Commissioner of Income-tax Vs. Goodyear Tyre and Rubber Co. - Court Judgment

Excerpt:
- - ? 7. whether, on the facts and in the circumstances of the case, the proceedings under section 147(a) initiated in the case of the assessed are valid inasmuch as there was a failure to disclose truly and fully the material facts but only a means (sic) for such material fact had been disclosed ? 8. whether, on the facts and in the circumstances of the case, the ground of appeal challenging the proceedings under section 147 having been voluntarily given up before the commissioner of income-tax (appeals), it could be raised by the assessed and the tribunal has jurisdiction to admit the additional ground with regard to such controversy ? 9. whether, on the facts and in the circumstances of the case, the tribunal's powers under the income-tax act, 1961, are not restricted to the subject-matter of appeal before them inasmuch as the ground challenging the proceedings under section 147 was specifically given up by the assessed before the commissioner of income-tax (appeals and so we do not see how it can be said that there was any omission or failure on the part of the assessed to give material facts when it filed its return of income originally.b.n. kirpal, j.1. this judgment will dispose of i.t.c. nos. 104 to 109 of 1983 pertaining to the assessment years 1972-73 to 1977-78. 2. briefly stated, the facts are that the respondent is an american company which is non-resident and had entered into an agreement for the supply of technical know-how, etc., with goodyear india ltd. this agreement which was initially entered into in the year 1961 expired in september, 1972. an application was made to the government of india for granting approval to the extension of the said agreement. 3. the accounting year of the respondent is the calendar year. thereforee, for a period of three months in the calendar year 1971 relevant to the assessment year 1972-73 and thereafter till 1976 when the approval of the government of india was obtained, the respondent company did not include in their return any royalty which had been agreed to be paid to it by the indian company. however, a note was added in the covering letter to the return which was filed by the respondent. inter alia, to the effect that royalty would be payable after the approval has been obtained from the government of india. it was also indicated in the said letter that the amount payable to the respondent has been credited in the books of account of the indian company and, as and when permission is obtained, a revised return would be filed by the assessed. 4. admittedly, for the aforesaid assessment years 1972-73 to 1977-78, no amount of royalty was taxed in the hands of the respondent. the government of india approved the fresh agreement which was entered into on june 17, 1976. it seems that for the year 1977-78, the entire income payable under the agreement was sought to be taxed. the respondent however, succeeded in appeal and it was held that the royalty received was not taxable in the year 1977-78 alone, thereafter, the assessment for the years 1972-73 and 1973-74 seeking to tax the royalty received by the respondent. 5. the income-tax officer reopened the assessments for the years 1972-73 and 1973-74 and in the pending assessments for the years 1974-75 to 1977-78 taxed the whole amount of royalty which had accrued to the respondent in the said years. 6. appeals were filed against the said order before the commissioner of income-tax for the years 1972-73 and 1973-74. it was also alleged that notices were not validly issued under section 147(a) and the assessments could not have been reopened. however, this ground was not pressed before the commissioner of income-tax as the assessed contended that it was prepared to pay the legitimate amount of tax provided no penalty was levied. it seems that penalty was levied and on a further appeal before the income-tax tribunal, it was contended by the respondent that no part of the income had accrued in india or was taxable here and, secondly, for the years 1972-73 and 1973-74, there had been no omission on the part of the assessed to disclose any particulars and, as such, notices under section 147(a) had not been validly issued. 7. the tribunal came to the conclusion that there was a business connection between the respondent and the indian company but no part of the income was liable to be taxed in india as there was no evidence that any business operations had been carried out by the respondent in india. the tribunal also came to the conclusion that the notices under sections 147 and 148 had not been validly issued. 8. being aggrieved, the petitioner filed applications before the tribunal under section 256(1) seeking to refer the following 10 questions of law to this court for the years 1972-73 and 1973-74 : '1. whether, on the facts and in the circumstances of the case, the tribunal is right in holding that there was no 'business connection' established in the assessed's case 2. whether, on the facts and in the circumstances of the case, the tribunal is right in holding that no part of the service charges is taxable under the various provisions of the income-tax act, 1961 3. whether, on the facts and in the circumstances of the case, the tribunal is right in arriving at a different conclusion than that arrived at in ita nos. 13344 to 13347 of 19967-68 dated february 26, 1970 4. whether, on the facts and in the circumstances of the case, the tribunal is right in holding that no income has accrued or arisen or could be deemed to have accrued or arisen to the assessed in india 5. whether, on the facts and in the circumstances of the case, the tribunal is right in holding that the sum received by the assessed from goodyear india ltd., is fees for technical services and not royalty 6. whether, on the facts and in the circumstances of the case, the tribunal is right in holding that the entire sum of rs. 51,07,144 has not accrued or arisen in the previous year relevant to 1977-78 assessment year during which the approval of the central government was accorded to the agreement between the assessed and goodyear india ltd. 7. whether, on the facts and in the circumstances of the case, the proceedings under section 147(a) initiated in the case of the assessed are valid inasmuch as there was a failure to disclose truly and fully the material facts but only a means (sic) for such material fact had been disclosed 8. whether, on the facts and in the circumstances of the case, the ground of appeal challenging the proceedings under section 147 having been voluntarily given up before the commissioner of income-tax (appeals), it could be raised by the assessed and the tribunal has jurisdiction to admit the additional ground with regard to such controversy 9. whether, on the facts and in the circumstances of the case, the tribunal's powers under the income-tax act, 1961, are not restricted to the subject-matter of appeal before them inasmuch as the ground challenging the proceedings under section 147 was specifically given up by the assessed before the commissioner of income-tax (appeals and so such ground cannot be considered by the tribunal 10. whether, on the facts and in the circumstances of the case, the tribunal being the second appellate authority could decide and adjudicate for the first time that the proceedings under section 147(a) should be deemed to be proceedings initiated under section 147(b) ?' 9. in respect of the assessment years 1972-73 and 1973-74, the above-mentioned questions of law were proposed and for the years 1974-75 to 1977-78. the first six questions of law which are common were proposed. questions nos. 7 to 10 are restricted only to the assessment years 1972-73 and 1973-74 as they pertain to the issuance of the notices under section 147 of the act. the tribunal came to the conclusion that no question of law arises and the petition under section 256 was dismissed. 10. in our opinion, the tribunal was right in holding that no question of law need be referred.11. as already notices, the first six questions relate to the taxability of the royalty in the hands of the respondent. the tribunal has followed the decision of the supreme court in the case of carborandum co. v. cit [1976] 108 itr 335 and come to the conclusion that even though there was a business connection with existed between the assessed and the indian company, no part of the technical fee accrued or arose in india, in the present case, the finding of fact arrived at by the tribunal is that, even though there was a business connection with the indian. company, the respondent did not carry out any business operations in india. this is a finding of fact which has not been assailed in any of the ten questions which have been proposed. the supreme court, also in carborandum's case : [1977]108itr335(sc) had come to the conclusion that, on the finding of fact in that case, namely, that there was no business activity carried on in india, no part of the technical fee or royalty received by a foreign company was taxable in india. the facts of the present case are not distinguishable from that of carborandum's case : [1977]108itr335(sc) and even though a question of law may have arisen, in our opinion, the same is now academic because it is covered by the decision of the supreme court in carborandum's case : [1977]108itr335(sc) . 12. with regard to notices under section 147, it is clear that the assessed had, in the covering letters both for the years 1972-73 and 1973-74 set out all relevant material and basic facts informing the income-tax officer about the expiry of the original agreement, the application to the government for further extension and the fact that, under the new agreement, royalty would be payable to the respondent. for the years 1972-73 and 1973-74, it was also indicated that the indian company had credited their books of account with the amount of royalty payable to the respondent for the year 1973-74. even the amount which was credited was specified in the letter. we do not see how it can be said that there was any omission or failure on the part of the assessed to give material facts when it filed its return of income originally. in our opinion, the provisions of section 147(a) were not attracted and the reopening could not be resorted to under section 147(b) because the period of limitation had expired. in any case, seeking reference of question nos. 7 to 10 could be academic because. in our opinion, on merits, the income is not taxable in view of the decision of the supreme court in carborandum's case : [1977]108itr335(sc) . 13. for the aforesaid reasons, the petitions are dismissed but with no orders as to costs.