TMI Blog1981 (9) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years 1963-64 to 1968-69 ? " We are concerned with the assessment years 1963-64 to 1968-69. The assessee-company, Kirloskar Oil Engines Ltd. (hereinafter referred to as ' KOEL'), is the statutory agent of a non-resident U.K. Company, Glacier Metal Ltd. (hereinafter referred to as 'Glacier'). KOEL had been manufacturing bearings in India. However, in order to develop their business and to manufacture better quality bearings and for furthering their business, KOEL entered into a collaboration agreement with Glacier on 9th September, 1957. The said agreement provided, under cl. 5 thereof, for the sale of certain materials by Glacier to KOEL. The said cl. 5 provided: " 5(i) Kirloskar (that is, Kirloskar Oil Engines Ltd.the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO that no profit accrued to the foreign collaborator taxable in India on the sale of material. The ITO rejected the contention of the assessee relying on the decision of the Tribunal dated 27th May, 1965, in the assessee's own case for the assessment years 1958-59 to 1962-63, wherein the Tribunal had held that on the sale of bearings by the Glacier a net profit of 2 1/2% should be assessed as arising in India to Glacier. The assessee appealed to the AAC. There were two such appeals, one was filed in respect of the order for the assessment year 1963-64, and the other was for the assessment years 1964-65 to 1968-69. It was contended on behalf of the assessee before the AAC that the Tribunal's decision for the earlier years should not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of their collaboration agreement. In the, other appeal for the assessment years 1964-65 to 1968-69, another AAC also passed similar orders after going through the relevant material and adopting the observations of the AAC mentioned above in the earlier order. From the said orders of the AAC, the revenue appealed to the Tribunal. The Tribunal found that, earlier, another Tribunal in its decision had held that (1) Glacier had business connection in India, and (2) profit of 2 1/2% on sales should be attributed to selling operations and charged to tax in India. Subsequently, the assessee had filed a miscellaneous application before the same Tribunal urging that the evidence on record showed that no operations were carried out by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t's submission that the situs of the sale contract was in India. In making this submission, the department has urged that clause 5 of the agreement of 9-9-1957 was an independent sale contract, accepted by KOEL in India. Such a submission has not even the merit of being a farfetched argument. It is a completely wrong proposition to say that a collaboration agreement for rendering technical service, of which one clause casts an obligation on the manufacturer in India to buy raw material from the non-resident in certain circumstances, operates as a contract of sale of raw material by the non-resident to the resident manufacturer, accepted in India. The operation for acquisition of raw material, as rightly contended by the assessee's counsel, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndependent contract between the parties for the sale and purchase of the material. Particularly the right of KOEL to buy the said material from others under certain circumstances itself negatived the said clause being a contract of sale between the parties. Apart from that, the material produced by the assessee does show that the modus operandi for the purchase of the said material by. KOEL from Glacier was that KOEL placed orders with Glacier in a manner as any other customer would do and paid market price and Glacier accepted the said offer (to purchase) in England and received money for the said material also in England. The said documents also showed that the contract of sale of the said material was between principal and principal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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