K.L.MANJUNATH, J. - (1.) THIS appeal is by the Revenue challenging the order passed by the Income Tax Appellate Tribunal, Bangalore Bench, in I.T.A. No. 816/Bang/2002 dated August 26, 2003, for the assessment year 2000 -01.
(2.) THE facts of this case are as hereunder: The assessee is a company incorporated under the provisions of the Companies Act, 1956 to impart education. The assessee has entered into an agreement on November 10, 1999 with IITC, which is an educational institution situated at Chicago in order to impart distance education in certain faculties. As per the terms and conditions of the agreement, IITC has to impart education on certain faculties under a programme, known as Distance Education Programme for which the assessee -company has to provide infrastructure like collecting the application forms and forward the same to IITC, for the purpose of admission and after approval of admission, to collect the tuition fees and remit the same to IITC, USA and receive the education materials from IITC, and in turn pass on the same to the students admitted by IITC in Bangalore. In other words, it has to act as a liaison office between the students who have been admitted by IITC and the IITC. The Assessing Officer considering the provisions of Section 195 of the Income Tax Act treated the assessee as an assessee in default for having, not deducted tax at source while remitting the fees collected by it on behalf of IITC. Accordingly an order under Section 201(1) and 201(1A) of the Income Tax Act, was passed. This order was challenged by the assessee by filing an appeal before the Commissioner of Income Tax (Appeals) on the ground that the IITC has no permanent establishment in India and it is not carrying on any business or trade in India, therefore, there was no necessity for the assessee to deduct tax at source as required under Section 195 of the Income Tax Act and requested the Commissioner of Income Tax (Appeals), to allow the appeal and set aside the order passed by the Assessing Officer. The contentions urged by the assessee were turned down and the appeal ultimately came to be dismissed. Against which, a second appeal before the Income Tax Appellate Tribunal, Bangalore, was filed. The Income Tax Appellate Tribunal, Bangalore having heard the counsel for the parties held that in view of the agreement entered into between IITC and the assessee and in view of the Double Taxation Avoidance agreement for United States of America pursuant to the notification dated December 20, 1990 held that IITC, USA, has no permanent establishment in India and that the fees collected by the assessee and transferred the same to IITC, USA does not attract deduction of tax at source as required under Section 195 of the Act. Accordingly, the appeal was allowed and the order passed by the Assessing Officer and the Commissioner of Income Tax (Appeals), were set aside. Being aggrieved by the same, the present appeal is filed raising the following substantial question of law: (1) Whether the Tribunal was justified in holding that the income received by IIT, Chicago from the assessee cannot be treated as an income liable to tax as per the provisions of the Indian Income Tax Act? (2) Whether the imparting distance education by the IIT, Chicago through the assessee amounts to business or trade and liable for tax? (3) Whether the Tribunal was justified in holding that the income received by IIT, Chicago would not fall under Article 7 or Article 12 of the Double Taxation Avoidance Agreement?
(3.) WE have heard the learned Counsel appearing for the parties.;