LexCOMMISSIONER OF INCOME TAX, WEST BENGAL versus WESMAN ENGG. CO. (P.) LTD.
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COMMISSIONER OF INCOME TAX, WEST BENGAL
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v.
WESMAN ENGG. CO. (P.) LTD.
JANUARY 24, 1991
[N.M. KASLIWAL AND K. RAMASWAMY, JJ.]
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Income Tax Act, 1961: Sections 195, 248, 25 l(l)(c): Jurisdictio'n
of the appellate authority-Whether extends to determining quantum of
sum chargeable.
Section 195(2): Order passed by assessing authority-Whether
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appealable under section 248.
The respondent-assessee, a private limited company and a
licensee, under an agreement was required to pay to its foreign col-
laborators (licensors) certain amounts towards cost of working draw-
ings and royalty. It applied to the Income Tax Officer to grant the
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necessary certificate to enable it to approach the Reserve Bank of India
for remittance to its foreign collaborators. The Income Tax Officer held
that the remittance represented payment for supply of technical know-
how and for use of the trade name and manufacturing right of the
licensor company and that the said amount neither fell within the
exempted category nor did the agreement for avoidance of double taxa-
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tion apply to the case, and directed the assessee to deduct tax@ 65% op
the sum to be remitted.
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The assessee did not dispute the assessability of the royalty, but
challenged in appeal, that since the whole of the sum towards the cost of
working drawings exceeded the remuneration, the same was not tax-
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able, and that the assessment was barred by the Double Taxation Avoi-
dance Agreement. The Appellate Asstt. Commissioner rejected the
Double Taxation Avoidance plea, but determined the cost of the work-
ing drawings at 75% and the net profit chargeable at 25% of the amount
to be remitted to the non-resident company.
The Revenue appealed before the Appellate Tribunal challenging
the jurisdiction of the appellate authority under s. 248 to determine the
quantum of income, and that the Appellate Asstt. Commissioner was
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wrong in allowing expense~ @7S% of the remittance. The assessee rded
cross-objection. Holding that the Appellate Asstt. Commissioner could
pa55 an order re1;arding the quantum, that the amount fixed by him
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118
SUPREME COURT REPORTS
[1991) 1 S.C.R.
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could not be said to be unreasonable, and that the amount brought to
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charge by the Income Tax Officer was not exempt under the Double
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Taxatio11 Avoidance Agreement, the Tribunal dismissed the Depart-
ment's appeal and partly allowed the assessee's cross-objection.
At the instance of the Revenue, the Tribunal referred the question
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to the High Court which was answered in favour of the assessee.
In the appeal by certificate to this Court, it was contended that:
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the order passed by the lhcome Tax Officer under s. 195(2) was not
appealable to the Appellate Asstt. Commissioner under s. 248, and that the
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appellate authority had no jurisdiction to deal with the quantum of the
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sum chargeable under the provision of the Income Tax Act from which
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the assessee was liable to deduct tax under s. 195.
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Dismissing the appeal, this Court,
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HELD: 1.1 Once an appeal has been preferred to the Appellate
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Asstt. Commissioner under s. 248 of the Income Tax Act, 1961, on the
matter of liability of the company to deduc~ taxes, the appellate autho-
rity was well within its competance to pass an order on quantum also. [ 124D]
1.2 Section 251(1)(c) gives full power to the appellate authority to
pass such orders in the appeal as it thinks fit. [125A]
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1.3 The right to appeal under s. 248 of the Income Tax Act is
clear and it cannot be said that such a right is restricted and the Appel-
late Asstt. Commissioner was not competent to fix the quantum or to
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revise the p~oportion of the amount chargeable under the provisions of
the Act as determined by the Income Tax Officer. [124F)
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2. The language of s. 248 of the Income Tax Act, 1961 is wide enough
to cover any order passed under s. 195. The Appellate Asstt. Commis-
sioner was also competent to pass an order ~tl:t regard to quantum
when once he is seized of the matter. {123F; 124D]
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3. Under s. 248 a person having deducted and paid tax under
s. 195 inay appeal to the Appellate Asstt. Commissioner denying his
liability to make such deduction and for a declaration that he is not
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liable to make such deduction. '(124E]
Meteor Satellite Ltd. v. Income Tax Officer Companies Circle IX,
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Ahmedabad, [1980] 121ITR311, held inapplicable.
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\.,,).
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