Pramod Kumar, A.M., - (1.) AS these three appeals relate to the same assessee and involve somewhat identical issues, we are taking up all these appeals together, as a matter of convenience, for disposal by way of this consolidated order. In all the appeals, common ground of the revenue is that on the facts and in the circumstances of the case, the Commissioner (Appeals) has erred in concluding that 'the assessing officer was not justified in refusing the NOC to the assessee' and in directing that 'the tax already deducted at source should be refunded to the assessee as it was not incumbent on the part of the assessee to deduct tax at source'. To put it in simple words, revenue is aggrieved that Commissioner (Appeals) erred in holding that no tax was required to be deducted from certain remittances made by the respondent.
(2.) WE will first take up ITA Nos. 970 and 971/Cal/1998 which relate to the respondent's liability of deducting tax at source from two payments, amounting to French Francs 5,14,790 and French Francs 3,14,950 covered by the respective appeals, made to one M/s Decoufle s.a.r.l., France, on account of installation and commissioning charges in respect of certain machineries purchased from this very French company.
(3.) BRIEFLY stated, material facts of the case are that respondent, i.e., ITC Ltd. (hereinafter referred to as "the assessee tax -deductor") imported two sets of machines from M/s Decoufle s.a.r.l., France, (hereinafter referred to as 'Decoufle'). Decoufle also deputed its technicians, for installation and commissioning of these machines, 6 -3 -1995 to 10 -7 -1995 (146 days), and 15 -3 -1995 to 29 -5 -1995 (75 days), respectively. It was in connection with this installation and commissioning of machines that the assessee was to pay sums of French Francs 5,14,790 and French Francs 3,14,950 (net of taxes) to Decoufle. The assessee moved application under section 195 of the Income Tax Act (hereinafter referred to as 'the Act') and prayed for issuance of a 'no objection certificate' for remitting these sums without any deduction of tax at source. It was contended that installation and commissioning of machines does not constitute 'technical services fee' within meaning of Explanation 2 to section 9(1)(vii) of the Act and that it is in the nature of business profits. The assessee further contended that in view of article 5(3) of India France Double Taxation Avoidance Agreement, Decoufle did not have 'permanent establishment' (hereinafter referred to as 'PE') in India as installation project did not exceed six months. It was also submitted that unless the French company has a permanent establishment in India and unless the income arises from the business carried through the permanent establishment in India (article 7(2)1, the same cannot be brought to tax in India. A declaration by Decoufle regarding non -maintenance of PE in India was also filed before the assessing officer. The assessing officer, however, was far from impressed. The assessing officer observed that the installation and commissioning services were requisitioned by the assessee after the import of machines in questions and, therefore, such services cannot be said to be integral part of transaction. It was also observed that Explanation 2 to section 9(1)(vii) was not applicable to the facts of this case as the same covered only an assembly project whereas installation and commissioning in question cannot be termed as an assembly project. The assessing officer thus held the fees paid for installation and commissioning of machines as income of the French company taxable in India under section 5(2)(b) read with section 9(1)(vii) of the Act. It was also held that in view of the provisions of section 115A(1)(b) of the Act, the aforesaid income was taxable at the rate of 30 per cent. The assessing officer also mentioned that on earlier occasions also, the assessee -company had made payments under similar circumstances, to Decoufle and the NOCs (i.e., orders under section 195(2)] were issued on the conditions of deducting the tax at the rate of 30 per cent, which were never agitated by the assessee. Accordingly, assessing officer directed the assessee to deduct the tax at source from the payments made to Decoufle at the rate of 30 per cent. Aggrieved, the assessee carried the matter in appeal before the Commissioner (Appeals). In appeal learned Commissioner (Appeals) observed that 'there is no denying the fact that M/s Decoufle has supplied the machines to assessee -company' and 'it has also installed and commissioned the machine for operation'. It was, therefore, concluded that 'it cannot be said that M/s Decoufle has provided technical consultancy service to the appellant'. The Commissioner (Appeals) further observed that Decoufle did not have any 'permanent establishment' (hereinafter referred to as PE) in India and that unless the Decoufle has a PE in India or unless the installation project takes more than six months time, income embedded in such payments was not taxable in India. It was stated that when there is no PE and the installation project does not take time beyond six months, the tax has to be paid in the country from which plant and machinery is purchased and from which the persons come for setting up and installing the plant and machinery. In support of this proposition, a reference was made to articles 5 and 7 of the India -France DTAA. It was in this background that the Commissioner (Appeals) came to the conclusion that the assessing officer was not justified in declining issuance of a no objection certification for remittances to Decoufle, without any deduction of tax at source. The Commissioner (Appeals) also directed the assessing officer that 'refunds (of taxes already deducted) may be issued forthwith'. Revenue is aggrieved and in appeal before us.;