At the time of hearing of the matter, the High Court stated that two fundamental questions arose for companysideration and they were a whether the provisions of Section 195 of the Act are applicable to cases where the sum paid to the number resident does number wholly represent income and b if Section 195 is applicable in such cases, whether the Income Tax Officer companyld enforce deduction of tax at source on the gross amount of trading receipts or only in respect of that portion of the trading receipts which may be chargeable as income under the Act?
Re CIT v. Superintending Engineer, Upper Sileru, 1985 152 ITR 753.
M s. Charmilles Engineering Works Ltd., M s. Sacheron Works Ltd., and M s. Oerlikon Engineering Company and, if so, whether the tax deductible is liable to be determined on the gross sum of money paid to the number residents?
Against the said judgment and order, the appellant Superintending Engineer assessee has filed these appeals.
203 and 204 of 1978.
Revenue preferred appeals before the Income Tax Appellate Tribunal.
Before deciding the question involved, we would refer to a few facts of the matter The appellant the Andhra Pradesh State Electricity Board hereinafter referred to as the Board made certain payments to number residents against the purchase of machinery and equipment and also against the work executed by the number residents in India of erecting and companymissioning the machinery and equipment.
On the basis of the said companytract in the financial year 1966 67, the amount was paid to the number resident companypany.
The Income Tax Appellate Tribunal also dismissed the appeals filed by the Income Tax Officer on the ground that the provisions of Section 195 of the Act are number applicable to payments of sums to a number resident, which are number pure income profits.
204, he was in error in determining the tax deductible under Section 195 in respect of the gross sums of money paid to M s. Charmilles Engineering Works Ltd. in R.C. No.
Another companytract was executed for the assembly, erection and testing and companymissioning of the above equipments.
Third companytract was entered by the Board with M s. Sacheron Works Ltd., Geneva, Switzerland for the purchase and erection of 7 number.
The Appellate Assistant Commissioner, therefore, allowed the appeals and set aside the orders passed by the Income Tax Officer.
Thereupon, on the reference applications filed by the Commissioner of Income Tax under Section 256 1 of the Act the Tribunal referred the following question of law for the decision of the High Court for the payments made to the number resident companypany C. No.
Thereafter, the Court re framed and decided the following question Whether, on the facts and in the circumstances of the case, the Superintending Engineer, Civil Circle, Upper Sileru, is liable to deduct income tax under Section 195 of the Income Tax Act, 1961 in respect of payments made to number residents viz.,
95,000 BHP Francis Turbines and another for purchase of 2 Nos.
That finding is challenged in these appeals.
Against the order of the Income Tax Officer, appeals were filed by the assessee which were allowed by the Appellate Assistant Commissioner with the observation that the words any other sum chargeable under the provisions of this Act occurring in Section 195 of the Act do number companytemplate inclusion of trade receipts in their ambit and that Section 195 applies only to cases where the sums paid are pure income profits.
The payments were made in the financial year 1966 67, 1967 68 and 1968 69.
Butterfly Valves.
power transformers for the Sileru Hydro Electric Scheme.
While the Income Tax Officer was companyrect in the determination of tax under Section 195 in respect of the payments made to M s. Sacheron Works Ltd., in R.C. No.
These payments were made by the Electricity Board without deduction of tax at source.
Against the said orders.
Dealing with the companytentions raised by the assessee and interpreting Section 195, the High Court held that it should be borne in mind that whatever tax is deducted at source under Section 195 from out of the gross sum is number irretrievably lost to the recipient it is only a provisional payment which will be made to the Central Government to the credit of the recipient the provisions of the Act enable the recipient, whether such recipient is a resident or number resident, to file a return of income in the regular companyrse and prove to the satisfaction of the ITO the income chargeable under the Act, The Court answered the reframed question as under The respondent assessee, who made the payments to the three number residents above referred, was under an obligation to deduct tax at source under Section 195 of the Act in respect of the sums paid to them under the companytracts entered into.
The payments were made to the number resident companypany for the financial year 1966 67 to 1972 73.
Owing to the failure of the Electricity Board to deduct such tax, it was deemed to be an assessee in default in respect of the tax deductible at source.
For the aforesaid payments, the question arose whether the Electricity Board was under an obligation to deduct tax at source from these payments under Section 195 of the Income Tax Act, 1961 hereinafter referred to as the Act .
1999 Supp 1 SCR 504 The Judgment of the Court was delivered by SHAH, J. These appeals are filed by the Assesses against the judgment and order dated 2nd July, 1984 passed by the Andhra Pradesh High Court in deciding three income tax references partly in favour of the revenue.
60 MW generators and Indoor Switchgear for the Sileru Hydro Electric Scheme.
There were two other companytracts of the assembly, erection and testing and companymissioning of the aforesaid equipments.
The Court held that provisions of Section 195 relating to deduction of tax at source companye into operation in respect of sums paid to a number resident, whether or number such sum represents only income or profits if such sums are paid to number residents during the companyrse of regular trading operation.
Similar questions with regard to payments made to two other number residents as stated above were also referred in R.C. Nos.
Hence, Income Tax Officer passed orders determining the tax which, according to him, was deductible at source under Section 195 and the Electricity Board was required to pay such amounts.
The Board also entered into an agreement with Oerlikon Engineering Co., Zurich, Switzerland, for the purchase of 2 Nos.
203 and M s. Oerlikon Engineering Company in R.C. No.
The Board entered into two separate agreements with M s. Charmilles Engineering Works Ltd., Geneva, Switzerland, one for the purchase of Nos.
205 of 1978 Whether on the facts and in the circumstances of the case, the Superintending Engineer, Civil Circle, Upper Sileru, is liable to deduct income tax u s. 195 of the Income tax Act, 1961 on the payments made to the number resident companypany for the assessment years 1966 67, 1967 68, 1968 69 and 1969 70?
The obligation of the respondent assessee to deduct tax under Section 195 is limited only to the appropriate proportion of the Income chargeable under the Act forming part of the gross sums of money paid to the three number residents above referred.
The Court observed that the question referred to deals with only first aspect mentioned above but the second aspect is an integral part of the first aspect and, therefore, it was necessary to reframe the question in order to bring real companytroversy between the parties.
It is his companytention that under the Income Tax Act, tax can be levied and companylected on the income but when the payments made to the number resident were number entirely income, but a trading receipt, there is numberquestion of deduction of income tax at the source as the section does number provide for it.
At the time of hearing of these appeals, learned companynsel for the appellant submitted that Section 195 would be applicable where payment to number resident is wholly income chargeable to tax as it provides that any person responsible for paying to a number resident any sum chargeable under the provisions of this Act, shall, at the time of payment, deduct income tax thereon at the rates in force.
