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TMI Blog2001 (8) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax of 30 per cent. on the royalty 'income received by it in pursuance of the agreement signed on December 10, 1981? 2. Whether, on a proper interpretation of the Contract Act and the agreements entered into by Chloride Group Plc. with Chloride India Ltd. from time to time, the Tribunal was correct in law in holding that the agreement dated December 10, 1981, was not a separate and new agreement and even assuming that it was a separate agreement, the effective date of signing of the contract was to be treated as January 1, 1980, in the light of the decision in the case of CIT v. Continental Commercial Co. Ltd. [1991] 192 ITR 66 (Cal)? 3. Whether the Tribunal was correct in law in interpreting the provisions of article 13(2) of the Dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve interim approval for the extension of the agreement which shall be for a period of five years from January 1, 1980 to December 31, 1984. During the relevant previous year, the assessee had only royalty income, which arose by virtue of clauses 9 and 14 of the agreement dated December 10, 1981. It offered this amount for taxation at 40 per cent. under section 115A of the Income-tax Act. Thereafter, by a letter dated December 26, 1985, the royalty income was offered for the period from April 16, 1981, to December 31, 1984 at 30 per cent., as provided in article 13 of the Double Taxation Avoidance Agreement dated April 16, 1981 (hereinafter referred to as "the convention" between India and U. K.). The Assessing Officer has not accepted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second agreement was entered into in 1974 and the third agreement was entered into on December 10, 1981. The last agreement was made effective for the period from January 1, 1980, to December 31, 1984. He submits that as per article 13 of the convention the tax rate in the case of fees for technical services will be taken at 30 per cent. if the fees are paid in respect of a right or property which is first granted or under a contract which is signed after the date of entry into force of this convention and this convention has come into effect from November 23, 1981, the agreement has been signed in December, 1981. Therefore, the assessee is liable to pay tax at 30 per cent. of the gross amount of the royalties and fees for technical service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27 of this convention provides that the convention shall come into force on the date of the notification. For enforcing this convention, the notification has been issued on November 23, 1981. Article 13(2) of the Convention provides that if the right or property, which is first granted, or under a contract, which is signed, after the date of entry into force of this convention, the tax rates shall be at 30 per cent. The relevant part of article 13 reads as under: "Royalties and fees for technical services. -(1) Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. (2) However, such royalties and fees for technical services may also b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vention that is November 23, 1981. He claimed the rate of 30 per cent. tax only for the income which accrued after November 23, 1981, the words in sub article (2) of article 13 as they are paid in respect of a right or property which is first granted, 'or under a con tract which is signed" after the date of enforcement of this convention. Thus, the tax so charged shall not exceed 30 per cent. for the period from November 23, 1981. Admittedly, in the case in hand, the Double Taxation Avoidance Agreement with the U. K. which is called the convention has come into force on November 23, 1981, and the agreement between Chloride Group Ltd. and Chloride India Ltd. has been signed on December 10, 1981. That is after the commencement of the conve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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