This appeal is preferred by assessee-company against order of Commissioner (Appeals) by which he held that appeal filed by assessee- company does not lie under provisions of section 248 of Income-tax Act, 1961 (' Act '). 2. relevant facts are: assessee-company entered into agreement on 12-1-1984 with KHD Engg. GmBH, Koln, West Germany for provision of technical know-how by latter for establishment and operation of Magnesite Benefication Plant which was to be set up by assessee- company at its magnesite works at Salem in Tamil Nadu. This agreement was approved by Government of India on 17-12-1983. Under this agreement lump sum consideration was payable by assessee-company in one instalment to West Germany company for preparing and providing to assessee-company lay out, data and other technical information for establishment of abovesaid plant. aforesaid consideration payable to West German company was net of tax, i.e., tax liability of West German company was to be borne by assessee-company. In order to remit aforesaid lump sum consideration to West German company, assessee- company has to obtain permission from RBI. Before that it has to apply to ITO for issue of no objection certificate. assessee-company made application to ITO for issue of said certificate on 1-5-1984. In that letter assessee-company pointed out that under provisions of section 115A(1)(b)(ii)(1) read with section 10(6A) of Act rate at which tax was to be deducted from remittance was 20 per cent and tax at that rate would amount to Rs. 8,29,229 and to enable to assessee-company to deposit that amount challan should be issued. assessee-company in this letter explained its viewpoint as to how rate of tax should be 20 per cent. But ITO by his letter dated 21-5-1984 informed assessee-company that its contention that remittance under consideration would fall within meaning of section 115A(1)(b)(ii)(1) chargeable to tax at 20 per cent rate was not tenable. assessee-company was requested to deduct tax at 40 per cent in order to obtain no objection certificate. assessee-company on receipt of this letter from ITO paid tax at 40 per cent which worked out to Rs, 16,55,096 on very next day, namely, 22-5-1984 but in order to establish its view that rate of tax at which tax was to be deducted was only 20 per cent, filed appeal before Commissioner (Appeals). 3. Commissioner (Appeals) refused to admit appeal under section 248 with following observations: " dispute as is evident from grounds and ITO's letter dated 21- 5-1984 is not of nature described in section 248. dispute is to whether assessee's liability for tax deduction at source falls under sub-clause (ii)(1) of clause (i) of clause (b) of sub-section (1) of section 115A or under sub-clause (iii) thereof. assessee is not one who having in accordance with provisions of section 195 deducted and paid tax in respect of any sum chargeable under this Act... denies his liability to make such deduction. company in fact admits liability for making such deduction as is mentioned in section 195 but contests amounts on basis of dispute not under section 195 but under section 115A. appeal, therefore, does not fall under section 248 and is dismissed for non-admission on that count." 4. Aggrieved by this order, assessee-company has come up in appeal before us and contention taken on behalf of assessee-company was simple, namely, that under section 248 which provides for appeal against such orders passed by ITO, first requisite was that tax must have been deducted and paid and then liability to deduct tax must be challenged. Without payment of tax under section 195 of Act no appeal would lie. Commissioner (Appeals) was under impression perhaps genuinely that assessee-company did not deposit tax. That was why he mentioned in his order that assessee was not one, who having in accordance with provisions of section 195 deducted and paid tax. It was on that erroneous impression that he held that appeal was not maintainable under section 248. Since tax was paid, learned counsel for assessee submitted that case fell squarely within provisions of section 248 and, therefore, appeal was maintainable. He requested that we should direct Commissioner (Appeals) to take appeal on record and decide issue. He placed reliance on decision of Calcutta Bench of Tribunal in case of Graphite Vicarb India Ltd. v. ITO [1986] 18 ITD 58. learned departmental representative after some discussion confessed that since tax was paid in this case as pointed out by assessee's counsel at 40 per cent, which was rate demanded by ITO, ingredients of section 248 appear to have been satisfied and, therefore, appeal was maintainable. 5. Normally this concession would have been enough for us to hold that appeal was maintainable and remit it back to Commissioner (Appeals) for disposal on merits. Before we do that, we would like to point out what exactly section 248 provided and how payment of tax is necessary requisite to qualify assessee to file appeal: " 248. Any person having in accordance with provisions of sections 195 and 200 deducted and paid tax in respect of any sum chargeable under this Act, other than interest, who denies his liability to make such deduction, may appeal to Appellate Assistant Commissioner or, as case may be, Commissioner (Appeals), to be declared not liable to make such deduction." This section on careful reading gives right to any person who having i n accordance with provisions of section 195 deducted and paid tax in respect of any sum chargeable under this Act and who denies his liability to make such deduction to file appeal to AAC or Commissioner (Appeals), as case may be, for declaration That assessee was not liable to make such deduction. In this section crucial words are ' who denies his liability to make such deduction '. In this clause most crucial words are ' such deduction '. ' Such deduction ' would mean deduction as required of him under provisions of sections 195 and 200. If under those provisions assessee was required to deduct certain amount of tax but assessee disputes quantum only if he deducts such tax and pays to Government, he will be entitled to claim before appellate authority that under provisions of Act he was not liable to deduct tax at such rate or on such amount or as case may be. denial of liability to make such deduction, therefore, in this case, would mean deduction at rate of 40 per cent. But to acquire eligibility to file appeal assessee must deposit tax at 40 per c e n t which assessee did in this case, which unfortunately missed attention of Commissioner (Appeals), which is clear from observations he made, which we have extracted above. Since tax has been paid in this case in accordance with provisions of section 195, namely, at 40 per cent, appeal is clearly maintainable. 6. We, therefore, direct Commissioner (Appeals) to admit appeal land give his decision as to whether rate of tax to be deducted at source would be 20 per cent or 40 per cent. 7. In result, appeal is allowed. *** DALMIA CEMENT (BHARAT) LTD. v. INCOME TAX OFFICER