COMMISSIONER OF INCOME TAX, WEST BENGAL vs. WESMAN ENGG. CO. (P.) LTD.

CIVIL APPEAL No. 1535/1978Supreme Court[1991] 1 S.C.R. 11724 January 1991Bench: 2 JudgesAuthor: N.M. KASLIWAL, K. RAMASWAMY OF9 pages
AI SummaryDismissed

What were the facts?

The assessee, Wesman Engg. Co. (P.) Ltd., a private limited company, entered into an agreement with foreign collaborators for technical know-how and royalty payments. The assessee applied to the Income Tax Officer (ITO) under Section 195(2) of the Income Tax Act, 1961, for a certificate to remit payments. The ITO directed the assessee to deduct tax at 65% on the sum to be remitted, holding that it was for technical know-how and use of trade name, and not covered by exemptions or double taxation avoidance agreements. The assessee appealed to the Appellate Assistant Commissioner (AAC), disputing the taxability of the entire sum for working drawings and the applicability of the double taxation avoidance agreement. The AAC rejected the double taxation avoidance plea but determined the taxable amount at 25% of the remittance, allowing 75% as expense. The Revenue appealed to the Appellate Tribunal, challenging the AAC's jurisdiction to determine the quantum and the allowance of expenses. The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross-objection. The High Court, on reference, answered in favour of the assessee. The Revenue appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that once an appeal has been preferred to the Appellate Assistant Commissioner (AAC) under Section 248 of the Income Tax Act, 1961, on the matter of the company's liability to deduct taxes, the appellate authority is well within its competence to pass an order on the quantum as well. The Court reasoned that Section 251(1)(c) grants the appellate authority full power to pass such orders in the appeal as it thinks fit. The right to appeal under Section 248 is clear and not restricted, allowing the AAC to fix the quantum or revise the proportion of the amount chargeable as determined by the Income Tax Officer. The language of Section 248 is wide enough to cover any order passed under Section 195, and the AAC is competent to pass an order regarding quantum once seized of the matter. The Court found no force in the contention that Section 248 only allows denial of liability and not determination of quantum. The appeal was dismissed.

What were the issues?

1. Whether an order passed by the Income Tax Officer under Section 195(2) of the Income Tax Act, 1961, is appealable to the Appellate Assistant Commissioner under Section 248 of the Act? (Question of law) 2. Whether the appellate authority has jurisdiction to determine the quantum of the sum chargeable under the Income Tax Act from which the assessee is liable to deduct tax under Section 195, when an appeal is filed under Section 248? Assessee's Contentions: The assessee argued that the entire sum towards the cost of working drawings exceeded the remuneration, making it not taxable. They also contended that the assessment was barred by the Double Taxation Avoidance Agreement. (As per the facts, the assessee's specific arguments on appeal to the AAC are mentioned, but their arguments before the Tribunal and Supreme Court are primarily focused on the jurisdiction of the appellate authority regarding quantum). Revenue's Contentions: The Revenue contended that the order passed by the Income Tax Officer under Section 195(2) was not appealable to the Appellate Assistant Commissioner under Section 248. They further argued that the appellate authority had no jurisdiction to deal with the quantum of the sum chargeable under the Income Tax Act from which the assessee was liable to deduct tax under Section 195. The Revenue also argued that the AAC was wrong in allowing expenses at 75% of the remittance.

Which sections of the Income-tax Act were involved?

Section 195,Section 248,Section 251(1)(c)

AI-generated summary — verify with the full judgment below

COMMISSIONER OF INCOME TAX, WEST BENGAL A v. WESMAN ENGG. CO. (P.) LTD. JANUARY 24, 1991 [N.M. KASLIWAL AND K. RAMASWAMY, JJ.] B/ Income Tax Act, 1961: Sections 195, 248, 25 l(l)(c): Juri ictio'n of the appellate authority-Whether extends to determining quantum of sum chargeable.

Section 195(2): Order passed by assessing authority-Whether C 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 D 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- E tion apply to the case, and directed the assessee to deduct tax@ 65% op the sum to be remitted. · The assessee did not

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 195

All 2,796 judgments and leading authorities on Section 195 →

Recent GST High Court judgments

Search GST case law →