Delhi High Court

Purket & Otheres vs Asstt. Cit on 10 May, 2002

Equivalent citations: (2004) 90 TTJ Del 289

ORDER

Diva Singh, J.M.

These eleven appeals are filed by different assesseds against the orders of Assistant Commissioner, Circle-I, Saharanpur. All these appeals were heard together and are being decided together as identical issues are raised therein.

2. Various grounds have been raised by the assessed in ITA No. 1653/Del/1996 which read as under :

"1. The authority below erred on facts and in law in assessing a sum of Rs. 4,16,110 as remuneration received by the assessed, foreign technician in Czechoslovakia from his foreign employers based in Czechoslovakia as a permanent employee of the said foreign employers for the services rendered by him as a (specialist) employee of the foreign employers in assisting them in performing their part of the obligation under the collaboration agreement, which payment by the foreign employers as such could not be brought to tax under the Indian tax law.

2. That the foreign technicians were in India, merely to assist only their foreign employers in Czechoslovakia to enable them to render and finalise their part of obligation under the collaboration agreement and that at no time the assessed foreign technician was in employment of the Indian contracting party (BHEL) to the agreement. These technicians had always continued to be answerable to their own foreign employers and were liable to be recalled, withdrawn, replaced and even to termination, as emerging from the agreement regarding expertise, quality and seniority of expert, and even the quantity of the personnel to come under the collaboration agreement. The foreign party to the agreement had necessarily and always to act through its own personnel/employees only through out the duration of the collaboration agreement with the Indian party for rendering its own part of the obligation under the agreement.

3. Such foreign technicians became entitled to their remuneration by rendering services only to their own foreign employers and they were paid also accordingly in their own country of origin by their own foreign employers.

4. The perquisite value of free accommodation provided by the Indian party to the agreement at site in term of the collaboration agreement, to the assessed specialist foreign technicians, coming under the collaboration agreement, for assisting their Czechoslovakian employers in performing their (Czechoslovakian party) obligation under the foreign collaboration agreement could not be taxed in the hands of the assessed.

5. The initiation of proceeding under section 148 was without any basis and against the authority of law.

6. That, without conceding the above, the notice issued to the assessed under section 148 was illegal and void ab initio inasmuch as the requirement of time laid down therein for filing the return in pursuance thereof did not stand complied with and all proceedings thereafter are invalid and to be annulled.

7. That the deduction of Rs. 2,07,934 under section 56(1) was wrong in law inasmuch as the assessment already made stood completed and final.

8. That the addition of Rs. 2,07,934 as income from other sources by allegedly following the decision in Emil Webber v. CIT (1993) 200 ITR 483 (SC) was wrong on facts and in law since the said decision was rendered on totally different facts and were not applicable to the facts in the case of the assessed.

9. That the charging of interest under section 234A and also under section 234B was illegal and wrong in law inasmuch as the assessed was a salaried employee and also because no opportunity of being heard was provided to the assessed before levying the laid charges under sections 234A and 234B."

3. Right at the outset, it was submitted by the learned authorised representative of the assessed that the point at issue is fully covered in favor of the assessed by the judgment of the Allahabad High Court in Civil Misc. Writ Petition No. 532 of 1994 (Tax) Tomasek Alexander & Ors. v. CIT. It was further contended that facts and circumstances are identical. As such, the assessed's appeal deserves to be allowed. Our attention was also invited to order dated 2-5-2001, in ITA No. 312/Del/1995 for 1990-91 assessment year, wherein the appeal of the revenue against the order of Commissioner (Appeals), wherein the penalty imposed under section 271(l)(c) was quashed, was rejected by the Tribunal and the order of the Commissioner (Appeals) was upheld. It was further contended that the Tribunal in the said case had relied upon the Civil Misc. Writ Petition No. 532 of 1994 (Tax) in the case of Tomasek Alexander v. CIT (supra). Our attention was invited to a SMC order of the Tribunal, dated 22-6-2001, wherein in ITA No. 307/Del/1995 in the case of Assistant Commissioner v. Faji Czeck Expert c/o Manager (F.P.) BHEL, Rampur, Haridwar, the action of the Commissioner (Appeals) was upheld by which penalty imposed under section 271(1)(c) was quashed.

4. Learned Departmental Representative, on the other hand, contended that the said decision of the Allahabad High Court does not render any help to the present case as the said decision has already been considered in the impugned order and there are material changes in the facts and circumstances of the two cases. As such, the orders of the tax authorities are fully justified in the facts and circumstances as well as position of law.

5. In the aforementioned facts and circumstances, it was considered appropriate to adjourn the appeals filed by the assesseds and afford an opportunity to the learned authorised representative to come prepared and argue the appeals on merits.

6. At the next hearing, it was conceded by the learned authorised representative that no doubt the said decision of the Allahabad High Court does not fully cover the issue at hand but the fact remains that the assesseds are foreign technicians who were in India and rendering the services to their foreign employer on whose account the payment was made to the said technicians. As such, the decision of the Allahabad High Court though not fully covering the issue at hand, lends support to the case of the assessed.

7. Before adverting to the arguments raised by both the sides in the present appeal, it would be appropriate to refer briefly to the facts as appreciated by the tax authorities.

8. The relevant facts of the case are that the assessed is a foreign technician whose status in the year under consideration is resident but not ordinary resident. For the relevant assessment year, Manager (F), BHEL, Ranipur, Haridwar, filed return of income of this technician as his agent on 27-6-1991, disclosing therein the salary income at Rs. 4,16,109. The said return was accompanied by a salary certificate duly signed by the Manager (F), BHEL, Ranipur, Haridwar, disclosing therein the same salary income of this Czech technician. A copy of the self-assessment challan evidencing payment of Rs. 2,07,934 made on 25-3-1991, was also filed. The said return was processed and an intimation under section 143(1)(a) was completed on the returned income on 25-10-1991. On 29-3-1993, the assessing officer issued a notice under section 148 of the Act after recording the reasons on the order sheet of the assessment folder maintained for this assessment year.

"In this case return declaring total income of Rs. 4,16,110 was filed on 27-6-1991, and the same was processed under section 143(1)(a) of the Act. Later on, on going through the case records, I came to know that the tax of Rs. 2,07,934 was due from the assessed, but the same has been paid by the BHEL and accordingly, the same is a part of taxable receipt in the hands of the assessed as received from BHEL by him. I, therefore, have reason to believe that the income chargeable to tax as mentioned above has escaped assessment for assessment year 1991-92. "

9. In response to the said notice, return of income was filed under protest disclosing the same salary income. Thereafter, an application in Form No. 8 with reference to the provisions of section 158(1) of the Act was filed to keep the reassessment proceedings pending till a decision in identical/similar cases is delivered by the Hon'ble High Court of Allahabad before whom the BHEL had already filed writ petitions in the cases of other foreign technicians in whose cases similar issues were involved. In the course of the assessment proceedings, it was contended by the learned authorised representative that the assessed is a foreign technician and in the year under consideration, was an employee of M/s. Skoda Export of Czech Republic. It was further contended that he was deputed by his employer for technical assistance on behalf of his employer to work with BHEL, Ranipur, Haridwar, in accordance with the contract signed between BHEL and M/s. Skoda Export. It was also contended that the said contract was duly approved by the Government of India. The contention was also put forth that the payment of salary was made to the assessed in Czech Republic by his employer M/s. Skoda Export and there was no payment made to the assessed as remuneration by BHEL during his stay in India. It was also contended that there was no employer- employee relationship between BHEL and the assessed as the relationship of the assessed was with his employer which is a foreign company based in Czechoslovakia. The contention was putforth that the amount of income-tax was paid by BHEL on behalf of the assessed on his salaries in accordance with the terms of agreement between BHEL and M/s. Skoda Export. It was also submitted that while filing the return, the amount of service charges was declared as income under the head salaries which his employer M/s. Skoda Export had claimed from BHEL for the services rendered by the assessed in India in terms of the aforesaid agreement between BHEL and the said foreign company. The contention was also put that the tax paid on such income of the assessed neither accrued nor arose to him in India.

10. The assessed was put to notice by the assessing officer as to why the tax so paid by BHEL on his salaries be not included under section 56 of the Act in view of the decision of the Hon'ble Supreme Court in the case of Emil Webber v. CIT (supra). In response to the said notice, after seeking adjournment initially, the assessed moved an application under section 144A of the Act before the Deputy Commissioner, Range Dehradun, stating therein that the assessed had already filed a declaration in Form No. 8 as required under section 158(1) of the Act to keep the proceedings pending till the decision of the Hon'ble High Court of Allahabad on writs filed by BHEL before it in the similar cases of few foreign technicians including the assessed-technician in respect of assessment year 1990-91 involving identical questions of law.

11. The Deputy Commissioner issued the instructions under section 144A of the Act on 28-2-1995, rejecting the assessed's contention stating that there has to be identical question of law for any assessment year in the case of the assessed pending before the Hon'ble High Court either under section 256 or 257 or 261 of the Act before the Supreme Court whereas the proceedings are as a result of writ petitions filed. Regarding the assessed's request that the assessing officer be refrained from grossing up of amount of tax paid, the assessed's request was also turned down. He observed that in view of the fact that the assessed has filed a return of remuneration received by him for the assessment year in which BHEL has paid the tax liability, thus the income-tax paid by BHEL on behalf of the assessed is an integral part of the remuneration received by the technician and that such tax had direct co-relation with the remuneration paid and once the amount of remuneration unmistakenly is accepted as taxable in India, the taxes paid thereon had direct connection with the above remuneration and hence is taxable. As such, reliance was placed upon the decision of the Apex Court in the case of Emil Webber (surpra).

12. He, further clarified that no exemption under section 10(6)(vii)(a) of the Act could be allowed as there was no relationship of employer and employee between BHEL and the foreign technicians. Accordingly, the assessing officer was directed to complete the assessment of these technicians including the assessed. On the basis of these instructions and keeping in view the submissions made before him on behalf of the assessed, the assessing officer completed the assessment in the case of the assessed and the assessed's income under the head salaries as shown in the return and tax paid by BHEL on behalf of the assessed as assessed's income under the head income from other sources. Thus, completing the assessment, he charged interest under sections 234A, 234B and 234C of the Act and also issued penalty notice under section 271(1)(c) of the Act.

13. Aggrieved by this, the assessed filed an appeal on the following grounds before the Commissioner (Appeals) :

"The learned assessing officer was not justified for charging the tax on non-taxable salary, grossing up and charging of the interest under sections 234A and 234B from the appellant- assessed. "

14. On the date of hearing, a prayer for admission of additional grounds was raised which read as under :

"1. That the notice issued under section 148 of the Act was not legal and in accordance with the law inasmuch as the period of not being less than 30 days allowable under section 148 was not allowed for filing the return and accordingly the notice being void ab initio, all proceedings pursuant thereto stood rendered null and void. The notice is illegal.

2. All the facts pertaining to the assessment year 1991-92, the relevant accounting period being the year ended on 31-3-1991, being fully known to the assessing officer when he made the assessment for this year on 25-10-1991, there was no basis in law to give jurisdiction to the Assistant Commissioner for issuance of notice under section 148. The notice issued under section 148 was without jurisdiction, illegal and without any legal basis.

3. That the inclusion of any remuneration paid by the foreign employer in the collaboration agreement outside India was wrong and against law, and ought not to have been assessed as such by the assessing authority.

4. That an item wrongly shown in the return but not assessable under India tax law ought to have been excluded from assessment.

5. The payment by the Indian party to foreign party Skoda Export was under the terms of agreement and was made to the foreign party direct and not to the specialist in India in any form whatsoever.

The supervisory charges were merely the yardstick to determine, inter alia, the liability of the Indian party towards the foreign party under the collaboration agreement.

The above grounds sought to be raised being totally legal, these may kindly be permitted to be raised."

15. The Commissioner (Appeals) asked the assessing officer to offer his comments if any on the said application who furnished his comments vide letter dated 23-11-1995, a copy of which was given to the learned authorised representative of the assessed in response to which he stated that whatever has been stated in the earlier written submissions, the same may be considered in addition to the submissions made verbally before the Commissioner (Appeals). The additional grounds 1 and 2 were admitted by the Commissioner (Appeals) in view of the fact that the grounds were legal in nature and ground Nos. 3, 4 and 5 were also admitted being related to grounds already raised before the Commissioner (Appeals) as they were not additional grounds of appeal and as such were considered along with the main grounds.

16. At the time of hearing, learned authorised representative submitted that the notice under section 144 of the Act was not legal and valid. As such, it was contended that an assessment made in pursuance of such a notice was void ab initio, and deserves to be quashed.

17. After considering the submissions of the assessed, challenge to notice issued under section 148 was rejected and it was considered that the issuing of notice under section 148 of the Act is fully justified. Regarding the contention of the assessed that the period allowed to file a return of income in response to such a notice was mentioned as within 30 days from the date of service of this notice, whereas under section 148 such a period prescribed under section 148 of the Act for submission of such a return is not being less than 30 days. The decisions relied upon by the learned authorised representative were not accepted as they pertained to the provisions of the Income Tax Act, 1922 and were pertaining to the period before the enactment of section 292B of the Act which came into effect with effect from 1-10-1975. The second contention of the assessed was also not accepted.

18. As such, in the ultimate analysis, proceedings, initiated under section 148 of the Act for the year under consideration were held to be fully valid in the eyes of law.

19. Regarding the charging of interest under sections 234A and 234B of the Act and the additional grounds 3, 4 and 5 raised by the assessed in support of which it was contended by the learned authorised representative that the inclusion of any remuneration paid by any foreign employer outside India was wrong and against law, and ought not to have been assessed as such by the assessing officer, and the item wrongly shown in the return under the Indian tax law ought to have been excluded from assessment and that the payment of Indian party to foreign party M/s. Skoda Export was under the terms and agreement, and was made to the foreign party direct and not to the specialist in India in any form whatsoever and the fact that the supervisory charges were merely the yardstick to determine, inter alia, the liability of the Indian party towards the foreign party under the collaboration agreement, and moreover the payment was made to the specialists who received their salaries in their own countries, hence the same could not be assessed under the Indian law as income-tax was at no stage the employer of these specialists. The argument that M/s. Skoda Export did not have any permanent establishment in India and thus there was no relationship of employer-employee between BHEL and the specialists. The argument was putforth that there accrued or arose no salaries in India to these specialists in terms of section 5 of the Act. Arguments were also raised that the entire burden of tax was taken by BHEL in terms of collaboration agreement and since the assessed had filed a return on 27-6-1991, and with it the challan for payment of tax made by BHEL was fully in the knowledge of the assessing officer, and thus, there was no need to act under section 148 of the Act, and the interest charged under section 234A of the Act was not chargeable. The fact that these experts were not employees of BHEL and were salaried employees, therefore, they were not liable to pay advance-tax. Hence, interest under section 234B of the Act also could not be charged. Before the Commissioner (Appeals), reliance was placed upon the decision of the Hon'ble High Court of Allahabad dated 5-12-1995, in Civil Misc. Writ Petn. Nos. 532 to 538 of 1994 in the cases of Tomasek Alexander & Ors. v. CIT (supra).

20. The Commissioner (Appeals) asked the assessed to show how the said decision is applicable to the case of the assessed who in the year under consideration has worked for more than 183 days and whose status is resident and not ordinary resident. Therefore, it is squarely covered by clause (2) of artical 16 thereby making salaries received by him in such an accounting year taxable in the 'other State', i.e., India, the learned counsel of the assessed offered no arguments.

21. The Commissioner (Appeals), as such, considering the submissions of the assessed, concluded that the action of the assessing officer in initiating proceedings under section 148 of the Act was fully justified. He also observed that the technicians in the year under consideration had been in India for a period exceeding 183 days which in the case of the assessed was 214 days. Thus, in view of this fact, the amount of remuneration so paid to him by his employer for the work done in India, therefore, arose in India and hence, by virtue of the provisions contained in section 9(1)(ii) of the Income Tax Act, 1961, read with its Explanation, the same becomes taxable in India. He further concluded that this was the reason why the return of income was filed by the assessed disclosing such remuneration received by him for assessment purposes and BHEL also paid the tax liability in respect of the same. As regards the tax paid by BHEL in respect of such a remuneration received by the foreign technicians also becomes assessable in the hands of the foreign technicians for assessment purposes for the year under consideration as a perquisite assessable under section 56(1) of the Act, reliance was placed on the decision of the Apex Court in the case of Emil Webber (supra). The contention of the assessed that the decision was not applicable was not accepted because it was concluded that had the technician been an employee of BHEL, such tax perquisite would have become assessable in his hands under section 17(2)(iv) of the Act. But, in view of the fact that no employer-employee relationship existed between BHEL and foreign technician, as such, the salary was paid by his employer M/s. Skoda Export and not by BHEL, but such a tax payment on his salaries was his liability which was discharged by the Indian concern in pursuant to an agreement with foreign concern; such a tax perquisite, therefore, becomes taxable in his hands under the head 'income from other sources' under section 56(1) of the Act. Regarding the applicability of the decision, in view of the fact that it was delivered in 1993, the Commissioner (Appeals) held that it is a settled law that when Hon'ble Supreme Court decides an issue regarding the interpretation of a particular provision of the Act, it is accepted that such an interpretation of that particular provision was right from its inception and not only with effect from the pronouncement of the judgment unless their Lordship clearly specifies in its decision that the said interpretation would not be made retrospective. The Commissioner (Appeals) further examined the provisions of the DTAA between India and Czechoslovakia and artical 15 specifically thereof to examine whether the tax perquisites were assessable in the hands of the assessed.

22. As such, after examining in detail clauses (1) and (2) of artical 15 along with sub-clause (a), (b) and (c), it was held that by virtue of the fact that the assessed had stayed in India for about 214 days, the requirements of sub-clause (a) are not satisfied. Thus, as a result of this, the remuneration derived may be taxed in the other State, i.e., India. It was further found that the expatriate technician under consideration had exercised his employment not in the contracting State but in the other State, i.e., not in Czechoslovakia but in India, therefore, the remuneration so derived by him from such exercise of his employment in India becomes taxable in India. The Commissioner (Appeals) further observes that when confronted with the provisions of artical 15 with reference to the case under consideration for the assessment year under consideration, the learned authorised representative had no arguments to offer. Accordingly, the action of the assessing officer was confirmed. Same was the fate of the obligation of the foreign technician to pay Indian income-tax for such remuneration derived by him in the accounting year under consideration and in view of the fact that the tax under the agreement between BHEL and M/s. Skoda Export was paid by BHEL, therefore, such a tax paid by BHEL was a perquisite assessable in the hands of the foreign technician under the head 'income from other sources' under section 56(1) of the Act.

23. Regarding the contention about provisions of section 10(6)(viia) of the Act, the assessed's argument was held to be not tenable by virtue of the fact that the BHEL was not the employer of the foreign technician of the assessed-firm and since there was no relationship between employer and employee, the tax paid by BHEL on the salaries of the foreign technicians does not form part of the technicians' salaries in terms of section 17(2)(iv) and has to be assessed in the hands of the foreign technicians under section 56(1) of the Act. The learned authorised representative's arguments were rejected. The charging of interest under sections 234A and 234B was decided in the following manner :

"10. Now, the issue relating to charging of interest under sections 234A and 234B of the Act. Since a return in response to a notice under section 148 of the Act dated 29-3-1993, was to be filed within a period of 30 days and the same stood filed only on 15-11-1993, it was, therefore, a belated return and hence interest under section 234A(3) of the Act was, therefore, clearly chargeable from the appellant. Accordingly, charging of interest under section 234A of the Act is hereby upheld and appellant's contention in this regard is hereby rejected. As regards charging of interest under section 234B, I hereby hold that the intimation passed under section 143(1)(a) of the Act on 25-10-1991, was not an assessment order. This finding finds support from the decision of the Hon'ble Patna High Court Ranchi Club Ltd. v. CIT & Ors. (1995) 214 ITR 643 (Pat). Thus, when no assessment in its case stood made the impugned assessment so made under section 143(3) read with section 14B of the Act is a regular assessment and hence interest under section 234B of the Act can be charged. As regards the contention that no such interest was chargeable it is also hereby rejected. For charging of interest under section 234B of the Act one has only to see whether the tax paid in advance is less than 90 per cent of the assessed tax, and in the case of the appellant it is seen that a tax of Rs. 2,07,934 has been paid on 25-3-1991, though in the challan form of self-assessment tax. But, since as per provisions of proviso to section (1) of section 211 of the Act any amount paid by way of advance-tax on or before the 31st day of March shall also be treated as advance-tax paid in financial year ending on that day for all the purposes of this Act and as the appellant had paid such an amount on 25-3-1991, though with a wrong challan, therefore, such an amount has to be treated as an advance-tax. On the assessed income, assessed tax came to Rs. 3,24,374; 90 per cent of it comes to Rs. 2,91,937 and as the tax paid in advance is only Rs. 2,91,934, therefore, such tax paid in advance is less than 90 per cent of the assessed tax and hence interest under section 234B of the Act is hereby held as chargeable. It may also be mentioned here that if liability to pay tax on the remuneration derived by the appellant was that of BHEL, it was for the BHEL to pay such an advance-tax on the salaries and tax perquisite income of the appellant. The contention that payment of advance-tax is not applicable to the case of the salaried person, it is also not tenable in the case of the appellant as such a salary for the year under consideration has not been paid by the BHEL to the appellant, and hence provisions of section 192 are not attracted. Provisions of section 195 of the Act are also not applicable to his case as his salaries were paid to him by his employer, M/s. Skoda Export, and not by the BHEL. Further, the provisions of section 195 were applicable only to deduct tax at source on payments made by the BHEL to M/s. Skoda Export, which TDS cannot be said as made on salaries of these specialists even though such payments made to M/s. Skoda by the BHEL might have been calculated on the basis of salaries payable to them. Thus, the only provisions of the Act attracted were of advance-tax as the BHEL was responsible under this agreement to pay taxes on salaries, etc., of these specialists. Accordingly, I hereby hold that the assessing officer was justified in charging interest under section 234B of the Act and thus his such an action is hereby confirmed."

24. Aggrieved by this, the assessed is in appeal before us.

25. As observed earlier, the learned authorised representative on the earlier date submitted that the point at issue is fully covered in favor of the assessed by virtue of the judgment of the Hon'ble Allahabad High Court in the case of Tomasek Alexandar (supra).

26. The learned Departmental Representative did not agree with the submissions of the learned authorised representative and had contended that the said judgment had already been considered in the impugned order and apart from that, the issue was distinguishable as in the facts of the present case, the status of the assessed is undisputably a resident and not an ordinary resident whereas the status in the facts of the case as were before the High Court of Allahabad were that the assessed's status was non-resident and on facts were admittedly in India for a period of less than 182 days.

27. On the next date of hearing, learned authorised representative conceded that the facts in the present case and the facts as appreciated by the Hon'ble High Court of Allahabad were distinguishable and, as such, the issue could not be said to be covered by it. The submissions made before the Commissioner (Appeals) and the assessing officer were reiterated. In response to a specific query on facts, it was submitted by the learned authorised representative that the payments were received by the foreign technicians in Czechoslovakia and not in India and the amounts were paid by BHEL to M/s. Skoda Exports who had raised invoices for such payments as per the agreement. The contention putforth was that BHEL and M/s. Skoda Exports had entered into an agreement for a specific purpose and as per the said agreement, the payment was to be made to M/s. Skoda Exports by BHEL to the employees of M/s. Skoda Exports. Strength was derived from the fact that the agreement had been approved by the Government of India. It was stated that the return had been filed by BHEL by showing nil income. It was further contended that the assessed's case is that the assessing officer made a grossing up of the amount of tax paid by BHEL on account of foreign technicians which were covered by the agreement. It was contended that the Income Tax Act is not applicable to the issue at hand and the amount of tax has been wrongly paid, and in view of the fact that no assessment should have been made in the present facts of the case and even the income returned by the assessed itself should not be taxed, the question of grossing up does not arise. It was specifically put to the learned authorised representative that apart from arguing at length on the above proposition whether he would like to touch any other ground which has been raised in the present appeal, the learned authorised representative struck to his argument that assessment in the present case could not be made under the Income Tax Act. Reliance was placed upon another judgment of the Hon'ble Allahabad High Court in Civil Misc. Writ Petn. No. 536 of 1994 in the case of Mr. Moregenstern Werner clo Manager (Fp) Heep, BHEL, Haridwar v. CIT and it was contended that therein, the assessed had filed his return under a mistaken advice wherein the assessed had claimed exemption on daily allowance to the extent of Rs. 1,11,264 on account of income-tax under section 10(14)(i) of the Act. The Assistant Commissioner had also wrongly assessed the income of the petitioner as shown in the return and adjusted the amount of income-tax paid by BHEL. After the assessment was completed and the mistake was realised, the assessed filed a revision application before the Commissioner (Appeals) under section 264 of the Act. The Hon'ble Allahabad High Court after examining section 5(1)(c) read with sub-sections (1) and (6) of section 6 of the Act held that the assessed's salary in Germany from M/s. Siemens was not taxable in India and the same could not be included in the total income of assessed in India. Therefore, after examining the provisions of section 10(14), the Hon'ble Allahabad High Court quashed and set aside the assessment orders and the first appellate authority's order, and directed the revenue to refund an amount of Rs. 2,51,240 paid under the mistaken belief by BHEL. Accordingly, it was contended that in the facts of the case, the action of the assessing officer in grossing up was not justified. It was specifically put to the learned authorised representative that he has raised various grounds in the earlier appeal and it would be appropriate if he argued the same ground-wise. The learned authorised representative reiterated the submissions made earlier. On a specific query whether he wanted to argue ground Nos. 5 and 6 raised in the present appeal pertaining to reopening of assessment under section 148 and what submissions he would like to make in respect of these grounds, the learned authorised representative merely submitted that since the payments have been made and the assessment has been made under section 143(3) of the Act, no concealment is made out and only grossing up of income-tax made so. Thus, in effect, despite specific queries, learned authorised representative did not argue on the aspect of challenge to the grounds pertaining to section 148.

28. On merits, our attention was invited by the learned authorised representative to section 5(1)(c) and section 6 of the Act and it was conceded that no doubt the assessed has remained in India for more than 182 days but as per section 6, sub-sections (1) and (6), there are certain other requirements which also need to be considered. The contention putforth was that the assessed is an employee of M/s. Skoda Export and the payments have been made by BHEL to M/s. Skoda Export, and the assessed was never under the control of BHEL and M/s. Skoda Export has no permanent establishment in India, as such, the same was not exigible to tax in India.

29. It was specifically put to the learned authorised representative to address as per the facts of the case that who has paid in the present facts of the case to whom. It was further put to the learned authorised representative that the fact remains that the salary certificate has been duly signed and return on account of this has been filed by BHEL, and only when action under section 148 is taken, the assessed wants to argue that grossing up is not justified. Thus, in the relevant facts of the case, it is necessary to see as to how the payments have been made. Learned authorised representative in response to this query placed on record agreement between BHEL and M/s. Skoda Export, Fraha, Czechoslovakia which was entered into for supervisory services for erection, testing and commissioning of 2 x 60 MW reversible generating units at Kadana Hydro Electric Project of Gujarat Electricity Board. The said contract was entered into on 12-11-1984. Clause (3) of the said agreement was referred to :

"3.0 Terms and condition for deputing the supplier's experts :

3.1 For the technical services of the supplier's experts the payment at the following rates per calender month shall be paid by customer in rupees.

Designation

Year (From 1st January to 31st December)

Rs.

Chief of Supervision and

51.194

53.753

56.441

59.263

62.226

co-ordination (Chief of group)

Other experts

45.342

47,639

39.185

52.488

55.112

3.1 The above rates do not include any taxes, duties, income-tax, etc. except those as may be levied by Czechoslovak authorities. Such taxes if any levied by the Government of India, shall be borne by the customer. The supplier and supplier's experts shall however render necessary assistance to customer if and when required for obtaining income-tax clearance from Indian, authorities at the time of arrival, stay and departure of their experts.

3.2 The above rates in clause (3. 1) shall be changed in case that an agreement on rates for services of Czechoslovakia and India has been signed. The changed rates shall be applicable from the date specified in such agreement.

3.3 The rates for the deputation of the supplier's expert will be payable by the customer from the date the experts leave Prahe for joining duty at Kadana site till the date of their final arrival back at Prahe after the end of the assignment. The rates are exclusive of journey fare, which shall be to the customer's account. The supplier shall furnish full details of the date of departure and arrival back of their experts."

30. Learned authorised representative, after a perusal of the agreement entered into between BHEL and M/s. Skoda Export was specifically put to notice that he is arguing contrary to the contract which specifically in clause (3. 1) records that the payments are to be made on certain rates per calender month by the customer, i.e., BHEL in rupees and further that such tax if any levied by the Government of India shall be borne by the customer, i.e., BHEL. Thus, in the facts of the case, the payments have not been made in Czechoslovakia to the foreign technicians but, in fact, have been made in India. The learned authorised representative was specifically required to state as per facts where the payments have been made, whether in India or in Czechoslovakia by M/s. Skoda Export. Learned authorised representative conceded that amounts were in fact received in India by M/s. Skoda Export for the foreign technicians.

31. Learned Departmental Representative placed reliance on the orders of the tax authorities. Apart from relying upon the orders of the tax authorities, it was further submitted with respect to ground Nos. 5 and 6 that although the same were not argued by the learned authorised representative but reliance was specifically placed by her on the orders of tax authorities and on the basis of that, it was contended that action under section 148 was fully justified in the facts of the case.

32. Regarding the intimation under section 143 and section 148, reliance was placed upon Ranchi Club v. CIT (1995) 214 ITR 643 (Pat), wherein it has been held that in view of the provisions contained in section 147 of the Income Tax Act, 1961, and Explanation 2(b) thereof, even if assessment for 1991-92 assessment year had not been made in terms of section 143 and only an intimation had been sent to the assessed in response to the return filed by him, notice could be issued under section 148. Reliance was placed upon the jurisdictional High Court's decision in the case of MTNL v. Chairman, CBDT & Anr. (2000) 246 ITR 173 (Del) for the proposition that so long as the ingredients of section 147 are fulfillled, the assessing officer is free to initiate proceedings under section 147 and failure to take steps under section 143(3) will not render the assessing officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued.

33. Regarding the contentions raised by the assessed before the Commissioner (Appeals), which though were not argued before the Tribunal that sufficient time was not given, it was contended by the learned Departmental Representative that section 148 had been amended with retrospective effect from 1-4-1989, by Finance (No. 2) Act, 1996, wherein the words "not being less than thirty days" have been omitted by the legislature. Accordingly, it was contended that the proceedings under section 148 were fully valid.

34. It was further contended that the assessed at his own instance filed the return and now at this stage when action is taken under section 148, the assessed could not be allowed to raise the claim whereby it amounts to asking for a refund of the tax paid voluntarily by BHEL at their own instance. Reliance was placed upon the decision of the apex court in the case of CIT v. Sun Engineering Works (P) Ltd. (1992) 198 ITR 297 (SC) for the contention that the words "such income" in section 147 clearly referred to income which is chargeable to tax but has escaped assessment and the Income Tax Officer's jurisdiction is confined only to such income which has escaped tax or has been under assessed and does not extend to revising reopening or reconsidering the whole assessment or permitting the assessed to reagitate questions which had been concluded in the original assessment proceedings. It is only the underassessment which is set aside and not the entire assessment when reassessment proceedings are initiated. Claims which have been disallowed in the original assessment cannot be permitted to be reagitated on the assessment being reopened for bringing to tax certain income which has escaped assessment because the controversy on reassessment is confined to matters which are relevant only in respect of income which had not been brought to tax during the course of original assessment. Heavy reliance was placed on the said decision for the proposition that section 147 being for the benefit of the revenue and not the assessed, the assessed cannot be permitted to convert the reassessment proceedings into an appeal or revision in disguise and seek relief in respect of items earlier rejected, or claim relief in respect of items not claimed in the original assessment proceedings unless relatable to "escaped income".

35. Regarding the contentions of the learned authorised representative that the issue is covered by the decision of the Hon'ble Allahabad High Court in the case of Tomasek Alexander & Ors. v. CIT (supra), it was contended that therein the assessed had moved for revision under section 264 of the Act before the Commissioner (Appeals) whereas in the present facts of the case, the reopening was under section 148 and as such, the route adopted in both these cases was diametrically different. It was contended that in the facts of the present case, the assessed rightly offered income for the purposes of tax and it was rightly taxed by the tax authorities. As such, in the reassessment proceedings when action has been taken relying upon the Apex Court's decision in the case of Emil Webber (supra) which has been relied upon by the assessing officer wherein facts were almost similar, as such, the ratio is fully applicable to the issue at hand and the assessing officer has correctly applied the same. It was further submitted that on the facts of the present case, there is absolutely no dispute that tax on account of foreign technicians has been paid by BHEL. As such, the facts of the present case and the facts as appreciated by the Apex Court are identical.

36. Regarding the submissions of the learned authorised representative pertaining to section 5, it was contended that the issue does not arise in the present case and also does not figure in the facts of the case as per record and the implications of the proviso have also not been considered. In view of the fact that in the present case, the status of the assessed was a resident but not ordinary resident, thus, relying on section 9(1)(ii), it was contended that the income which falls under the head 'salaries' is deemed to accrue or arise in India if it is earned as a result of services rendered in India and received the payment in India the amount as such becomes taxable by the deeming provision in India.

37. Reliance was placed upon the decision of the Hon'ble Supreme Court in the case of Performing Right Society Ltd. & Anr. v. CIT & Ors. (1977) 106 ITR 11 (SC) for the proposition that the question as to the source of income is not relevant for the purpose of ascertaining whether the income accrues or arises in India because section 5(2) provides that all income "from whatever source derived" is to be included in the total income of the non-resident assessed if the income accrues or arises in India during the relevant year. Accordingly, it was contended that here in the present facts of the case as per section 9(1)(ii), the income is deemed to arise in India and there is no evidence on record to show that the assessed is not ordinary resident. Section 9(1)(ii) is attracted by virtue of services rendered in India so what was received by the foreign technicians was deemed to be received in India. It was contended that the decision of the Allahabad High Court in the case of Mr. Morgenstern Werner (supra) was a writ against a revision provision and section 9(1)(ii) has not been referred to there and nor has its implications consequently were considered.

38. Our attention was also invited to the decision of the Delhi High Court in the case of T.P.S. Scoott & Ors. v. CIT (1998) 232 ITR 475 (Del) wherein the facts were that the tax was paid by British High Commission to Indian Government on behalf of the assesseds who were employees of the British Council for the relevant period and in view of the fact that the British High Commission at that point of time was hot the employer of the assesseds, the payments made by the British High Commission as per the assesseds could not be deemed to be a perquisite in terms of section 17(2)(iv) of the Act and, therefore, could not be included in the gross salary of the assesseds. It was also contended that the salaries were paid in sterling in United Kingdom. In the facts of that case, the Tribunal found that although the services were rendered by the employees in India and the payments were made outside India under some internal arrangement, it could not detract from the applicability of the provisions of the Act that the payments made by the British High Commission were a part of the condition of service and were referrable to the holding of the office by the assesseds as employees, and was a part of the emoluments; that the payments in the year in question included payment of the amount equal to the tax of the assesseds. The jurisdictional High Court therein held that sections 2(24)(iii), 15, 17(2)(iv) of the Income Tax Act, 1961, make it clear that an amount of tax which would have been payable by an employee-assessed if paid by the employer on behalf of the assessed is to be included in the perquisite, amounting to salary, rendering it liable to tax by being included in income. Thus, relying upon this decision, it was contended that there is no dispute over the fact that when the tax has been paid by BHEL on behalf of the foreign technicians, then it can be held to be part of the salary and the action of the assessing officer in grossing up was fully justified.

39. With regard to ground No. 4 raised by the assessed, it was contended that it does not arise from the impugned order or from any other order of the tax authorities and, as such, should not be allowed to be raised at this stage. Reliance was placed upon the decision in the case of V. Enrico v. ITO (1995) 55 ITD 121 (Del) for the proposition that where the assessed has travelled beyond the scope of grounds of appeal and the controversy that has not been raised before the revenue authorities, the claim was beyond the scope of the appeal, as such, deserves to be rejected.

40. With regard to assessed's challenge to sections 234A and 234B which though not argued by the learned authorised representative, learned Departmental Representative placed reliance on the orders of tax authorities. Reliance was also placed upon the decision of the Apex Court in the case of CIT v. Anjum M.H. Ghaswala & Ors. (2001) 252 ITR 1 (SC) for the proposition that the interest under sections 234A and 234B is mandatory.

41. Accordingly, on the basis of the above detailed arguments, it was contended by her that the assessing officer has rightly charged on the facts of the case.

42. Learned authorised representative, in reply, argued that if any mistake has been committed by BHEL and any salary certificate has been filed by virtue of which tax has been paid and income has been returned, the assessment made is bad in law and deserves to be quashed. It was conceded that no doubt the Allahabad High Court does not squarely cover the issue at hand but relying upon the ratio of the said judgment, it was contended that the assessments deserve to be quashed.

43. Having heard the rival submissions and perused the material placed on our files, and the judgments relied upon before us by both the sides, we are of the opinion that in the present facts of the case, no interference is called for. There is no dispute over the issue that the returns were filed by BHEL on account of the foreign technicians. The salary certificates have been duly signed by the appropriate persons. No challenge is posed to the same by the assessed up to this stage. On the contrary, the returns have been filed voluntarily by the assessed himself. In the present facts of the case, the assessed undisputedly filed the returns voluntarily duly accompanied with the salary certificates duly signed by the appropriate person after section 143(1) intimation. When reopening was done under section 147 thereupon the assessed filed a return under protest showing the same income. Aggrieved by the assessment made in pursuance to section 147, in appeal before the Commissioner (Appeals), the assessed raises only one ground pertaining to sections 234A and 234B but on the date of hearing, additional grounds were sought to be raised when, for the first time, the assessed challenges that the income was not correctly assessed and was wrongly shown by the assessed in the return. Having given our due consideration to the peculiar facts of the case, we are of the opinion that in the present facts, it would not be fair to allow the assessed to agitate at this stage that the return was filed under a mistake. We have taken cognizance of the fact and it is a settled position of law that the provisions of section 147 are for the benefit of the revenue and when any action is taken or proposed to be taken under this section, then the assessed cannot, while challenging the action under section 147, turn the appeal for a review or revision of the assessment proceedings.

44. We would further like to state that the facts as they stood before the Hon'ble Allahabad High Court in the case of Tomasek Alexander & Ors. (supra), were distinguishable. Therein, the assessed had challenged under the provisions of section 264 the action of the assessing officer. Apart from that, therein, the status of the assessed for the year under consideration was also different. There, the assessed by virtue of being in India for less than 182 days, was undisputedly on facts not resident and on the basis of this, relying upon the DTAA artical 15, sub-clause (2), it was found that all the conditions, namely, in (a), (b) and (c) of the said sub-clause were fully satisfied. As such, on this reasoning, the amount was held to be not taxable in India whereas the facts in the present was are distinctly different.

45. Similarly, in the case of Morgenstern Werner (supra), the assessed had moved a petition under section 264. Therein, the arguments before the tax authorities as well as the Hon'ble Allahabad High Court were on the basis of section 5(1)(c) and section 6(6) of the Act and although the DTAA was not considered at all but the facts there were that the salary was not received in India but was received from M/s. Siemens in Germany. Therein, the foreign technicians in India were the employees of M/s. Siemens who as a matter of fact have received their salaries from M/s. Siemens in Germany. In the facts before us, there is no such finding of fact. Moreover, no arguments have been addressed to state that the contract entered into between BHEL and M/s. Simens, on one hand, and BHEL with M/s. Skoda Export, on the other, is identical or materially similar. Without entering into the controversy purely examining the contract placed before us, it is seen that clause (31) bears out the fact that the payment is made by BHEL in rupees. The fact was confronted to the learned authorised representative that why the payment should be made in rupees in Czechoslovakia and the tax thereon had also been borne by BHEL and paid to the Government of India in India. The learned authorised representative had conceded that the payment is received in India in rupees. Thus, the facts of the two cases are diametrically different.

46. In the course of the arguments, in a cursory manner, on the first date of hearing, reference by the learned authorised representative was made of the judgment of the Hon'ble Supreme Court in the case of Daryao & Ors. v. State of U.P. AIR 1961 SC 1457 for the proposition that rule of res judicata is not merely a technical rule but is based on public policy on the basis of which it was contended that the judgment of the Allahabad High Court in Tomasek Alexander (supra) will operate. We are in full concurrence with the view relied upon by the learned authorised representative and, in fact, there can be no dispute over this settled proposition of law. Without even entering into the arena that res judicata does not act as a bar in income-tax cases as each year is an independent year, in the present facts of the case as was specifically brought to the notice of the learned authorised representative the facts as appreciated by the Hon'ble Allahabad High Court which happens to be the jurisdictional High Court were diametrically different. Apart from the fact that the status of the assessed in the facts therein and the facts as before us were different, there was also a difference of the route adopted in the two proceedings. The facts as they stood before the Hon'ble High Court were that there the assessed Realizing its mistake moved a revision petition before the first appellate authority under section 264, whereas here even after filing return under protest under section 147 showing the same income and raising in appeal before the Commissioner (Appeals). The grounds pertaining to sections 234A and 234B, the assessed raised the additional ground at the time of argument for the first time that the return was filed by mistake. We are of the view that this argument cannot be allowed to be raised for the first time at this stage in the situation where the reopening is made under section 147 which provision admittedly is for the benefit of the revenue. It would be against the settled principle of law, namely that section 147 is for the benefit of the revenue and not for the assessed and the reopening cannot be allowed to be treated as a review or a revision by the assessed as was held by the Apex Court in CIT v. Sun Engineering (supra). As such, apart from the abovementioned difference, the facts as appreciated in the jurisdictional High Court's decisions are diametrically different as has been discussed by us in the earlier part of our order.

47. Thus, after fully addressing the arguments raised by the learned authorised representative, we are of the opinion that no interference is called for in the impugned order. With regard to various challenges posed in the present appeal which were not argued by the learned authorised representative though the learned Departmental Representative has put up a strong defense in each one of them, having gone through the impugned order and considering the submissions of the learned Departmental Representative, we are of the opinion that in the facts of the case, it is not necessary to deal with those issues separately as we are fully satisfied by the reasons and finding of the Commissioner (Appeals) which are supported by the proposition of law relied upon by the learned Departmental Representative. As such, the action of the tax authorities is upheld. Accordingly, the grounds raised by the assessed are rejected.

48. In the result, the appeal filed by the assessed is dismissed.

49. It was a common stand of the learned authorised representative and the learned Departmental Representative that the facts in the other remaining ten appeals are identical though the number of dates vary but in each one of them, the stay in India is definitely for more than 182 days. As such, no separate arguments were addressed either by the learned authorised representative or the learned Departmental Representative as the consensus was that there is no change in material facts and circumstances. In view thereof, relying upon our reasoning and finding given in ITA No. 1653/Del/1996, the grounds raised by the assesseds in all these appeals for identical reasons are rejected.

50. In the result, all the appeals filed by the assesseds are dismissed.