Ita/682/2008 Of Director Of Income-Tax (International Taxation) v. Harnischfeger (U.k.) Limited

ORDER SHEETIN THE HIGH COURT AT CALCUTTACivil Appellate JurisdictionORIGINAL SIDE ITA/788/2008DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION), KOLKATA-Versus-HARNISCHFEGER (U.K.) LTD.-And-ITA/682/2008DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-Versus-HARNISCHFEGER (U.K.) LTD. BEFOREThe Hon’ble Justice I.P. MUKERJI-And-The Hon’ble Justice BISWAROOP CHOWDHURYDate: 13[th] October, 2023 Mr. Aryak Dutt withMs. Riya Kundu, Advs....for the appellant in ITA/788/2008. Ms. Smita Das De, Adv....for the appellant in ITA/682/2008.Mr. J.P. Khaitan, Sr. Adv. withMr. Somak Basu, Adv....for respondent. The points in each of the appeals are similar. We have taken themfor hearing together and are disposing of the same by this commonjudgement and order. On 12[th] September, 2008, these appeals under Section 260A ofthe Income Tax Act, 1961 were admitted by a division bench of this courton the following questions of law : “i)Whether in the facts and in the circumstances of thecase, the Income Tax Appellate Tribunal is correct inholding that income from supply of spare parts by theassessee non-resident company was not liable to tax inIndia on the ground that the agreement for maintenanceof the shovels supplied was divisible and not acomposite one and that the sale took place outside Indiacontrary to the facts to the effect that the spares weresupplied in India in connection with the maintenance of the shovels supplied and as an integral part of thecomposite agreement for maintenance, the spares notused remained the property of the assessee company,the spares were used according to the requirement forthe maintenance and the remuneration therefor waspayable hourly with reference to the maintenance ? Whether, on the facts and in the circumstances of thecase, the Income tax Appellate Tribunal is correct inholding that only 15% of 47% of the payment made formaintenance of the shovels supplied by the assesseecompany was liable to tax contrary to the facts to theeffect that 53% payment to Voltas Ltd. distributor of theassessee, was on behalf of the assessee company, thegrounds of appeal before the Tribunal were withreference to the individual items of the expenditureclaimed and allowed for the maintenance work, theentire payment was with reference to the time consumedin the maintenance on account of labour and overheadcharges and there is no basis for estimating the incomeat 15% instead of the actual income after allowing theexpenditure incurred and allowable and the finding ofthe Tribunal to the effect that the appointment of theVoltas Ltd. by the assessee resulted in maintaining apermanent established by it ?” Two substantial points are involved in these appeals. The first is,whether the appellant had a service permanent establishement in Indiaso as to be eligible to income tax in this country? The second is :Whether the contract between the respondent and the Indian buyercompany was composite in nature or divisible? As far as the first point is concerned, the learned tribunal, by itsimpugned judgement and order dated 31[st] January, 2008, held that the respondent did have a service permanent establishment in India. It hadheld so after a detailed analysis of facts, evidence and with compellingreasons. The second point was : Whether the agreement of the respondentwith the Indian buyer for the sale and supply of electric shovels wasseparable from the one for the supply of spares and maintenance of theelectric shovels or was it part of a composite agreement? The tribunal by detailed reasons came to the finding that thecontract and transactions were divisible and that the responsibility forcarrying out the contract with the Indian buyer was entrusted by theagreement to Voltas, which had a major and separate role to play in theperformance of the contract and in maintenance of the said equipmentssold. respondent did have a service permanent establishment in India. It hadheld so after a detailed analysis of facts, evidence and with compellingreasons. The second point was : Whether the agreement of the respondentwith the Indian buyer for the sale and supply of electric shovels wasseparable from the one for the supply of spares and maintenance of theelectric shovels or was it part of a composite agreement? The tribunal by detailed reasons came to the finding that thecontract and transactions were divisible and that the responsibility forcarrying out the contract with the Indian buyer was entrusted by theagreement to Voltas, which had a major and separate role to play in theperformance of the contract and in maintenance of the said equipmentssold. We are of the view that there is absolutely no dispute about thelaw applicable. The dispute was with regard to the certain facts whichwere essential to be established for application of the law. The finding onfacts, as held by the tribunal, are reasonable and a plausible view of thematter. Hence, we do not find any substantial question of law involved tocall for our interference with the said order of the tribunal. We dispose of each of the appeals by answering question nos. 1and 2, stated in the first paragraph of this order in the affirmative. (I.P. MUKERJI, J.) (BISWAROOP CHOWDHURY, J.) K. BanerjeeA.R. (C.R.)