TMI Blog1988 (10) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... eration of the special equipment, operation of the processes and use of essential specialty chemical products, which help to eliminate the use of lime-stone and hard coke, save on energy consumption, reduce pollution effects and also reduce the substantial sugar losses in carbonation mud in the manufacture of plantation white sugar (known as "process technology"). The patents, the "process technology" and special equipment used together are known as "TALODURA" and "TALOFILTRATE" processes (referred to as "Talo Processes"). The DCM wanted to adopt the "Talo Processes" to treat juice evaporator syrup and filtrate for the manufacture of the product at its existing sugar factories inIndia(Debrala). Therefore, DCM entered on12-10-1983into a Technical Collaboration Agreement with TL for the transfer of comprehensive technical information and know-how and the supply of equipment by TL to DCM. As per this Agreement, the information relating to "Talo Processes" was to be transferred to DCM by TL outsideIndia. In consideration of the supply of the documents concerning the processes, DCM had to pay a total amount of pound 1,55,000 in four instalments. The first instalment of pound 38,750 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on entered into between the Government of India and the Government of UK for the avoidance of double taxation [vide Notification No. GSR 612(E) dated 23-11-1981 of the Ministry of Finance (Department of Revenue)], the term "royalties" in para 3 of Article XIII has been defined to mean payments of any kind including rentals received as a consideration for the use of, or the right to use : " (a) any patent, trademark, design or model, plan, secret formula or process ; (b) industrial, commercial or scientific equipment, or information concerning industrial, commercial or scientific experience ; (c) any copyright of literary, artistic or scientific work, cinematographic films, and films or tapes for radio or television, broadcasting, but does not include royalties or other amounts paid in respect of the operation of mines or quarries or of the extraction or removal of natural resources. " The two definitions are not identical as under the Double Taxation Avoidance Agreement, the definition is a truncated one. The IAC (Asst.) however, seems to have gone by the definition of "royalty" under the Income-tax Act, 1961. 3. In appeal, although the learned CIT (A) accepted the positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording to which, the profits of an enterprise of a contracting State could be taxable only in that State unless the enterprise carries on business in the other contracting State through a permanent establishment situated therein. He also referred to Article V in this connection which defines the term "permanent establishment" as a fixed place of business in which the business of the enterprise is wholly or partly carried on. Pointed reference was also made by him in this connection to para 2(j) of Article V wherein "permanent establishment" is provided to include a building site or construction, installation or assembly project or supervisory activities in connection therewith, where such site, project or supervisory activity, continues for a period of more than six months, or where such project or supervisory activity, being incidental to the sale of machinery or equipment, continues for a period not exceeding six months and the charge payable for the project or supervisory activity exceed 10 per cent of the sale price of the machinery and equipment. He also in this connection referred to a certificate dated 2-3-1984 of TL to the effect that they had no permanent establishment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have considered the rival submissions of both the sides as also the decisions referred to above. The double taxation avoidance agreements are referable to sections 90 and 91 of the Income-tax Act, 1961. Where a specific provision is made in the double taxation avoidance agreement, that provision prevails over the general provisions contained in the Income-tax Act. The laws in force in either country continue to govern the assessment and taxation of the income in the respective countries except where provisions to the contrary have been made in the agreement. This position is not under dispute before us and was also clarified vide Circular No. 333 dated2-4-1982of the Foreign Tax Division. 7. Therefore, we have to examine the definition of 'royalty' under the double tax avoidance agreement rather than under the Income-tax Act, 1961. It would, therefore, not be necessary to look at the dictionary meaning of the said term or even to refer to the Circular dated9-8-1969of the Board dealing with the nature and meaning of this term. A perusal of the Technical Collaboration Agreement shows that the amount of pound 1,55,000 was to be paid by DOM to TL once for all as consideration for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless the enterprise carries on business in the otherContractingStatethrough a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but to the extent attributable to that permanent establishment. Article V of the said agreement defines the term 'permanent establishment' as meaning a fixed place of business in which the business of the enterprise is wholly or partly carried on. Thereafter, certain categories --- (a) to (j) are enumerated which would be included in the term 'permanent establishment'. Neither under the main definition nor under the inclusive part thereof it could be said that TL has a permanent establishment inIndia. In this connection, it is also relevant to notice that TL had clearly stated in its certificate dated 2-3-1984 that the amount payable by DCM in terms of the agreement entered into on 12-10-1983 for the disclosure of the know-how constituted business profits in terms of Article VII of the Convention and that TL had no permanent establishment in India in terms of Article V of the Convention. This certificate was obtained by the assessee prior to the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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