Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2018 (10) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (10) TMI 1607 - HC - Income TaxRoyalty V/S fee for technical service - Payments liable to Income tax Act - scope of the work was for design of a new 3-valve cylinder head with AVL CCBR combustion system - DTAA India and Austria - Treatment to sum as royalty and bringing it to tax - claim of the assessee that the payment represent fee for technical services - revenue's plea is that clause 7 of the general terms and conditions would clearly show that the know-how and patents and the ideas introduced into the project shall remain the exclusive property of the Austrian company and therefore, what has been given to the assessee is only a right to use and therefore, the payment is royalty. Held that:- We are unable to accept the submission made by the Revenue for treatment to sum as royalty for the reason that the engine has already been developed by the assessee and scope of the technical services agreement was only to design a new 3-valve cylinder head with a specified combustion system for considerable improvement of fuel efficiency, performance and meeting the Indian emission standards. All products, design of the engines and vehicles are supplied by the assessee. On completion all the drawings are also delivered by the Austrian company to the assessee. The entire project was carried out in Austria and no part of the project was performed in India. Thus, in our considered view the CIT(A) rightly held that the payment does not constitute royalty. In the assessee's own case for the assessment years 1991-92, 1992-03 & 1994-05 [1999 (5) TMI 69 - ITAT MADRAS-A] a similar agreement came up for interpretation. In the said agreement, the Austrian company was to render technical assistance for consideration to be paid in four installments for improvement of fuel efficiency of carburetters manufactured by the assessee for two wheeler engines. The Tribunal after considering the admitted facts, pointed out that the Austrian Company was not a manufacturer of two wheelers and was only a consultant and according to the terms of the agreement between the two companies the entire technical know-how was absolutely to be passed on to the assessee and there was no grant of any right to use any property of the Austrian company and the payment could only be termed as 'fees for technical services' and could not be considered in the nature of royalty, since it was not payment for the right to use any property of the Austrian company. We find the terms and conditions of the agreement are similar to that of the agreement, which is subject matter of consideration in this appeal and the decision in the assessee's own case - Decided against revenue.
|