TMI Blog2006 (2) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... s by agreement dated 25-4-1991, 12-4-1994 and 20-4-1999. According to the agreements, the non-resident companies were supposed to provide know-how, technical information, technical assistance, training, manufacturing data for which licence was granted to the assessee-company for its production and updating the product in India and abroad. The licensors i.e., foreign companies who are the sole owners of the technical information or know-how granted to the assessee-company as licensee. Know-how was defined in the agreement as knowledge and technical expertise possessed by licensor. Similarly, the technical information and technical assistance were also defined therein. The different clauses of the agreement has been quoted by the learned CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty, because it is not a case of outright purchase. Against that order of CIT (Appeals), the assessee has filed the present appeals. Since the issues involved in all these appeals are common, these are disposed off by this common order. 4. The learned counsel appearing on behalf of assessee has filed a paper book containing written submissions, agreements with the foreign parties, DTAA Agreement and also Circulars issued by the Board as well as decisions of various High Courts. It was submitted that the foreign parties entered into agreement with the assessee to supply technology through documents at his country i.e., at the foreign country. It was submitted that under article 7 of DTAA there is a clause for exemption of such fees to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaning of royalty under article 12 of Double Taxation Avoidance Agreement. Similarly the payment comes within the meaning of royalty as provided under section 9(1)( vi ) of the Income-tax Act. The Learned Departmental Representative supported the orders passed by the learned CIT(Appeals) on this matter. 6. We have heard both sides. The Learned CIT(A) in his order has held that the payment made by the assessee is royalty within the meaning of section 9(1)( vi ) of the Income-tax Act and article 12 of DTAA between India and USA. At page 14 of the order, the meaning of royalty as provided in article 12 has been reproduced by Learned CIT(A). According to that provision, "payment of any kind received as consideration for the use of or right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use or disposition thereof; and ( b )payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2( c ) or 3 of article 8." We have already held that clause ( a ) by which payment is made for right to use of any copyright is not applicable in the present case. Under clause ( iv ) fees for included services means payments of any kinds to any person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n but also undertakes to supply the licensee with technical know-how that is to say, information from his own experience on the most efficient and economical way of working the patent. It is estimated that more than 50% of license contracts include know-how provisions." 8. The Hon ble High Court also considered the decision of Karnataka High Court in the case of Citizen Watch Co. Ltd. v. IAC [1984] 148 ITR 774 , where it has been held that the term royalty is referable to payments to be made for use of patents and it does not include fee payable for supply of documents and information. In the case of CIT v. Mitsui Engg. Ship Building Co. Ltd. [2003] 259 ITR 248 3 , the Hon ble Delhi High Court has held as follows : "The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds dismissed." 9. The Hon ble Delhi High Court considered the decision of Madras High Court in the case of Nayveli Lignite Corpn. Ltd. ( supra ), where similar view has been taken. In view of the aforesaid discussion we find that the aforesaid materials and case laws were not examined by the learned CIT(Appeals) before taking the decision. Definitely, the aforesaid decisions have a bearing on the issue before us. Accordingly, we set aside the matter and restore it to the file of Learned CIT(A) for considering the issue afresh in accordance with law. CO.24/B/03 and CO Nos. 2 to 4/B/04 10. The Revenue has filed these cross-objections against the findings recorded by the learned CIT(Appeals). In the cross-objections reliance was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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