COMMISSIONER OF INCOME-TAX Vs. COMBUSTION ENGINEERING INC

JUDGEMENT

(1.) THE Revenue filed this appeal questioning the correctness of the order passed by the Tribunal in I. T. A. No. 573/mds/1999 dismissing the appeal filed by the Revenue on the ground that COD approval has not been obtained, however, giving liberty to the Department to recall the order of the Tribunal after obtaining the COD approval by framing the following question of law:

(2.) THE material facts, which are necessary for resolution of the questions of law, are as follows:-The assessee Combustion Engineering Inc. ,u. S. A. , entered into an agreement with Bharat Heavy Electricals Limited, Trichy for manufacture of high pressure boilers required for thermal power generation. M/s. Bharat Heavy Electricals Limited, a public sector undertaking representing the assessee foreign company being their collaborators filed return for the assessment year 1984-85 in the representative capacity on 30. 06. 1984 admitting an income of Rs. 2,09,27,650/ -. During the previous year, BHEL paid the assessee M/s. Combustion Engineering Incorporation (USA) Rs. 1,24,29,628/- as payment for supply of technical documentation/know-how and other services rendered in USA. The assessing officer taxed the above receipts at 50% and 70% for the assessment year 1983-84 and 1984-85 respectively.

(3.) AGGRIEVED by the same, appeals were filed by the assessee before the Commissioner of Income-tax (Appeals) who allowed the appeals. The Department filed appeal before the Income Tax Tribunal and the Tribunal upheld the income of Rs. 61,01,250/- being the fees for special engineering services to BHEL Trichy in pursuance of an agreement approved by the Government of India on 27. 9. 1983 though the agreement was dated 16. 8. 1982. The Tribunal in its earlier order had held that the income was correctly returned by the assessee for the assessment year 1984-85. However, the assessee's agent BHEL, Trichy by letter dated 5. 8. 1994 had stated that the sum of Rs. 6,01,250/- was not included in the income of the assessee returned for the assessment year 1984-85. Thus the assessing officer had reason to believe that there was failure to admit the income chargeable to tax and such income had escaped assessment for the assessment year 1984-85. Hence, notice under Section 148 was served on the assessee after obtaining approval from the Commissioner of Income Tax. Pursuant to the notice issued, a return of income was filed on 27. 4. 1995 by the assessee. Thereafter notice under Section 143 (2)was served and the assessment was finalised including the said amount. Thereafter an order under Section 154 dated 10. 09. 1998 was passed stating that as sum of Rs. 16,05,693/- was the balance tax payable, but due to typographical mistake it was indicated as 'balance refundable'. Aggrieved by the same, the assessee filed appeal before the CIT Appeals, who allowed the appeal. The Department filed appeal before the Tribunal, which dismissed the appeal on the ground that COD clearance was not obtained, without going into the merits of the case. The correctness of the said order is put in issue before this Court in this appeal by formulating the questions of law extracted above.