TMI Blog1982 (11) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement entered into between the Govt, of India and the Govt. of Czechoslovakia, the Govt. of India formed a company, called "Bharat Heavy Plate Vessels Ltd. ", a wholly Govt. of India-owned company, for manufacturing heavy plates and high pressure vessels. On February 27, 1968, an agreement was entered into between the "Bharat Heavy Plate Vessels Ltd. ", (hereinafter referred to as " the company ") and the "Skoda Exports ", Praha (Czechoslovakia) , whereunder the Skoda agreed to render technical assistance and consultancy service to the company in erecting its plant and in putting it on stream. In this referred case, we are concerned with two assessment years, viz., 1969-70 and 1970-71. For the assessment year 1969-70, the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee applied for and obtained this reference under s. 256(1) of the Act. Sri S. Parvatha Rao, learned counsel for the assessee, contended that, under the agreement dated February 27, 1968, the non-resident company, viz., Skoda, agreed to depute certain technical personnel to India to render technical assistance, guidance and advice, and the agreement also provided for payment of the salaries of such persons by the Indian company. The consultancy fee provided for under the agreement is not at all for anything done, or any activity carried on by, the non-resident company in India, but is on account of the training given to the deputed personnel in Czechoslovakia, and as a compensation for gathering and sparing those persons for deputation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and that, for that purpose, it shall depute group of designing experts to India. Article 5(1) says that the consultancy activity consists of granting of the expert technical advice, opinions, and/or recommendations in technical basic matters, according to the circumstances, by the supplier's experts to the corresponding experts of the customer, to the extent possible by the number of experts deputed by the supplier, and limited to their field of specialisation. It is further provided that the consultancy activity shall be only advisory, and shall not extend to performing of any individual task. It is not necessary to refer to arts. 6 to 8. Articles 9 and 10 deal with consultancy services in, the matter of introduction of production at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closure 2 contains the number and nature of experts to be deputed, while enclosure 5 contains the terms and conditions upon which such experts shall serve in India. A reading of the above provisions makes it clear that Skoda, the nonresident company, is charging the Indian company for the technical assistance and consultancy service, rendered by it in two ways, viz., (i) payment of salaries of the personnel deputed by it to India; and (ii) consultancy fee for rendering technical assistance and consultancy services. It is clear that the consultancy service or technical assistance, which the Skoda was to render to the Indian company, was to be rendered only through exerts or the personnel deputed by it and such personnel had to be paid thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy fee earned by Skoda Must be deemed mainly to arise from its: activity carried on in India and is, accordingly taxable in the hands of its agents, i.e., Bharat Heavy Plate Vessels Ltd.. Visakhapatnam. Mr. S. Parvatha Rao relied upon certain decisions in support of his contention that none of the consultancy services can be said to have been rendered in India to which a brief, reference" is necessary. However, before referring to those cases, we must say that, Whether any part of the activity is carried on in India or not, is essentially a question of fact, and the decided cases, would be relevant only for the principles underlying the decision The first decision cited is in Carborandum Co. v. CIT [1977] 108 ITR 335 (SC). That was: a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emitted to the Japanese company. This again is a case where the Japanese company did not carry on any activity whatsoever in India. All its activity was outside the Indian territories. Lastly, Mr. Parvatha Rao sought to rely upon the decision in CIT v. Hindustan Shipyard Ltd. [1977] 109 ITR 158 (AP), the decision of a Bench of this court (to which one of us, Punnayya J., was a party). But, we find that that case deals entirely with the question; whether any business connection existed between the Hindustan Shipyard Ltd. and the Polish Co., with it had entered into an agreement. The said decision does not deal with the question with which we are concerned herein. For the above reasons, our answer to the question referred shall be in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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