered. The Income Tax Officer treated the assessee as the agent of the non-resident company and held that 75 per cent. of the said sum should be treated as the income of the nonresident company arising in India. He further held that the assessee has agreed to make the payment "net". The income accruing to the non-resident company was computed on "tax on tax basis". He determined the total income at Rs. 21,98,716. In appeal, the Appellate Assistant Commissioner cancelled the order of assessment based on its earlier order. In second appeal by the Revenue, the Income Tax Appellate Tribunal followed its earlier orders in I.T.A. Nos. 226 to 231/(Coch) of 1976-77 and I.T.A. No. 826/(Coch) of 1976-77 dated February 28, 1978, -for the assessment year 1969-70 and held that no assessment could be made on the assessee treating it as the agent of the non-resident company. The order of the Appellate Assistant Commissioner was affirmed. It is, thereafter, at the instance of the Revenue that the two questions of law formulated hereinabove have been referred for the decision of this court.

We heard counsel. The earlier orders of the Appellate Tribunal, on the basis of which the Appellate Tribunal passed its present order, namely, I.T.A. Nos. 226 to 231/(Coch) of 1976-77 came up before this court in I.T.A. Nos. 59 to 64 of 1981 Commissioner of Income Tax Vs. Fertilizers and Chemicals (Travancore) Ltd., ). A Bench of this court by judgment dated February 16, 1987, considered the matter at length and declined to answer the questions referred to this court, which centred round the applicability or otherwise of Section 163 of the Income Tax Act, 1961. The aforesaid judgment is Commissioner of Income Tax Vs. Fertilizers and Chemicals (Travancore) Ltd., . This court held that the Tribunal did not consider the question whether the assessee had any business connection with the non-resident so as to treat him as an agent of the non-resident u/s 163 of the Income Tax Act. It was further held that, only on deciding this issue, the question whether the orders passed by the Income Tax Officer u/s 163 and the assessments could be sustained will arise. The questions referred to this court were not answered, but the Income Tax Appellate Tribunal was directed to dispose of the appeal afresh. The above decision was followed in a subsequent decision of this court in Income Tax Reference No. 92 of 1982 between the same parties. The judgment is dated March 2, 1987.

It is agreed before us that the decision reported in Commissioner of Income Tax Vs. Fertilizers and Chemicals (Travancore) Ltd., and the unreported decision in Income Tax Reference No. 92 of 1982 between the same parties will govern the issue in this case as well.

Following the earlier Bench decisions of this court, we decline to answer the questions referred to this court by the Income Tax Appellate Tribunal in its statement of the case dated October 20, 1989. But, at the same time, we direct the Income Tax Appellate Tribunal to restore the appeal to file and decide the matter afresh for the assessment year 1970-71, bearing in mind the earlier decision on the subject in Commissioner of Income Tax Vs. Fertilizers and Chemicals (Travancore) Ltd., .

The reference is disposed of as above.

A copy of this judgment, under the seal of this court and the signature of the Registrar, shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.