Sen, J. - (1.) The facts found and/or admitted in these proceedings are as follows: Amco Furnace Contractors Ltd., the assessee, is a non-resident. By an agreement dated the 16th March, 1964, entered into by and between the assessee and Hindusthan Steel Ltd., the assessee, inter alia, undertook to design, supply, erect and commission at a site in Durgapur, West Bengal, a forge shop and sheet mill furnaces and to supply spare parts for the same. Pursuant thereto the assessee started the work in 1964, but before the same could be completed the contract was terminated in 1967. On the 7th November, 1968, a settlement was arrived at by and between the assessee and the Hindusthan Steel Ltd. whereunder the assessee received the following amounts for works done up to the date of the termination of the contract: JUDGEMENT_868_ITR116_1979Html1.htm
(2.) The assessee was assessed to income-tax in the assessment years 1965-66 to 1968-69, the relevant accounting years being the calendar years 1964 to 1967. In course of the proceedings, it was claimed by the assessee that a part of its agreement with the Hindusthan Steel Ltd. consisted of delivery of plant and equipment, etc., outside India on f.o.b. basis, and the profits in respect thereof were not taxable under the I.T. Act, 1961. In the assessment year 1965-66, the ITO negatived such claim. The assessments in the subsequent years were made accordingly on year-wise receipt and expenditure.
(3.) Being aggrieved, the assessee preferred appeals to the AAC and contended that the payments relating to plant and equipment, etc., supplied outside India were also received by it outside India and were not taxable and that in any event such payments in respect of sale of capital assets were receipts of a capital nature and not liable to be taxed. The AAC held that there being an admitted business connection between the assessee and the Hindusthan Steel Ltd. and there being only one contract between the parties there was no reason to treat the supply of plant, equipment, etc., as a separate contract. The AAC also held that the determination of the income on the basis of total receipts and/or expenses vis-a-vis the work done was appropriate.;