K.C.Agarwal, Actg.C.J. - (1.) This application filed under Section 256(2) of the Income-tax Act by the Department raises the following two questions of law : "1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that there is neither any business connection between M/s. Schreiner and M/s. Inter Aviation Service Co. in India nor is there any payment to them by M/s. Schreiner from India ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the Commissioner of Income-tax (Appeals) was entirely justified in drawing the inference that M/s. Schreiner cannot be held as an agent of M/s. Inter Aviation Service Co., A. G. ?"
(2.) In brief, the background of these two questions raised was that M/s. Schreiner Airways B. V., a non-resident company, during the accounting period relating to the assessment year 1985-86, carried on the business of providing helicopter services to the Oil and Natural Gas Commission of India, as per the agreement between the parties, dated September 13, 1988. M/s. Schreiner Airways B. V., in turn, engaged M/s. Inter Aviation Service Co., another non-resident company, for repairs and maintenance of its helicopters, during its operation, while rendering the services to the Oil and Natural Gas Commission of India and, accordingly, the case of the Revenue was that M/s. Schreiner Airways had paid money to M/s. Inter Aviation Service Co. for repairs and maintenance of its helicopters and, consequently, M/s. Schreiner Airways was the agent of M/s. Inter Aviation Service Co. and, as such, liable to be assessed under the Income-tax Act on the amount disclosed by the Revenue. The Revenue claimed that, under Section 9(1) read with Section 163 of the Income-tax Act, M/s. Schreiner Airways had to be held as an agent of M/s. Inter Aviation Service Co. and, as such, was liable to pay income-tax.
(3.) The Income-tax Officer, by his judgment dated November 13, 1986, upheld the contention of the Revenue and held that M/s. Schreiner Airways was the agent of M/s. Inter Aviation Service Co. for the assessment year 1985-86. Aggrieved, M/s. Schreiner Airways went up in appeal before the Commissioner of Income-tax (Appeals), Meerut, who differed with the findings of the Income-tax Officer and reversed the same by holding that : "no activities were carried out by M/s. Schreiner Airways in agreement with M/s. Inter Aviation Service Co. in India. It is also clear from the certificate that no helicopters were sent for repairs to M/s. Inter Aviation Service Co. which were plied in India in agreement with the appellant company and the ONGC. The services were rendered by M/s. Inter Aviation Service Co. for repairing and overhauling of helicopters in Switzerland for the helicopters plied-outside the territory of India. In view of this factual position, the appellant, M/s. Schreiner Airways, cannot be treated as an agent of M/s. Inter Aviation Service Co., A. G. for taxation purpose. The order passed by the Assessing Officer is not sustained.";