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TMI Blog2003 (5) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial nature which was in the form of monthly compilation called "executive overview" containing data on Carbon Graphite Electrodes Industry in which the assessee is dealing and, hence, it was a payment for royalty. The payment was also for passing information of confidential nature on telephone as evincible from the FAX message dated January 29, 1996, and, therefore, the transaction involved imparting of information concerning technical, industrial, commercial or scientific knowledge, experience or skill and the relevant transaction is the payment of royalty by the assessee to the firm at USA, according to clause (iv) of Explanation 2 to clause (vi) of sub-section (1) of section 9 of the Income-tax Act and article 12(3) of the Avoidance of Double Taxation Treaty with the United States of America. The Assessing Officer held that according to article 12(2) of the Avoidance of Double Taxation Treaty, the amount was taxable in India and according to section 9(1) the income was deemed to accrue or arise to PCI in India. Being dissatisfied with the order of assessment the assessee-company preferred an appeal before the Commissioner of Income-tax (Appeals), Bhopal, assailing the levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (iv) of Explanation 2 to section 9(1)(vi) of the Income-tax Act. It is canvassed by him that the Tribunal has totally misunderstood the conception by arriving at the conclusion that it is a booklet though the correspondence between the parties does exposit that it is not a booklet but was information which is confidential in nature. Mr. Ajay Vohra, learned counsel appearing for the assessee, sounding a contra note, has submitted that to appreciate the whole scenario sections 5(2) and 90(2) are to be appreciated. It is his further submission that the supplier had submitted a compilation of data and such supply do not, in any manner, show any experience. It is urged by him that according to the various clauses of the treaty the information was relatable to the industrial, commercial, technical or scientific, but in the obtaining factual matrix the said test is not met and, therefore, the order passed by the Tribunal cannot be flawed. Learned counsel further submitted that when there is discrepancy between the statutory provision and the treaty relating to avoidance of double taxation the treaty has to prevail. It is also canvassed by him that every information supplied does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel appearing for the assessee, has placed reliance on these provisions and the decision rendered in the case of CIT v. Davy Ashmore India Ltd. [1991] 190 ITR 626 (Cal). It is worth noting here that section 90(2) was inserted by the Finance (No. 2) Act, 1991, with retrospective effect from April 1, 1972. In the case of Davy Ashmore India Ltd. [1991] 190 ITR 626 (Cal) it has been held as under: "Our attention has been drawn to a decision of the Andhra Pradesh High Court in the case of CIT v. Visakhapatnam Port Trust [1983] 144 ITR 146. There, the Andhra Pradesh High Court, while considering the Indo-German Double Taxation Avoidance Agreement, held that in cases of inconsistency between the agreement and the Act, the agreement will prevail. In our view, where an express provision to the contrary is made in this agreement, the transaction will be governed by such agreement. Explanation 2 to section 9(1)(vi) cannot have any application inasmuch as the definition of royalty has been specifically provided in the agreement. Thus, an express provision to the contrary has been made in the agreement. There is also another aspect of the matter. The charging provisions in sections 4 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films; or (vi) the rendering of any services in connection with the activities referred to in sub-clauses (i) to (iv), (iva) and (v)." In this context it is also relevant to reproduce paragraph 3 of article 12 of the treaty. The said article deals with royalties and fees for included services and paragraph 3 of the same reads as under: "3. The term 'royalties' as used in this article means: (a) payments of any kind received as consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the market it has a status of a book and, therefore, it would be a plant as per statutory definition but cannot earn the status of royalty. On the contrary, Mr. Rohit Arya would like to press into service the correspondence entered into between the parties to highlight that it is not the data simpliciter, as is put forth by the assessee, but data or information which has immense signification with the industrial concern. In this context we think it apposite to refer to the decision rendered in the case of Scientific Engineering House P. Ltd. v. CIT [1986] 157 ITR 86; AIR 1986 SC 338, 344. In the aforesaid case the assessee, a manufacturer of scientific instruments and apparatus entered into collaboration agreement with a Hungarian Trading Company for undertaking manufacture of microscopes under which the foreign collaborator in consideration of payment of Rs. 1,60,000 agreed to supply to the assessee all the technical know-how required for manufacture of the instruments. In that context, the apex court came to hold that the payment made by the assessee to the foreign collaborator was attributable wholly towards the acquisition of a depreciable asset. Their Lordships in paragrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, therefore, their Lordships treated it as a plant. But in the present case there is continuous supply of data which is information and has a different connotation. As far as the nature of the list in question is concerned it is submitted by Mr. Vohra, learned counsel for the respondent, that the information obtained by the assessee is in the nature of book and in any case it is not information which would show any kind of experience skill or expertise. It is contended by him that any information relating to the commercial venture cannot be regarded as information as understood in the context of the provision or that of the treaty to earn the status of royalty. It is also put forth by him that there has to be something else to earn the status of information. Mere data or a calculation sheet would not have the status of royalty. Mr. Arya has contended that any information should be regarded as royalty. On a perusal of the provisions we are of the considered opinion that any information cannot earn the status of royalty. To have the status of royalty it has to have some special features. We are not entering into the debate whether the statutory provision or the treaty would prevail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the lower authorities on the issue. This ground is allowed in favour the assessee." On a scrutiny of the aforesaid it appears that the information was in the form of collection of the data in the subject available in the market. Contrary to this, Mr. Rohit Arya has submitted that the correspondence between the assessee-company and the Department situated in the USA is quite different. He has referred to a FAX message which reads as under: "It has been some time now that you have had the Carbon Databank material. I sincerely hope that you have found it very useful and will become a subscriber very soon. The benefits of information in this area is very important, I believe, and more information would be passed between us by telephone because of the confidential nature of material that cannot be published." Learned counsel for the appellant has also drawn our attention to certain other correspondences between the assessee and the foreign company that have been brought on record. We think it appropriate to reproduce a letter from PCL USA. It reads as under: 'I think we are slightly confused on the definitions. What we have got as a sample from you is (a) a booklet entitled exe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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