COMMISSIONER OF INCOME TAX Vs. HEG LTD

JUDGEMENT

(1.) IN this appeal preferred under Section 260A of the IT Act, 1961 (hereinafter referred to as 'the Act'), by the Revenue a short but interesting question arises for adjudication.

(2.) THE facts which are essential to be adumbrated for the disposal of the present appeal are that the assessee-company filed its return for the asst. yr. 1993-94 on 30th Dec., 1993, declaring total loss of Rs. 70,83,568. Upon processing, adjustments in respect of certain claims were made and loss was determined at Rs. 17,48,715 and accordingly, an intimation under Section 143(1)(a) of the Act was served on the assessee-company on 31st March, 1996. THE AO also directed to deduct TDS at the prescribed rate on the remittance of US $ 25,000 to M/s PCI Kingwood, USA, as the payment was made for purchase of data of confidential nature which was in the form of monthly compilation called "executive overview" containing data on carbon graphite electrodes industry in which the assessee is dealing and hence it was a payment for royalty. THE payment was also for passing information of confidential nature on telephone as evincible from the FAX message dt. 29th Jan., 1996 and, therefore, the transaction involved imparting of information concerning technical, industrial, commercial or scientific knowledge, experience or skill and the relevant transaction is the payment of royalty by the assessee to the firm at USA, according to Clause (iv) of Expln. 2 to Clause (vi) of Sub-section (1) of Section 9 of the IT Act and Article 12(3) of Avoidance of Double Taxation Treaty with the United States of America. THE AO held that according to Article 12(2) of Avoidance of Double Taxation Treaty, the amount was taxable in India and according to Section 9(1) the income was deemed to accrue or arise to M/s PCI in India.

(3.) THIS Court at the time of admission of the appeal had framed the following substantial question of law :