The Commissioner of Income-tax, West Bengal Vs. M/S. Wesman Engg. Co. (P.) Ltd. - Court Judgment

Excerpt:
direct taxation - deduction - sections 195, 248 and 251 of income-tax act, 1961 - whether appellate assistant commissioner (aac) had jurisdiction to deal with quantum of sum chargeable under provisions of act from which assessee was liable to deduct tax under section 195 - aac was competent to pass order on quantum when once he is seized of matter - under section 248 person having deducted and paid tax under section 195 may appeal to aac denying his liability to make such deduction and for declaration that he is not liable to make such deduction - section 251 (1) (c) gives full power to aac to pass such orders in appeal if necessary. - [k.n. wanchoo, c.j.,; g.k. mitter,; c.a. vaidialingam and; r.s. bachawat, jj.] in the state of madhya pradesh v. v. p. sharma, [1966] 3 s.c.r. 557 this court held that once a declaration under s. 6 of the land acquisition act 1894 was made the notification under s. 4(1) of the act was exhausted and there could be no successive notifications under s. 6 with respect to land in a locality specified in one notification under s. 4(1). relying on the above judgment the present writ petitions were filed in order to challenge successive notifications under s. 6 following a single notification under s. 4(1) in respect of land belonging to them. meanwhile in order to meet the situation created by the judgment in v. p. sharma's case the president of india promulgated the land acquisition (amendment and validation) ordinance (1 of 1967). the ordinance was later followed by the land acquisition (amendment and validation) act 1967. section 2 of this act purported to amend s. 5-a of the principal act by allowing the making of more than one report in respect of land which had been notified under s. 4(1). section 3 purported to amend s. 6 of the principal act by empowering different declarations to be made from time to time in respect of different parcels of land covered by the same notification under s. 4(1) irrespective of whether one report or different reports had been made under s. 5-a sub-s. (2). section 4 of the act purported to validate all acquisitions of land made or purporting to have been made under the principal act before the commencement of the ordinance namely january 10, 1967, notwithstanding that more than one declaration under s. 6 had been made in pursuance of the same notification under s. 4(1), and notwithstanding any judgment, decree or order of any court to the contrary. the amending act also laid down time limits for declarations under s. 6 of the principal act after the notification under s 4(1), had been issued in respect of notifications made after january 20. 1967 the time limit was three years; in respect of notification made before that date the time limit was to be two years after that date. provision was also made for payment of interest on compensation due to persons in respect of whose land declarations under s. 6 had been delayed beyond a specified period; no interest was however, to be paid to those to whom compensation had already been paid. the petitioners by leave of court amended their petitions to attack the validity of the. aforesaid validating act on the following main grounds : (1) by seeking to validate past transactions of a kind which had been declared invalid by this court without retrospectively changing the substantive law under which the past transactions had been effected the legislature was encroaching over the domain of the judicial power vested by the constitution in the judiciary exclusively; (ii) the validating act did not l4sup. c.i.1684 revive the notification under s. 4 which had become exhausted after the first declaration under s. 6 and no acquisition following thereafter could be made without a fresh notification under s. 4; (iii) the validating act violated art. 31(2) of the constitution inasmuch as it purported to authorise acquisitions without fresh notifications under s. 4 thereby allowing compensation to be paid on the basis of the said . notification under s. 4 without allowing for increase in the value of land thereafter; (iv) the validating act violated art. 14 of the constitution in various ways. held: per wanchoo c.j., bachawat & mitter, jj.- (i) the american doctrine of well defined separation of legislative and judicial powers has no application to india and it cannot be said that an indian statute which seeks to validate invalid actions' is bad if the invalidity has already been pronounced upon by a court of law. a.k. gopalan v. state, [1950] s.c.r. 88, referred to. (ii) the absence of a provision in the amending act to give retrospective operation to s. 3 of the act does not affect the validity of s. 4. it was open to parliament to adopt either course e.g. (a) to provide expressly for the retrospective operation of s. 3, or, (b) to lay down that no acquisition purporting to have been made and no action taken before the land acquisition (amendment and validation) ordinance, 1967 shall be deemed to be invalid or even to have become invalid because, inter alia, of the making of more than one declaration under s. 6 of the land acquisition act, notwithstanding any judgment decree or order to the contrary. parliament was competent to validate such actions and transactions, its power in that behalf being only circumscribed by appropriate entries in the lists of the seventh schedule and the fundamental rights set-forth in part iii of the constitution. section 4 of the amending act being within the legislative competence of parliament, the provisions thereof are binding on all courts of law notwithstanding judgments, orders or decrees to the contrary rendered or made in the past. [67 c-f] case-law referred to. (iii) the impugned act does not violate art. 31(2). the act does not in express terms enact any law which directly affects compensation payable in respect of property acquired nor does it lay down any principles different from those which were already in the land acquisition act of 1894. after the amendment of the constitution in 1955 the question of compensation is not justiciable and it is enough if the law provides that a person expropriated must be given compensation for his property or lays down the principles therefor. [67 g-h] the legislature might well have provided in the act of 1894 that it would be open to the appropriate government after issuing a notification under s. 4 to consider objections raised under s. 5 with regard to the different localities from time to time enabling different reports to fie made under s. 5-a with consequent adjustments in s. 6 providing for declarations to be made as and when each report under s. 5a was considered. by the validation of action taken under s. 6 more than once in respect of a single notification under s. 4, the original scheme of acquisition is not altered. the public purpose behind the notification remains the same. it is not as if a different public purpose and acquisition of land for such purpose were being interploated by means of the validating act. only the shortcoming in the act as to want to provision to enable more than one decla- ration under s. 6 are being removed. [68 d-f] the date of valuation under the validation act is that of the issue of notification under s. 4(1), a principle which has held the field since 1923 legislative competence to acquire land under the provisions of the land acquisition act cannot be challenged because of constant appreciation of land values all over the country due to the prevalent abnormal inflation. there must be some time lag between the commencement and conclusion of land acquisition proceedings and in principle there is nothing wrong in accepting the said commencement as the date of valuation. sections 4 and 23 of the land acquisition act are protected by art. 31(5) (a) of the constitution. only ss. 5-a and 6 of the act have been amended. the amendment does not alter the principle of compensation fixed by the act nor contravene art. 31 of the constitution in any way. [69 g-70 b] it cannot be said of the validating act that it was fixing an arbitrary date for the valuation of the property which bore no relation to the acquisition proceedings. the population in indian cities especially in the capital is ever-increasing. the state has to plan the development of cities and it is not possible to take up all schemes in all directions at the same time. the resources of the state may not be sufficient to acquire all the area required by a scheme at the same time. of necessity the area under the proposed acquisition would have to be carved into blocks and the development of one or more blocks at a time could only be taken up in consonance with the resources available. even contiguous blocks could be developed gradually and systematically. in view of such factors it cannot be said that the principle of fixing compensation on the basis of the price prevailing on the date of the notification under s. 4(1) of the land acquisition act was not a relevant principle which satisfied the requirements of art. 31(2).[70 c-71 h] the state of west bengal v. mrs. bela banerjee, [1954] s.c.r. 558, state of madras v. d. namasivaya mudaliar, [1964] 6 s.c.r. 936 and, p.v. mudaliar v. deputy collector, [1965] 1 s.c.r. 614, considered. (iv) the validating act was not violative of art. 14. whenever an amending act is passed there is bound to be some difference in treatment between transactions which have already taken place and those which are to take place in the future. that by itself will not attract the operation of art. 14. again, even with respect to transactions which may be completed in the future, a reasonable classification will not be struck down. [72 c] jalan trading co. v. mazdoor union, [1967] 1 s.c.r. 15, relied on. it is not possible to say that because the legislature thought of improving upon the act of 1894 by prescribing certain limits of time as from 20th january 1967 the difference in treatment in cases covered by the notification before the said date and after the said date denies equal protection of laws because the transactions are not similarly circumstanced. some of the notifications issued under s. 4 must have been made even more than 3 years before 20th january, 1967 and such cases obviously could not be treated in the same manner 'as notifications issued after that date. art. 14 does not strike at differentiation caused by the enactment of a law between transactions governed thereby and those which are not so governed. [73 h-74 b] hatisingh manufacturing co., ltd. v. union of india, [1960] 3 s.c.r. 528. no grievance can be made because interest is denied to persons who have already taken the compensation. even here the classification is not unreasonable and cannot be said to be unrelated to the object of the act. [74 e-f] per shelat and vaidialingam, jj. (dissenting)- by validating the acquisition orders and declarations made on the basis of an exhausted notification under s. 4 the impugned act saves government from having to issue a fresh notification and having to pay compensation calculated on the market value as on the date of such fresh notification and depriving the expropriated owner of the benefit of the appreciated value in the meantime. the real object of s. 4 of the impugned act is thus to save the state from having to compensate for such appreciation under the device of validating all that is done under an exhausted s. 4 notification and thus in reality fixing an anterior date i.e. the date of such a dead s. 4 notification for fixing the compensation. the impugned act thus suffers from a two fold vice : (i) that it purports to validate acquisitions orders and notifications without resuscicating the notification under s. 4 by any legislative provision on the basis of which alone the validated acquisitions, orders and declarations can properly be sustained and (ii) that its provisions are in derogation of art. 31(2) as interpreted by this court by fixing compensation on the basis of value on the date of notifications under s. 4 which had become exhausted and for keeping them alive no legislative provision is to be found in the impugned act. it is therefore not possible to agree with the view that the purpose of s. 4 is to fill the lacuna pointed out in sharma's case nor with the view that it raises a question of adequacy of compensation. the section under the guise of validating the acquisitions, orders and notifications camouflages the real object of enabling acquisitions by paying compensation on the basis of values frozen by notifications under s 4 which by part acquisitions thereunder had lost their efficacy and therefore required the rest of the land to be notified afresh and paying compensation on the date of such fresh notifications. the fact that neither s. 4 nor s. 23 of the principal act are altered does not make any difference. [89 d-h, 85 h] section 4 of the amending act must therefore be struck down as invalid. [90 a] - is well within his competence to pass an order on the quantum also.ordern.m. kasliwal, j. 1. this appeal by grant of certificate under section 261 of the income tax act, 1961 by high court of calcutta raises the following question for consideration:whether on the facts and circumstances of the case in an appeal filed under section 248 of the income tax act, 1961, the a.a.c. had jurisdiction to deal with the quantum of the sum chargeable under the provision of the said act from which the assessee was liable to deduct tax under section 195 thereof?2. brief facts of the case are that the respondent-assessee is a private limited company incorporated in india. the assessee company carried on some business in collaboration with m/s. wilhelm rupp-mann, industrieofenbau, stuttgart w, gutenbergstr. by an agreement entered on 1st january, 1963 it was agreed that the foreign collaborators would grant to the indian company during the term:(a) the exclusive right to manufacture the licensed equipment in india.(b) the exclusive right to sell the licensed equipment in india under the 'wesman ruppnan' such sale to be effected by the agency agreed upon,(c) permit licensees to export the licensed equipment freely out side india, except to countries where the licensors have similar license-arrangements.clause 5 of the agreement provided for payment to the licensees of the following sums:(a) a payment of 5 per cent towards the cost of detailed working drawings in terms of clause 3(b). the payment for these drawings shall be admissible in those cases where new drawings are supplied by the licensors abroad i.e. from their or their associates works design offices at stuttgart or elsewhere in europe.this payment shall not be admissible for minor modification of drawings and designs which have already been purchased from the licensors and paid for by the licensees nor on repeat orders executed by the licensees.this fee shall be calculated on the ex-factory selling price of the licensed products after deducting the value of imported components used in the manufacture thereof, if any, payment for cost of drawings shall be arranged by the licensees against supply of individual furnace designs, such payment being effected forthwith against delivery of drawings.' (b)'a royalty at 5 per cent (five) which will be subject to indian taxes on the annual net ex-factory sale value of each licensed equipment manufactured by the licensees shall be payable to the licensors. the value of imported components, if any, that may be used in the manufacture of the licensed equipment shall be deducted in computing the ex-factory price of the licensed equipment for purpose of payment of royalty. the payment has to be effected together with the report referred to under clause 6.3. the assessment year involved in the case is 1964-65. in the matter of remittance to the non-resident company, the assessee vide applications dated june 4, 1964 and 18.8.64 requested the income tax officer to grant necessary certificate in order to enable them to approach the reserve bank of india for remittance to their collaborators. the said applications related to the invoice in regard to supply of drawings for manufacture of furnances in india in accordance with their collaboration agreement. the income tax officer placing reliance on the terms of the agreement came to the conclusion that the payments made by the applicant company to the non-resident collaborators in germany could be grouped under the heads royalties and remuneration for labour or personal services. according to the income tax officer neither the remittance fell within the exempted category nor did the agreement for avoidance of double taxation between india and the federal german republic apply to the facts of the instant case. according to him, the payment of the remittances in respect of which the applications had been made represented payment for supply of technical know-how and for use of trade name and manufacturing right of the licensor company. he did not agree with the submissions of the assessee company and disposed of the said applications vide order dated 5th september, 1964 under section 195(2) of the income tax act, 1961 directing the assessee company to deduct tax @ 65% on the entire sum proposed to be remitted.4. the assessee company preferred an appeal to the appellate assistant commissioner. it did not dispute the assessability of the royalty @ 5% mentioned in clause 5(b) of the agreement aforesaid. it, however, challenged that the whole of the sum of 5% specified in clause 5(a) was not chargeable to income tax in india. in regard to the same the assessee submitted that there was no liability to deduct tax in terms of the order of the income tax officer as, in its opinion, (a) the services, if any, enumerated under clause 5(a) of the agreement were performed outside india and the payments were also being made outside india so that the amount paid was not chargeable to tax under the indian statute, (b) there was a bar to assessment under the income tax act, 1961 in terms of an agreement for avoidance of double taxation between india and the federal german republic referred to above and (c) in the alternative, since the cost of the work drawings to the foreign collaborators exceeds the remuneration, the same was not taxable.5. the appellate assistant commissioner did not accept the first two of the aforesaid contentions of the assessee. with regard to the third contention, however, the appellate assistant commissioner came to the conclusion that it would be reasonable to determine the said cost by estimate which he did at 75 per cent of the amount paid to the non-resident. in his opinion the net profit chargeable to tax was accordingly 25% of the amount paid.6. the department filed an appeal against the aforesaid order of the appellate assistant commissioner and the assessee filed a cross objection, before the income tax appellate tribunal. both the departmental appeal and the assessee's cross objections were heard together and decided by a consolidated order of the tribunal. the departmental representative made two submissions. the first was that the a.a.c. was wrong in holding that the quantum of income could be determined in an appeal under section 248. the second was that the a.a.c. was wrong in allowing expenses at 75% of the remittance. the first point of the assessee's cross objection was covered by the first ground of the departmental appeal mentioned above. the second point raised in the assessee's cross objection was to the effect whether the payment for the cost of drawings were exempt from the tax under the provisions of double taxation avoidance agreement or not. the tribunal, taking the points raised in the departmental appeal first, came to the conclusion that it was difficult to accept the argument that a total denial enable an appeal to be filed but not a part denial with reference to part of the payment subjected to deduction of tax. in the opinion of the tribunal the interpretation of section 248 of the income tax act as given by the a.a.c. was correct. according to the tribunal the a.a.c. could pass an order regarding the quantum. the tribunal held that the same could not be said to be unreasonable. in the result the departmental appeal was dismissed. in regard to the assessee's cross objection, the tribunal held that first part of the cross-objection had already been dealt with in the appeal preferred by the departmental and to that extent the assessee's cross objection on the said issue automatically succeeded. in regard to the second issue, the tribunal came to the conclusion that the amount brought to charge by the income tax officer was not exempt under the double taxation avoidance agreement between india and the federal republic of germany vide articles 3(1) and 16 of the agreement. the assessee's cross objection was thus, partly allowed.7. at the instance of the commissioner of income tax, west bengal-i the tribunal referred the above mentioned question for the opinion of the high court. the high court followed its earlier judgment dated 12th august, 1970 in income tax reference no. 31 of 1970 (commissioner of income tax west bengal-i calcutta v. beni ltd., calcutta) and answered the said question in the affirmative and in favour of the assessee by order dated 10th february, 1976. the department filed an application for leave to appeal to the supreme court and the high court by order dated 8.9.1977 certified it to be a fit case for appeal to the supreme court under section 261 of the income tax act, 1976 and issued a certificate accordingly.8. we have heard mr. s.c. manchanda, sr. advocate for the appellant but nobody appeared for the respondent. the high court in answering the reference placed reliance on its earlier judgment dated august 12, 1970 but the copy of the said judgment has not been supplied in the paper book as such we were derived to go through the reasoning given by the high court in answering the reference in the affirmative and in favour of the assessee.9. it was contended by mr. manchanda that the order passed by the income tax officer under section 195(2) of the income tax act, 1961 (hereinafter referred to as the act) was not appealable to a.a.c. under section 248 of the act. his further contention was that the order passed by a.a.c. was totally without jurisdiction and the only remedy available to the assessee was to file a writ petition to high court under ' article 226 of the constitution of india. in our opinion this question does not arise before us nor such question was raised in the reference before the high court. the commissioner of income tax only sought to refer the following question for the opinion of the high court:whether, on the facts and circumstances of the case in appeal filed under section 248 income tax act, 1961, the appellate assistant commissioner had jurisdiction to deal with the quantum of the sum chargeable under the provision of the said act from which the assessee was liable to deduct tax under section 195 thereof?the above question does not contain the objection that no appeal was maintainable under section 248 of the act against the order of the income tax officer passed under section 195(2) of the act. the high court was not called upon to decide any question of jurisdiction as sought to be raised by mr. manchanda before us nor the high court has granted any certificate in this regard. so far as the question referred to the high court is concerned, its language shows that there was no controversy about the appeal filed under section 248 of the act and the only question raised was whether the a.a.c. had jurisdiction to deal with the quantum of the sum chargeable under the provisions of the said act from which the assessee was liable to deduct tax under section 195 thereof. the argument thus raised by mr. manchanda before us that order under section 195(2) was not appealable under section 248 of the act, is nut available. even otherwise the language of section 248 of the act is wide enough to cover any order passed under section 195 of the act. the case meteor satellite ltd. v. income tax officer, companies circle-ix, ahmedabad : [1980]121itr311(guj) cited in support of the above contention by mr. manchanda is of no relevance.10. it was next contended by mr. manchanda that the a.a.c. was wrong in holding that the quantum of income could be determined in an appeal under section 248. it was also argued that the a.a.c. was also wrong in allowing the expenses at 75% of the remittance. it would be proper to reproduce section 248 of the act which reads as under:section 248: appeal by person denying liability to deduct tax:any person having in accordance with the provisions of sections 195 and 200 deducted and paid tax in respect of any sum chargeable under this act, other than interest, who denies his liability to make such deduction, may appeal to the deputy commissioner (appeals) or, as the case may be, the commissioner (appeals) to be declared not liable to make such deduction.11. it was argued by mr. manchanda that under section 248 a person could deny his liability to make such deduction but there was no power to determine the quantum and to say as to what extent the said remittance will be taxed. we find no force in the above contention, section 248 makes a mention of sections 195 and 200 and it does not speak of the sub-clauses of section 195 either (1) or (2). when once an appeal has been preferred to the a. a.c. on the matter of liability of the company to deduct taxes, the a.a.c. is well within his competence to pass an order on the quantum also. in our opinion the a.a.c. was also competent to pass an order with regard to quantum when once he is seized of the matter. under section 248 a person having deducted and paid tax under section 195 may appeal to the a.a.c. denying his liability to make such deduction and for a declaration that he is not liable to make such deduction. it is thus difficult for us to accept the arguments that total denial may enable an appeal to be filed but not a part denial with reference to part of the payment subjected to deduction of tax. the right of appeal given under section 248 is clear and we cannot accept the view sought to be propounded by mr. manchanda that such a right is restricted and the a.a.c. was not competent to fix the quantum or to revise the proportion of the amount chargeable under the provisions of the act as determined by the income tax officer. section 251 of the act provides with the powers of the deputy commissioner (appeals) or, as the case may be, the commissioner (appeals). clause (c) of sub-section (1) of section 251 reads as under:section 251(l)(c):in any other case, he may pass such orders in the appeal as he thinks fit.the above provision jives full power to the appellate authority to pass such orders in the appeal as he thinks fit. there is no controversy before us that appeal could lie before a.a.c. under section 248 of the act. we are thus in agreement with the view taken by the high court and the income tax appellate tribunal. the appeal thus fails and is dismissed with no order as to costs as nobody has appeared on behalf pf the respondent.

Judgment:
ORDER

N.M. Kasliwal, J.

1. This appeal by grant of certificate under Section 261 of the Income Tax Act, 1961 by High Court of Calcutta raises the following question for consideration:

Whether on the facts and circumstances of the case in an appeal filed under Section 248 of the Income Tax Act, 1961, the A.A.C. had jurisdiction to deal with the quantum of the sum chargeable under the provision of the said Act from which the assessee was liable to deduct tax under Section 195 thereof?

2. Brief facts of the case are that the respondent-assessee is a private limited company incorporated in India. The assessee company carried on some business in collaboration with M/s. Wilhelm Rupp-mann, Industrieofenbau, Stuttgart W, Gutenbergstr. By an agreement entered on 1st January, 1963 it was agreed that the foreign collaborators would grant to the Indian company during the term:

(a) the exclusive right to manufacture the licensed equipment in India.

(b) the exclusive right to sell the licensed equipment in India under the 'Wesman Ruppnan' such sale to be effected by the agency agreed upon,

(c) permit licensees to export the licensed equipment freely out side India, except to countries where the licensors have similar license-arrangements.

Clause 5 of the agreement provided for payment to the licensees of the following sums:

(a) A payment of 5 per cent towards the cost of detailed working drawings in terms of Clause 3(b). The payment for these drawings shall be admissible in those cases where new drawings are supplied by the Licensors abroad i.e. from their or their associates works design offices at Stuttgart or elsewhere in Europe.

This payment shall not be admissible for minor modification of drawings and designs which have already been purchased from the Licensors and paid for by the Licensees nor on repeat orders executed by the Licensees.

This fee shall be calculated on the ex-factory selling price of the licensed products after deducting the value of imported components used in the manufacture thereof, if any, payment for cost of drawings shall be arranged by the Licensees against supply of individual furnace designs, such payment being effected forthwith against delivery of drawings.'

(b)'A royalty at 5 per cent (five) which will be subject to Indian taxes on the annual net ex-factory sale value of each licensed equipment manufactured by the Licensees shall be payable to the LicensOrs. The value of imported components, if any, that may be used in the manufacture of the Licensed equipment shall be deducted in computing the ex-factory price of the licensed equipment for purpose of payment of royalty. The payment has to be effected together with the report referred to under Clause 6.

3. The assessment year involved in the case is 1964-65. In the matter of remittance to the non-resident company, the assessee vide applications dated June 4, 1964 and 18.8.64 requested the Income Tax Officer to grant necessary certificate in order to enable them to approach the Reserve Bank of India for remittance to their collaboratOrs. The said applications related to the invoice in regard to supply of drawings for manufacture of furnances in India in accordance with their collaboration agreement. The Income Tax Officer placing reliance on the terms of the agreement came to the conclusion that the payments made by the applicant company to the non-resident collaborators in Germany could be grouped under the heads Royalties and remuneration for labour or personal services. According to the Income Tax Officer neither the remittance fell within the exempted category nor did the agreement for avoidance of double taxation between India and the Federal German Republic apply to the facts of the instant case. According to him, the payment of the remittances in respect of which the applications had been made represented payment for supply of technical know-how and for use of trade name and manufacturing right of the licensor company. He did not agree with the submissions of the assessee company and disposed of the said applications vide order dated 5th September, 1964 under Section 195(2) of the Income Tax Act, 1961 directing the assessee company to deduct tax @ 65% on the entire sum proposed to be remitted.

4. The assessee company preferred an appeal to the Appellate Assistant Commissioner. It did not dispute the assessability of the royalty @ 5% mentioned in Clause 5(b) of the agreement aforesaid. It, however, challenged that the whole of the sum of 5% specified in Clause 5(a) was not chargeable to income tax in India. In regard to the same the assessee submitted that there was no liability to deduct tax in terms of the order of the Income Tax Officer as, in its opinion, (a) the services, if any, enumerated under Clause 5(a) of the agreement were performed outside India and the payments were also being made outside India so that the amount paid was not chargeable to tax under the Indian Statute, (b) there was a bar to assessment under the Income Tax Act, 1961 in terms of an agreement for avoidance of Double Taxation between India and the Federal German Republic referred to above and (c) in the alternative, since the cost of the work drawings to the foreign collaborators exceeds the remuneration, the same was not taxable.

5. The Appellate Assistant Commissioner did not accept the first two of the aforesaid contentions of the assessee. With regard to the third contention, however, the Appellate Assistant Commissioner came to the conclusion that it would be reasonable to determine the said cost by estimate which he did at 75 per cent of the amount paid to the non-resident. In his opinion the net profit chargeable to tax was accordingly 25% of the amount paid.

6. The department filed an appeal against the aforesaid order of the Appellate Assistant Commissioner and the assessee filed a cross objection, before the Income Tax Appellate Tribunal. Both the departmental appeal and the assessee's cross objections were heard together and decided by a consolidated order of the Tribunal. The departmental representative made two submissions. The first was that the A.A.C. was wrong in holding that the quantum of income could be determined in an appeal under Section 248. The second was that the A.A.C. was wrong in allowing expenses at 75% of the remittance. The first point of the assessee's cross objection was covered by the first ground of the departmental appeal mentioned above. The second point raised in the assessee's cross objection was to the effect whether the payment for the cost of drawings were exempt from the tax under the provisions of Double Taxation Avoidance Agreement or not. The Tribunal, taking the points raised in the departmental appeal first, came to the conclusion that it was difficult to accept the argument that a total denial enable an appeal to be filed but not a part denial with reference to part of the payment subjected to deduction of tax. In the opinion of the Tribunal the interpretation of Section 248 of the Income Tax Act as given by the A.A.C. was correct. According to the Tribunal the A.A.C. could pass an order regarding the quantum. The Tribunal held that the same could not be said to be unreasonable. In the result the departmental appeal was dismissed. In regard to the assessee's cross objection, the Tribunal held that first part of the cross-objection had already been dealt with in the appeal preferred by the departmental and to that extent the assessee's cross objection on the said issue automatically succeeded. In regard to the second issue, the Tribunal came to the conclusion that the amount brought to charge by the Income Tax Officer was not exempt under the Double Taxation Avoidance Agreement between India and the Federal Republic of Germany vide Articles 3(1) and 16 of the Agreement. The assessee's cross objection was thus, partly allowed.

7. At the instance of the Commissioner of Income Tax, West Bengal-I the Tribunal referred the above mentioned question for the opinion of the High Court. The High Court followed its earlier Judgment dated 12th August, 1970 in Income Tax Reference No. 31 of 1970 (Commissioner of Income Tax West Bengal-I Calcutta v. Beni Ltd., Calcutta) and answered the said question in the affirmative and in favour of the assessee by order dated 10th February, 1976. The department filed an application for leave to appeal to the Supreme Court and the High Court by order dated 8.9.1977 certified it to be a fit case for appeal to the Supreme Court under Section 261 of the Income Tax Act, 1976 and issued a certificate accordingly.

8. We have heard Mr. S.C. Manchanda, Sr. Advocate for the appellant but nobody appeared for the respondent. The High Court in answering the reference placed reliance on its earlier Judgment dated August 12, 1970 but the copy of the said Judgment has not been supplied in the paper book as such we were derived to go through the reasoning given by the High Court in answering the reference in the affirmative and in favour of the assessee.

9. It was contended by Mr. Manchanda that the order passed by the Income Tax Officer under Section 195(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act) was not appealable to A.A.C. under Section 248 of the Act. His further contention was that the order passed by A.A.C. was totally without jurisdiction and the only remedy available to the assessee was to file a writ petition to High Court under ' Article 226 of the Constitution of India. In our opinion this question does not arise before us nor such question was raised in the reference before the High Court. The Commissioner of Income Tax only sought to refer the following question for the opinion of the High Court:

Whether, on the facts and circumstances of the case in appeal filed under Section 248 Income Tax Act, 1961, the Appellate Assistant Commissioner had jurisdiction to deal with the quantum of the sum chargeable under the provision of the said Act from which the assessee was liable to deduct tax under Section 195 thereof?

The above question does not contain the objection that no appeal was maintainable under Section 248 of the Act against the order of the Income Tax Officer passed under Section 195(2) of the Act. The High Court was not called upon to decide any question of jurisdiction as sought to be raised by Mr. Manchanda before us nor the High Court has granted any certificate in this regard. So far as the question referred to the High Court is concerned, its language shows that there was no controversy about the appeal filed under Section 248 of the Act and the only question raised was whether the A.A.C. had jurisdiction to deal with the quantum of the sum chargeable under the provisions of the said Act from which the assessee was liable to deduct tax under Section 195 thereof. The argument thus raised by Mr. Manchanda before us that Order under Section 195(2) was not appealable under Section 248 of the Act, is nut available. Even otherwise the language of Section 248 of the Act is wide enough to cover any order passed under Section 195 of the Act. The case Meteor Satellite Ltd. v. Income Tax Officer, Companies Circle-IX, Ahmedabad : [1980]121ITR311(Guj) cited in support of the above contention by Mr. Manchanda is of no relevance.

10. It was next contended by Mr. Manchanda that the A.A.C. was wrong in holding that the quantum of income could be determined in an appeal under Section 248. It was also argued that the A.A.C. was also wrong in allowing the expenses at 75% of the remittance. It would be proper to reproduce Section 248 of the Act which reads as under:

Section 248: Appeal by Person Denying Liability to Deduct Tax:

Any person having in accordance with the provisions of Sections 195 and 200 deducted and paid tax in respect of any sum chargeable under this Act, other than interest, who denies his liability to make such deduction, may appeal to the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to be declared not liable to make such deduction.

11. It was argued by Mr. Manchanda that under Section 248 a person could deny his liability to make such deduction but there was no power to determine the quantum and to say as to what extent the said remittance will be taxed. We find no force in the above contention, Section 248 makes a mention of Sections 195 and 200 and it does not speak of the sub-clauses of Section 195 either (1) or (2). When once an appeal has been preferred to the A. A.C. on the matter of liability of the company to deduct taxes, the A.A.C. is well within his competence to pass an order on the quantum also. In our opinion the A.A.C. was also competent to pass an order with regard to quantum when once he is seized of the matter. Under Section 248 a person having deducted and paid tax under Section 195 may appeal to the A.A.C. denying his liability to make such deduction and for a declaration that he is not liable to make such deduction. It is thus difficult for us to accept the arguments that total denial may enable an appeal to be filed but not a part denial with reference to part of the payment subjected to deduction of tax. The right of appeal given under Section 248 is clear and we cannot accept the view sought to be propounded by Mr. Manchanda that such a right is restricted and the A.A.C. was not competent to fix the quantum or to revise the proportion of the amount chargeable under the provisions of the Act as determined by the Income Tax Officer. Section 251 of the Act provides with the powers of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals). Clause (c) of Sub-section (1) of Section 251 reads as under:

Section 251(l)(c):

In any other case, he may pass such orders in the appeal as he thinks fit.

The above provision jives full power to the Appellate authority to pass such orders in the appeal as he thinks fit. There is no controversy before us that appeal could lie before A.A.C. under Section 248 of the Act. We are thus in agreement with the view taken by the High Court and the Income tax Appellate Tribunal. The appeal thus fails and is dismissed with no order as to costs as nobody has appeared on behalf pf the respondent.