2012 (3) TMI 98

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..... Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the lump sum consideration was royalty within the meaning of Article-VII of the Double Taxation Avoidance Agreement between India and Sweden as well as Sec. 9 of the I.T. Act, 1961? 2. The assessment year involved herein is AY 1986-87. The assessee is a non-resident Swedish company. The assessee had entered into an agreement with Atlas Copco (India) Ltd. on 25/3/1985 for supply of the technical know-how for the manufacture of screw type air compressors and to render technical assistance that may be required in the said manufacture during the existence of the agreement against the lumpsum consideration of US $ 1,80,000 payable in three insta .....

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..... he Indian territory. Cl. 4(a) stipulates that the assessee shall supply, impart and disclose, modifications, improvements and research in the know-how to the Indian company from time to time and vice versa. Cl. 4(b) provides restrictions on the Indian company that it shall not manufacture or sell in the market any product which did not attain the standard or degree of quality prescribed by the assessee company. Cl. 5(a) provides that the Indian company shall put the trade-mark of the assessee on all the items exported by it. Cl. 5(b) provides that the Indian company can use the trade-mark in advertisements, brochures, displays and other marketing information but will have to mention that manufacture of the items has taken place under the li .....

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..... see on account of right to use the knowhow for a specified period and there was no outright transfer of knowhow by the assessee company to the Indian Company. If the assessee retained all the rights in the knowhow to itself and only the limited right to use the knowhow was parted with under the agreement, then the amounts received thereunder would be nothing but royalty received for giving the right to use the knowhow for the limited period. 6. Moreover, Article VII of the Double Taxation Avoidance Agreement between India and Sweden, relevant to the assessment year in question reads thus :- "Article VII-Royalties derived by a resident of one of the territories from sources in the other territory may be taxed only in that other territory. .....

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