Allahabad H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there is neither any business connection between Schreiner and Inter Aviation Service Co. in India nor is there any payment to them by Schreiner from India ?

K. C. AGARWAL, ACTG. C. J.:

This application filed under s. 256(2) of the IT Act by the Department raises the following two questions of law:

” 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there is neither any business connection between Schreiner and Inter Aviation Service Co. in India nor is there any payment to them by Schreiner from India ?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the CIT (A) was entirely justified in drawing the inference that Schreiner cannot be held as an agent of 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 asst. yr. 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, dt. 13th Sept., 1988. Schreiner Airways B. V., in turn, engaged 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 Schreiner Airways had paid money to Inter Aviation Service Co. for repairs and maintenance of its helicopters and, consequently, Schreiner Airways was the agent of Inter Aviation Service Co. and, as such, liable to be assessed under the IT Act on the amount disclosed by the Revenue. The Revenue claimed that, under s. 9(1) r/w s. 163 of the IT Act, Schreiner Airways had to be held as an agent of Inter Aviation Service Co. and, as such, was liable to pay income- tax.

3. The ITO, by his judgment dt. 13th Nov., 1986, upheld the contention of the Revenue and held that Schreiner Airways was the agent of Inter Aviation Service Co. for the asst. yr. 1985-86. Aggrieved, Schreiner Airways went up in appeal before the CIT (A), Meerut, who differed with the findings of the ITO and reversed the same by holding that: ” no activities were carried out by Schreiner Airways in agreement with Inter Aviation Service Co. in India. It is also clear from the certificate that no helicopters were sent for repairs to Inter Aviation Service Co. which were plied in India in agreement with the appellant company and the ONGC. The services were rendered by 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, Schreiner Airways, cannot be treated as an agent of Inter Aviation Service Co., A. G. for taxation purpose. The order passed by the Assessing Officer is not sustained.”

4. In appeal, a certificate dt. 28th March, 1986, had been filed on behalf of the assessee, Schreiner Airways, obtained from Inter Aviation Service Co. to the effect that, during the fiscal year in question, nothing has been done which could establish the requirement of s. 163 of the IT Act. The certificate stated that— “(a) no employee or technician from our company visited India in connection with Schreiner’s operations ; (b) no repairs of helicopters or parts were carried out by our company in India. (c) no helicopters or parts used in India were sent to us for repairs or sent back by us to India, either in this year or the following years after the said repairs had been effected.”

After having placed reliance on the aforesaid certificate, the CIT (A) reversed the findings of the ITO and found that Schreiner Airways was not an agent of Inter Aviation Service Co. during the year underassessment for taxation purposes.

The Department took the matter in appeal before the Tribunal, but failed. All the findings recorded by the CIT (A) were affirmed by the Tribunal. In paragraph No. 20 of the judgment, the Tribunal held— “From the facts, as brought out above, it is clear that there is neither any business connection between Schreiner and Inter Aviation Service Co. in India nor is there any payment to them from India. In the circumstances, the learned CIT (A) was entirely justified in drawing the inference that Schreiner cannot be held as agent of Inter Aviation Service Co. A. G.”

After the said decision, the Revenue moved an application under s. 256(1) of the IT Act before the Tribunal which was rejected on the ground that no question of law arose from its judgment. Thereafter, the present application under s. 256(2) of the IT Act has been filed by the Department.

We have heard learned counsel for the parties and are of the opinion that the question whether Schreiner Airways was an agent of Inter Aviation Service Co. is a finding of fact inasmuch as it is based on the inferences drawn from the facts of the case.

A finding based on inferences drawn from the facts of a case is purely a question of fact and no statable question of law arises under s. 256 (2) of the IT Act from such a finding. Moreover, learned counsel for the assessee also cited before us a decision of the Supreme Court in the case of CIT vs. Toshoku Ltd. (1980) 19 CTR (SC) 192 : (1980) 125 ITR 525, in support of his contention that an income earned as commission by a non-resident company outside the country cannot be held taxable in India. That being so, we do not find any merit in the submission of the Department and this application under s. 256 (2) is, accordingly, rejected.

[Citation :182 ITR 429]