Law: Income Tax Act, 1922

Section: 66

Income-tax Act (XI of 1922)---S: 66(1) read with S. 42-Exemption from liability-Fees earned by assessee in nature of commercial profit--Assessee a foreign enterprise--­Contention as to assessee being a permanent establishment vehemently denied-No evidence produced to prove assessee being a personal establishment-Finding of lower tribunals as to assessee not being a permanent establishment, one of fact, and not challenged as being not permissible in view of evidence on record-Assessee, held, not a permanent establishment and tribunal in view of agreement between parties justified in exempting technical fee received by assessee-Question answered accordingly. JUDGMENT NAIMUDDIN, J.--By this reference and references made in I. T. C. Nos. 52/1972, 54/1972 and 58/1972 all under section 66(I) of the Income-tax Act, 1922 (hereinafter called Act) the Commissioner of Income Tax Karachi, East, seeks answer to the following question of law arising out of the common order of Income-tax Tribunal, Karachi Bench, Karachi, dated 12th. May, 1970, passed in Income-tax Appeals Nos. K-4/149, 150, 151, 152 and 153: "Whether on the facts and in the circumstances of the case the Tribunal was justified in exempting the technical fees, which are deemed to have accrued or arisen in Pakistan in view -of the provisions of section 42 of the Income-tax Act?". In order to answer the question it is necessary to refer to the acts leading to the making of the reference in this case and in the connected cases. Messrs Abbott Finance Co., S. A. R. L., Karachi, is a non-resident Association of the person (hereinafter called the Assessee) earned royalty for the use of Patent rights at the rate of 1½%. on the net sales of Abbot Laboratories (Pak.) Ltd., (hereinafter called the Company) and fee for technical services rendered to the Company under an agreement between the Assessee and the Company at the rate of ½ % on the said sales. The total amount earned by the assessee on both the counts for each of the following five financial years was as follows:- Assessment year Amount of Receipts Rs. 1963-64 15,882 1964-65 24,617 1965-66 40,328 1966-67 65,430 1967-68 1,11,813 The assessee filed income-tax…

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