S.H Kapadia, J.:— The assessee approached the Assessing Officer for issuing a no objection certificate for remitting certain amounts to the foreign company. The Assessing Officer was of the view that the amounts spent by the assessee towards air-fare for the foreign technicians, their boarding and lodging and other local expenses formed part of the fees payable to the foreign company. Accordingly, the Assessing Officer directed the assessee to deduct tax on this amount before issuance of the no objection certificate. The Assessing Officer was of the view that the above expense was in the nature of a constructive receipt in the hands of the foreign company and, therefore, the same was liable to tax under section 9(1)(vii) read with section 115A and section 44D of the Income-tax Act, 1961. Accordingly, the Assessing Officer directed the assessee to deduct tax at source on all payments irrespective of the fact whether they are remitted to the foreign company or were spent on the foreign technicians of that company in India. Being aggrieved, the assessee preferred an appeal to the Tribunal which, following its decision in the earlier years, held that the foreign technicians were required to travel only by Air India and they had no option of choosing the airline. That Air India was instructed to issue the tickets in USA on the advice received by Air India in India and they travelled to India since the technicians had to work at site. It has also been held for the earlier years that in the matter of housing of the technicians in the guest house the employees had no say. Hence, it was held that they did not derive any personal benefit. In the earlier years, the Tribunal had categorically held that the assessee was only required to provide the basics on which the technicians did not derive any benefit and, therefore, no part of the expenses could be treated as payment in lieu of fees. Being aggrieved by the decision of the Tribunal, the Department has come in appeal under section 260A of the Income-tax Act.
2. The short point which arises for determination in this appeal is, whether a substantial question of law arises in this case?
3. Mr. Desai, learned counsel appearing on behalf of the Department, contended that section 195 provides for deduction of tax at source subject to regular assessment. He contended that the scheme of section 195 clearly indicates that the expression “any other sum chargeable under the provisions of the Income-tax Act” would mean a sum on which income-tax is leviable.
4. In other words, according to learned counsel, tax was required to be deducted on the gross sum. In this connection, he relied upon the judgment of the Supreme Court in the case of Transmission Corporation of Andhra Pradesh Ltd. v. CIT, [1999] 239 ITR 587. In our view, the judgment of the Supreme Court has no application to the facts of the present case. In that matter, the person making payment did not file an application before the Assessing Officer for determination of the sum chargeable to tax. It was contended on behalf of the assessee in that matter that when payments made to the non-resident, were not entirely income, but a trading receipt then there was no question of deduction of income-tax at source as the said section did not provide for it. It was contended that what is taxable under the Income-tax Act is pure income or profits and not the gross sum. This argument was rejected by the Supreme Court by holding that the scheme of tax deduction at source applies not only to the amount paid which wholly bears the income character but also applies to gross sums. However, the said judgment was delivered in the context of the assessee making payment without filing an application for a no objection certificate before the Assessing Officer for determination of the sum chargeable to tax. It is for this reason that in the aforestated judgment, the Supreme Court has laid down that section 195(1) contemplated tentative deduction of income-tax subject to regular assessment and by the deduction of income-tax the rights of the parties were not, in any manner, adversely affected. That the only thing required to be done by the assessee was to file an application for determination by the Assessing Officer that such sum would not be chargeable to tax in the case of the recipient, or for determination of the appropriate proportion of such sum so chargeable, or for grant of a certificate authorising the recipient to receive the amount without deduction of tax, or for deduction of tax at a lower rate or for no deduction. However, if no such application is filed then the income-tax must be deducted on the gross sum. In the present case, as stated hereinabove, a specific application was made by the assessee before the Assessing Officer for determination of the sum chargeable to tax. In this case, we are not concerned with the fees remitted as Mr. Vyas fairly stated that the said amount would be taxable at source. In this matter, we are only concerned with the expenses incurred by the assessee for purchase of tickets from Air India and for local expenses. For all the earlier years, the assessee has succeeded before the Tribunal. Moreover, the said provision under section 195 is only for tentative deduction of income-tax subject to regular assessment and the rights of the parties are not in any manner adversely affected. Even in the earlier years, in the present matter, the Tribunal has clearly stated that its decision under section 195(2) should not be treated as a conclusion in the determination of income in the case of a foreign company. Hence, no substantial question of law arises.
5. Appeal is accordingly dismissed.