TMI Blog1990 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... would be 50 per cent. On the other hand, if the aforesaid agreement was entered into on a date after April 1, 1976, then the rate of tax would be 40 per cent. The assessee had entered into an agreement with an Indian concern on. March 12, 1964 in respect of Durgapur Unit of the Indian concern. Subsequently, by another agreement dated January 12, 1972, between the same parties, the original agreement dated March 12, 1964, was made applicable to the Bangalore Unit of the Indian concern. The agreement dated March 12, 1964, was to be in force for a period of ten years. Clause 11 of this agreement clearly stated that the intention of the parties was that the said agreement shall be renewed after the expiry of the aforesaid ten years for a further period of five years upon the terms and conditions to be mutually agreed by the parties. It so happened that the effective date from which the period of ten years was agreed to be reckoned was December 23, 1967. Hence, the said agreement expired on December 22, 1977. However, another agreement dated December 19, 1978, was entered into by the same parties by which the original agreement was deemed to have been extended for a period of five mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other hand, the Department resisted the claim of the assessee on the ground that the latter agreement dated December 19,1978, was nothing but an extension of the earlier agreement and so it was not a new agreement. The Tribunal was of the view which is as follows: "On a consideration of all the facts and circumstances of the case, we come to the conclusion that the payments received by the assessee during the two years under consideration had been made under the old agreement as extended in terms of clause 11 thereof. Hence, the Revenue authorities were quite right in holding that the agreement dated December 19, 1978, was not a new agreement but a mere extension of an existing one which was entered into prior to April 1, 1976 and, in that view of the matter, subjecting the royalty receipts in the hands of the assessee to tax at the higher rate. Hence, we uphold the orders of the Commissioner of Income-tax (Appeals ). " Before us the contentions raised before the Tribunal have been reiterated. To appreciate the contentions, it is necessary to refer to a few clauses of the agreement dated December 19, 1978, entered into between Graphite India Ltd. (GIL) and Great Lakes Carbo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In all other respects the principal agreement shall remain in full force and effect.' " (emphasis supplied). Clause 11 of the agreement dated March 12, 1964, provides as follows: " Subject to the provisions of clause 12 thereof this agreement shall be for a period of ten years commencing on the effective date and subject to the approval of the Government of India it is the intention of the parties that it shall be renewed thereafter for a further period of five years upon terms and conditions to be mutually agreed by the parties." ( emphasis supplied ). It has been contended by Dr. Pal appearing on behalf of the assessee that it is true that, under clause 11 of the agreement of 1964, it is provided that subject to the provisions of clause 12, the said agreement shall be for a period of ten years commencing on the effective date and subject to the approval of the Government of India, it was the intention of the parties that it shall be renewed thereafter for a further period of five years upon the terms and conditions as may be mutually agreed upon by the parties. Therefore, if the agreement of 1978 has been entered into by the parties, the rights and obligations of the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties flow from the new agreement of 1978 which are different from the principal agreement of 1964 and which agreement gives fresh life to the principal agreement of 1964 subject to the various modificatory clauses set out in the agreement of 1978. Drawing our attention to several clauses of the 1978 agreement, Dr. Pal has submitted that the agreement of 1978 is a different and new agreement. Clauses 2 to 9 of the agreement of 1978 modify the earlier agreement of 1964. Clause 4 of the agreement of 1978 specifically provides that clause 7 of the operation agreement, i.e., the agreement of 1964 and sub-clause (c) of clause 4 of the second agreement, i.e., the agreement of 1972 shall not have any application. Clause 7 of the agreement of 1964 refers to the payment of royalty and the computation of such royalty on the basis of the net sale price of all graphites sold for consumption in India. The said clause will no longer be operative regarding the agreement of 1978. In its place, clause 5 of the agreement of 1978 provides for the payment of royalty on the net sale price of all graphite products sold for consumption in India. The computation of the net sale price is different unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l know-how provided by Great Lakes to another Indian party under a separate agreement with the previous written approval of Great Lakes. Clause 8(b) of the 1978 agreement introduces a new provision. Graphite India Ltd. shall not be allowed to use foreign brand name on the graphite products sold within India but there shall be no restriction on the use of such brand name on the graphite products to be exported as if the right to use such name is granted. This clause does not appear under the old agreement of 1964. Clause 8(a) of the 1978 agreement further provides that the export of the graphite products can be made with the terms and conditions of the export sales agreement entered into on September 13, 1974. In other words, apart from the agreement of 1964, some of the provisions of the agreement of 1974 also have been incorporated in the agreement of 1978. On a consideration of all the relevant clauses of the agreement, it is submitted that the 1978 agreement is a separate agreement and the rights and obligations of the parties flow from the said agreement and not under the agreement of 1964. In this, connection, reference is made to section 115A(1)(b) of the Act. The said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so on. When the licence expires, the trade dies, unless the grant of a new licence enables it to be carried on for a further period. To give an illustration if a depositor makes a fixed deposit for three years with the banker at a stipulated rate of interest and, after the maturity of the fixed deposit, he renews the fixed deposit again for another term, say, for three or four years at the rate of interest stipulated between them, it cannot be argued that the fixed deposit which has been renewed after the maturity of the earlier fixed deposit is on the basis of the old contract and not on the basis of the separate agreement entered into with the banker. His right to receive interest on the basis of the fixed deposit will flow from the agreement renewing the earlier fixed deposit which had already matured and had expired. For the reasons aforesaid, the agreement of 1978 according to Dr. Pal is a separate agreement entered into between the parties after April, 1978, and the said agreement has been approved by the Government of India. The rights and obligations of the parties also are governed by the said agreement of 1978. We are, however, unable to agree with the contentions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words to that effect or the second one dealing with the same subject-matter as the first but in a different way ; it is impossible that the two would be both performed. The question is whether the contractual force is to be found in the second by itself. We have already extracted the relevant clauses. Apart from certain variations or modifications made in the original contract, the intention of the parties was clear that the original contract should continue for another five years subject to the modifications and alterations as provided in the supplemental agreement. The subsequent agreement has supplemented certain clauses in view of changed circumstances, but it cannot be said that it is altogether a separate agreement which, by itself, is enforceable in law. Invariably one has to look into the terms and conditions of the original contract to find out the rights and obligations of the parties to the contract. There is a variation of the terms in the original agreement between the same parties, which was subsisting and which was extended for a further period of five years. The intention of the parties to the agreement must be gathered from the words used in the document. It has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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