- (1.) These appeals are filed by the assessee against the judgment and order dated 2/07/1984 passed by the Andhra Pradesh High Court in deciding three income-tax references partly in favour of the revenue. (Re : CIT v. Superintendeing Engineer, Upper Sileru, (1985) 152 ITR 753 : (1985 Tax LR 72)). The Court held that provisions of Section 195 relating to deduction of tax at source come into operation in respect of sums paid to a non-resident, whether or not such sum represents only income or profits if such sums are paid to non-residents during the course of regular trading operation. That finding is challenged in these appeals.
(2.) Before deciding the question involved, we would refer to a few facts of the matter :- The appellant-the Andhra Pradesh State Electricity Board (hereinafter referred to as "the Board") made certain payments to non-residents against the purchase of machinery and equipment and also against the work executed by the non-residents in India of erecting and commissioning the machinery and equipment. The Board entered into two separate agreements with M/s. Charmilles Engineering Works Ltd. , Geneva, Switzerland, one for the purchase of Nos. 95,000 BHP Francies Turbines and another for purchase of 2 Nos. Butterfly Valves. There were two other contracts of the assembly, erection and testing and commissioning of the aforersaid equipments. The payments were made to the non-resident company for the financial year 1966-67 to 1972-73. The Board also entered into an agreement with Oerlikon Engineering Co. , Zurich, Switzerland, for the purchase of 2 Nos. 60 MW generators and Indoor Switchgear for the Sileru Hydro Electric Scheme. Another contract was executed for the assembly, erection and testing and commissioning of the above equipments. The payments were made in the financial years 1966-67, 1967-68 and 1968-69. Third contract was entered by the Board with M/s. Sacheron Works Ltd. , Geneva, Switzerland for the purchase and erection of 7 Nos. Power Transformers for the Sileru Hydro Electric Scheme. On the basis of the said contract in the financial year 1966-67, the amount was paid to the non-resident company. For the aforesaid payments, the question arose whether the Electricity Board was under an obligation to deduct tax at source from these payments under Section 195 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). These payments were made by the Electricity Board without deduction of tax at source. Owing to the failure of the Electricity Board to deduct such tax, it was deemed to be an assessee in default in respect of the tax deductible at source. Hence, Income-tax Officer passed orders determining the tax which, according to him, was deductible at source under Section 195 and the Electricity Board was required to pay such amounts. Against the order of the Income-tax Officer, appeals were filed by the assessee which were allowed by the Appellate Assistant Commissioner with the observation that the words "any other sum chargeable under the provisions of this Act" occurring in Section 195 of the Act do not contemplate inclusion of trade receipts in their ambit and that Section 195 applies only to cases where the sums paid are "pure income profits". The Appellate Assistant Commissioner, therefore, allowed the appeals and set aside the orders passed by the Income-tax Officer. Against the said orders, Revenue preferred appeals before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal also dismissed the appeals filed by the Income-tax Officer on the ground that the provisions of Section 195 of the Act are not applicable to payments of sums to a non-resident, which are not "pure income profits". Thereupon, on the reference applications filed by the Commissioner of Income-tax under Section 156 (1) of the Act the Tribunal referred the following question of law for the decision of the High Court for the payments made to the non-resident company :- R. C. No. 205 of 1978 : "Whether on the facts and in the circumstances of the case, the Superintending Engineer, Civil Circle, Upper Sileru, is liable to deduct income-tax u/s. 195 of the Income-tax Act, 1961 on the payments made to the non-resident company for the assessment years 1966-67, 1967-68, 1968-69 and 1969-70 -
(3.) Similar questions with regard to payments made to two other non-residents as stated above were also referred in R. C. Nos. 203 and 204 of 1978.;