TMI Blog2003 (2) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... o as "the Act"), the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (for short "the Tribunal"), vide its order dated July 29, 1992, has referred the following question for the opinion of this court: "Whether, on the facts and in the circumstances of the case, and in law the Tribunal was right in holding that the technical fees of Rs. 1,13,572 and Rs. 1,79,775 were required to be charged at 20 per cent. as per the provisions of section 115A(1)(b)(ii) of the Income-tax Act, 1961, as it stood at the relevant time?" The facts of the case are that the assessee Foss Electronic, a non-resident foreign company is developer of milko tester minor and designer and manufacturer of milk analysers (hereinafter referred to as "the foreign company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, he issued notice to the assessee, foreign company, why the assessment should not be revised in relation to the aforesaid assessment years. After hearing the assessee, the Commissioner took a view that the amount received by the assessee-foreign company was received as a fees towards know-how instalments and technical services rendered, i.e., training of Indian engineers abroad, deputation of foreign personnel to India to assist in the initial production and the relevant clause is section 115A(1)(b)(iii) of the Act and the tax should have been charged at 40 per cent. and not 20 per cent. That order of the Commissioner of Income-tax passed under section 263 of the Act was challenged by the foreign company-assessee before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is whether the relevant provision for tax in the case of the assessee is section 115A(1)(b)(ii) of the Act or section 115A(1)(b)(iii) of the Act. For that we have to go through the articles of agreement entered into in between the Indian company and the assessee-foreign company. Clause (4) of the recitals provides that the Indian company licensee wishes to enter into an agreement with Foss (assessee). The relevant para reads as under: "(4) Licensee wishes to enter into an agreement with Foss for the purchase of technical information and technical assistance relating to milko-tester minor, including licences under patents relating thereto, owned or controlled by Foss. In particular, licensee intends to manufacture the milko-tester minor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of payment in lieu of supply of technical know-how. Article 14 provides for rights to continue to use the technical information. As per article 14 of the agreement, the licensee, i.e., the Indian company, will continue to use the technical know-how after the expiry of the agreement period and if there was no default in payment, the licensee, i.e., the Indian company, can use that technical know-how after the expiry of that period at free of cost. If we go by the conditions of the agreement, the amount which has been paid in lieu of supply of technical know-how, it cannot be said that the amount which has been paid for technical know-how or for the assistance provided by the assessee-foreign company is payment against royalty. The entir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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