- (1.)ON this application under Section 256(1) of the IT Act, 1961, (hereinafter referred to as 'the Act'), the Tribunal, Jaipur Bench, Jaipur (for short 'the Tribunal') vide its order dt. 29th July, 1992, has referred the following question for the opinion of this Court :
"Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the technical fees of Rs. 1,13,572 and Rs. 1,79,775 were required to be charged @ 20 per cent as per provisions of Section 115A(1)(b)(ii) of the IT Act, 1961, as it stood at the relevant time ?"

The facts of the case are that the assessee M/s Foss Electronic, is a nonresident foreign company, developer of milko tester minor and designer and manufacturer of milk analysers (hereinafter referred to as 'the foreign company') agreed on 31st Oct., 1980, to supply technical Know-how to the Rajasthan State Industrial Development and Investment Corporation Ltd. (hereinafter referred to as 'the Indian company'), which was to undertake manufacture of electronic milk analyser (milk tester minor) in the State of Rajasthan by forming a public sector company jointly with Instrumentation Ltd., Kota. As per the terms and conditions of the said agreement, the foreign company was to supply technical information, drawings, specifications, quality control, test procedure and to train the officers of the Indian company against payment of royalty/fees and remuneration. The agreement was admittedly, duly approved by the Government of India for the year under consideration.

(2.)THE foreign company, assessee, received a sum of Rs. 1,13,572 and Rs. 1,79,775 during the asst. yrs. 1985-86 and 1986-87, respectively, from the Indian company on account of technical information furnished and technical services rendered i.e., training Indian engineers abroad, deputation of foreign personnel to India to assist the Indian company in initial production of electronic milk analyser. THE ITO charged the tax @ 20 per cent as per the provisions of Section 115A(1)(b)(ii) of the Act.
On perusal of the records for the asst. yrs, 1985-86 and 1986-87, the CIT was of the view that the order of AO was erroneous and prejudicial to the interests of Revenue and, therefore, he issued notice to the assessee, foreign company, why the assessment should not the revised in relation to the aforesaid assessment years. After hearing the assessee, the CIT took a view that the amount received by the assessee foreign company was received as a fees towards know-how instalments and technical services rendered i.e., training of Indian engineers abroad, deputation of foreign personnel to India to assist in the initial production and the relevant clause is Section 115A(1)(b)(iii) of the Act and the tax should have been charged A 40 per cent and not 20 per cent.

That order of the CIT passed under Section 263 of the Act was challenged by the foreign company-assessee before the Tribunal. The Tribunal took the view that as for the asst. yrs. 1983-84 and 1985-86 tax was charged @ 20 per cent considering the amount as royalty for technical know-how fees and that has not been revised. Therefore, the Tribunal has set aside the order of the CIT passed under Section 263 of the Act vide order, dt. 29th July, 1992.

None appeared for the assessee in spite of the fact, that the reference has been listed for hearing on various dates.

Heard, Mr. R.B. Mathur, learned counsel appearing for the Revenue.

(3.)MR.Mathur has drawn our attention to the various clauses of the agreement and submits that the amount paid was as technical know-how fees and not as a royalty and, therefore, the CIT has rightly revised the order of the AO and that the tax should be charged @ 40 per cent under Section 115A(1)(b)(iii) of the Act.
We agree with the contention of Mr. Mathur that by mistake of the officer of the Department if wrong order has not been challenged that does not give any right or confer any legal authority in favour of the assessee that in subsequent years also that mistake should perpetuate. That mistake should be rectified as early as possible. Therefore, we find no justification in the order of the Tribunal in holding that as in the earlier years, the rate of tax was @ 20 per cent under Section 115A(1)(b)(ii) of the Act, the same rate should be charged in the subsequent years.

The main question for our consideration is whether the relevant provision for tax in the case of the assessee is 115A(1)(b)(ii) of the Act or 115A(1)(b)(iii) of the Act. For that we have to go through the articles of agreement entered into in between the Indian company and the assessee foreign company.