FINORAM SHEETS LTD. Vs. ITO

JUDGEMENT

(1.) THE three captioned appeals preferred by the assessee raise common issues and therefore, we find it expedient to dispose of the same by way of a common order for the sake of convenience and brevity.

(2.) THE appeals arise out of a common order of the commissioner of the Income Tax (Appeals) -I, Pune dated 20.03.1998 which, in turn arose out of the respective orders of the Assessing Officer passed under section 195(2) of the Income Tax Act, 1961 (in short "the Act") holding that the assessee was required to deduct tax at source in respect of the impugned remittances to its foreign collaborator. Primarily, assessee denies its liability to deduct and pay income tax at source under section 195(1) of the Act in respect of the impugned amounts paid to its foreign collaborator. Briefly put, the relevant facts are that the assessee entered into a Technology License agreement with Paltough Ltd. Israel (in short 'Paltough') vide agreement dated 30.06.1994. The agreement envisaged transfer of technology to manufacture extruded PVC sheets. Paltough is stated to own and possess proprietary technical know -how and technical expertise with regard to the manufacturing of thermoplastic rigid sheets including PVC, Polycarbonate and acrylic sheets. It is provided in the agreement, a copy of which has been placed at pages 9 to 35 of the Paper Book, that Paltough agreed to transfer, disclose, supply technical data, information, specifications, plans and drawings relating to the manufacture, and design and production of the products and other know -how mentioned in the agreement. As per terms of the agreement, assessee was required to pay first installment of US$ 150,000 as consideration which comprised of US $ 125,000 towards Design engineering services, and US $25000 towards commercial services. Accordingly, it made an application dated 09.05.1995 to the Income Tax Officer Ward 1(5) Nigdi, for issuance of a certificate that no tax was liable to be deducted at source in respect of such remittance under section 195(2) of the Act. The Income Tax Officer, however, vide his order dated 11.08.1995 held that impugned sum was an income accrued in India in the hands of Paltough and therefore , the same was liable for deduction of tax at source at the time of its remittance by the assessee. This aspect of the matter is in dispute in ITA No. 350/PN/98.

(3.) IN the third appeal, i.e. ITA No. 351/PN/98, the only issue is with regard to payment of third installment of US $ 100,000 towards commercial services, on which also the stand of the Assessing Officer was similar to his earlier stand.