TMI Blog2003 (5) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... the present appeal are that the assessee-company filed its return for the assessment year 1993-94 on December 30, 1993, declaring total loss of Rs. 70,83,568. Upon processing, adjustments in respect of certain claims were made and loss was determined at Rs. 17,48,715 and, accordingly, an intimation under section 143(1)(a) of the Act was served on the assessee-company on March 31, 1996. The Assessing Officer also directed to deduct tax deducted at source at the prescribed rate on the remittance of US $ 25,000 to PCI Kingwood, USA, as the payment was made for purchase of data of confidential 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, accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e questioning the defensibility of the order passed by the Tribunal has submitted that the Tribunal has grossly erred in coming to hold that the transaction did not convey any sense of confidentiality and it was a general data provided to the assessee. It is urged by him that the service is continuous in nature and the correspondence on record clearly reveals that from time to time the supplier used to send the material and, therefore, if it is tested on the bedrock of continuity and bulk of information there remains no trace of doubt that it was such information which would come within clause (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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of this Act shall apply to the extent they are more beneficial to that assessee. Explanation.--For the removal of doubts, it is hereby declared that the charge of tax in respect of a foreign company at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such foreign company, where such foreign company has not made the prescribed arrangement for declaration and payment within India, of the dividends (including dividends on preference shares) payable out of its income in India." Mr. Vohra, learned 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, whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property; (iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property; (iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill; (iva) the use or right to use, any industrial, commercial, or scientific equipment but not including the amounts referred to in section 44BB; (v) the transfer of all or any rights (including the granting of a licence) 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 servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troversy that really emerges is whether scientific knowledge or experience or skill should govern any information concerning industrial or commercial spectrum or sphere. We are conscious that the use of the language in the enactment is slightly different than that has been used in the treaty. But, in the present case whether the enactment would prevail or the treaty, is not required to be answered inasmuch as the facet which has been highlighted before us is that every kind of information cannot be regarded as royalty. It is contended by Mr. Vohra that if information is gathered from time to time which is available 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advances, they might or would in course of time become obsolete. We are, therefore, clearly of the view that the capital asset acquired by the assessee, namely, the technical know-how in the shape of drawings, designs, charts, plans, processing data and other literature falls within the definition of 'plant' and is, therefore, a depreciable asset." Mr. Rohit Arya, learned counsel for the Revenue, has submitted that the aforesaid decision is distinguishable inasmuch as it was a one time supply and, therefore, the agreement was totally different in nature which pertained to giving services as per documentation list and, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse informative but that information was in the form of collection of datas on the subject available in the market. And the information with commentary furnished in the booklet in any manner cannot be termed as imparting of technical, industrial, commercial or scientific knowledge, experience or skill of the supplier absolutely meant for the assessee. We thus, cannot term the amount paid by the assessee to supplier in any way as 'royalty' as defined in Explanation 2(iv) to section 9(1)(iv) of the Act. We therefore, do not find force in the argument advanced by the learned Departmental Representatives supporting the orders 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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