<JGN>A. Venku Reddy,</JGN> J.M. - (1.) THESE appeals by the assessee in default, are directed against the consolidated order dt. 25th January, 1996 of the learned CIT(A). Hyderabad, confirming the order dt. 23rd November, 1995 passed under s. 201 of the IT Act by the ITO (TDS), Hyderabad, for the asst. yrs. 1991-92, 1992-93 & 1994-95, directing the assessee, in default to pay the deducted/deductible tax of Rs. 59,41,600 together with the interest of Rs. 28,79,435 levied under s. 201(1A) of the IT Act. Since a common issue arises for consideration in all these appeals, they have been heard together for disposal by a consolidated order.
(2.) According to the ITO (TDS), Hyderabad, the appellant a resident Indian company, made certain payments to a non-resident foreign company M/s. Lurgi Gmbh, West Germany, towards technical know-how and deducted the tax due thereon, but did not remit the tax deducted during the financial years 1991-92 and 1993-94 to the Government. In respect of the tax deducted during the financial year 1990-91, the appellant remitted the same to the Government with a delay of 13 months. Following is the table showing details of payments made to the foreign company and deductions to tax at source : judgement_5454_tlit0_19990.htm The TDS amount of Rs. 18,53,282, relating to the financial year 1990-91, though deducted on 19th June, 1990 was actually credited to the Central Government on 12th August, 1991 with a delay of 13 months. The tax deducted during the financial years 1991-92 and 1993-94, total amounting to Rs. 59,91,600 was not at all remitted to the Government. It would appear that the annual report of the appellate-company for the period ending 30th June, 1994 has shown outstanding liability of Rs. 59,41,600 being the income-tax deducted at source. The said fact came to the notice of the ITO (TDS). Hence, the ITO issued a notice dt. 8th November, 1995, calling upon the appellant to state the reasons for the non-remittance of TDS into Government account. He also requested the appellant in the said letter to furnish proof in case the tax was already remitted and further directed the appellant to file Annual Returns under Chapter-XVI for the years relevant to the financial year 1991-92 to 1994-95. In response to the said notice dt. 8th November, 1995, the appellant filed a letter dt. 17th November, 1995, along with certain enclosures. However, the said letter was silent on the aspect of payment of TDS of Rs. 59,41,600. On 22nd November, 1995, the ITO visited the office of the appellant-company to ascertain whether the tax deducted/deductible was, in fact remitted into the Government account or not. He was informed by the general manager (finance) of the appellant company that the TDS was not remitted even till 22nd November, 1995. Hence, on 23rd November,1995, the ITO made the impugned order under s. 201 treating the appellant as assessee in default in respect of the said amount of Rs. 59,41,600 not remitted to the Government. Further, the ITO levied total interest of Rs. 28,79,435 on the delayed remittance of TDS relating to the financial year 1990-91 and on the unremitted TDS for the financial years 1991-92 and 1993-94. Accordingly, the ITO passed an order under s. 201 directing the appellant to pay the unremitted TDS of Rs. 59,41,600 together with interest of Rs. 28,79,435.
(3.) AGGRIEVED by the order under s. 201 of the IT Act passed by the ITO, the assessee in default preferred the appeal before the CIT(A) contending inter alia that the ITO had not given a proper opportunity to the appellant to explain its stand as to how it is not liable to deduct or remit TDS on the payments made to the non-resident foreign company, that the appellant had only acquired certain assets absolutely from the foreign company outside India and no portion of the payment made for acquiring the said assets by it to the foreign company gave rise to any income arising or accruing in India under s. 9 of the IT Act, that the appellant acquired only basic engineering and licence on the basis of an outright sale, that the consideration paid by it for acquiring them cannot be treated as income arising or accruing in India to the foreign company, that on the said payments no income chargeable to income-tax in the hands of the foreign company arose or accrued in India particularly in view of the Agreement for a Avoidance of Double Taxation (AADT) executed between India and the Federal German Republic of Germany and that when no income chargeable to tax in the hands of the foreign company accrued or arose in India, the question of the appellant deducting TDS on the payments made by it to the foreign company and remitting the same to the Government does not arise at all. Thus, in effect, the stand taken by the appellant before the first appellate authority was that the payments made by it to the foreign company, cannot be considered either as "royalty" under s. 9(1)(vi) or as "fees for technical services" falling under s. 9(i)(vi) of the IT Act, that the entire transactions of delivering the basic engineering and licence and payment of consideration for them all took place outside India and nothing happened in India, that what was acquired by way of basic engineering and licence was a capital asset or plant for which it paid price and that there was no liability on its part to make any deduction of tax out of the consideration paid by it to the foreign company for basic engineering and licence.;