TMI Blog1979 (6) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... uction or direction of the same nature directing the respondent to promptly grant the tax clearance certificate as prayed for by the applicant. The facts leading to this petition are as follows : By a letter dated April 27, 1973, the Govt. of India issued a letter of intent in favour of Satellite Engineering Ltd. On January 24, 1974, the Govt. of India issued a letter incorporating the terms and conditions laid down by that Government while approving the terms of collaboration between the Satellite Engineering Ltd. and M/s. Meteor Pistons of Milano, Italy, for the manufacture of pistons in India by Satellite Engineering Ltd. The letter of January 24, 1974, stated that the approval was valid for a period of six months from the date of issuance of the letter. This period was subsequently extended from time to time. By its letter dated September 17, 1974, the Govt. of India suggested certain changes in the draft agreement between Satellite Engineering Ltd. and Meteor Pistons of Milano. Ultimately, an agreement dated September 26, 1974, was entered into between Satellite Engineering Ltd. and Meteor Pistons of Milano. By its letter dated November 25, 1974, the Govt. of India, Ministry o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the petitioner-company and Meteor Pistons of Milano deleting cl. 10 of the original agreement and substituting a new clause which in substance reproduces the first sentence of the original cl. 10. The rest of the provisions of the original cl. 10 were deleted by the supplementary agreement in view of the objection raised by the Govt. of India in the Ministry of Industry by letter dated December 11, 1975. The Ministry of Finance, by its letter dated January 21, 1976, acknowledged the receipt of the supplementary agreement. Under the terms of the collaboration agreement which is now deemed to have been executed between the petitioner-company and Meteor Pistons of Milano, an aggregate amount of pounds seven thousand five hundred sterling was to be paid by the petitioner-company to Meteor Pistons of Milano. This amount was required to be paid in three instalments of pounds two thousand five hundred sterling each on different dates. On November 24, 1976, the Reserve Bank of India addressed a letter to the petitioner stating that applications for remittance of royalty and/or other payments under the collaboration agreement should be made to the bank with income-tax clearance certifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther licences required ......... from the Meteor at prices ruling at the date of despatch the machinery which Meteor had agreed to provide for the manufacture of automotive pistons. Under clause 2, Meteor was also to provide the complete blueprint process, formulas and other technical and mechanical details and its operational aspects. The said blueprints, formulas, processes and other technical and mechanical details were to be prepared by Meteor in Italy, that is, in their own country, and Meteor was to intimate Satellite to send their representative to Italy and deliver all technical notes, drawings and blueprints to be examined and discussed to the satisfaction of Satellite. Meteor was also to inspect and select the requisite machinery for the pistons project and the said services of selection and inspection of the machineries were to be rendered in the country of origin of the machines selected by Meteor. The said machinery was to be carefully inspected and modified by Meteor which in their opinion should be entirely to their satisfaction for the production by Satellite of the said pistons in India and the said machinery was to be supplied to them by different manufacturers, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Govt. of India by their letter of December 11, 1975. At this stage, it may be mentioned that the Under-Secretary to Govt. of India in the Ministry of Industry and Civil Supplies (Department of Heavy Industries), stated in the letter of December 11, 1975, that on further examination of the final agreement between the petitioner and Meteor Pistons, it had been found that a provision made in cl. 10 of the agreement regarding payment of a commission of five per cent. on exports to the foreign collaborators was not in conformity with the Government's approval conveyed by the letter dated January 24, 1974. The letter proceeds : " It is, therefore, requested that you may kindly get a written confirmation from your collaborators in regard to the deletion of the above provision and furnish 15 photostat copies thereof to this department as early as possible. " Thus, it appears from the letter of December 11, 1975, that barring these words in cl. 10 of the original agreement of September 26, 1974, the Govt. of India had approved the rest of the provisions of the agreement of September 25, 1974, and the objection of the Govt. of India was to the payment of five per cent. of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to s. 9(1)(vi) for the purposes of this particular clause, " royalty " means consideration including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head " Capital gains ", for, (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property; (ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property ; and under cl. (iv), the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill. Under cl. (vii) of s. 9(1) which was inserted by the Finance Act,1976, with effect from June 1, 1976, income by way of fees for technical services payable by the Government or a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India, is deemed to accr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the sum which is so chargeable. He has also drawn our attention to the provisions of s. 160 under which, in respect of even a non-resident, a person who is treated as an agent under s. 163 is a representative assessee. Under s. 163, an agent in relation to a non- resident includes a person in India who is employed by or on behalf of the non-resident, or who has business connection with the non-resident, or from or through whom the non-resident is in receipt of any income, whether directly or indirectly, or who is a trustee of the non-resident and includes any other person who, whether a resident or non-resident, has acquired by means of a transfer, a capital asset in India. He has contended that in view of the provisions of s. 163(1)(b), (c) and the last part of (d), the petitioner is the agent of Messrs. Meteor Pistons of Milano and, therefore, by virtue of s. 160, he is a representative assessee. It is clear that under s. 200, any person deducting any sum in accordance with the provisions of the Act has to pay within the prescribed time the sum so deducted to the credit of the Central Government or as the Board may direct, and s. 201 deals with the failure to make the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the matter assessed and then tested it by way of appeal, first to the AAC, then to the Tribunal and then to the High Court by way of reference. Under these circumstances, the existing machinery by way of regular assessment is totally inadequate and unsuitable for the problem that faces the petitioner in this case and hence the preliminary objection must fail. One of the contentions urged by Mr. Desai was on the question of interpretation of s. 9(1), cl. (vi) and he contended that even if the proviso to cl. (vi) of s. 9(1) applied, the only thing that the provision would help the petitioner in doing would be to take this particular income by way of royalty out of the provisions of cl. (vi) but that would still leave the matter open to be brought under cl. (i) or cl. (vii) of s. 9(1). In our opinion, this contention must fail. Clause (vi) of s. 9(1) deals with a specific type of income, namely, income by way of royalty, whereas cl. (i) of s. 9(1) is a more general provision, which deals with all incomes accruing or arising, whether directly or indirectly, through or from, any business connection in India. Income by way of royalty is a species or one of the categories of a la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s manufacture of Meteor Pistons for automotive engines. Mr. Desai in this connection also contended that out of all classes of royalty mentioned in Expln. 2 to s. 9(1)(vi), it is only royalty for transfer of data, etc., and royalty for information in respect of data, etc., that are covered by the proviso to s. 9(1)(vi). This contention is correct but, in the instant case,the first instalment of pound sterling 2,500 is for transfer of data, documentation, etc., and the second instalment of an equal amount is for imparting of information in respect of the specifications for designs of the machinery which has to be selected and inspected by the foreign collaborator in order to see that the said machinery is according to the specifications required. The information that the machinery is in accordance with specifications is information in respect of specifications and hence the second instalment is also covered by this part of the proviso. The words " in respect of " are much wider than " for " and hence we have interpreted this part of the proviso in this manner. Under these circumstances, the amount with which we are concerned in this case is certainly royalty and this royalty is paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to April 1, 1976, and in view of the correspondence which we have referred to above, it is obvious that cl. 3 has now been approved by the Govt. of India because cl. 10, as amended by the supplementary agreement of May 15, 1976, was to bring the whole agreement including cl. 10 in line with the earlier approval of the Govt. of India. Mr. Desai contended that originally the agreement was between Satellite Engineering Ltd. and M/s. Meteor Pistons of Milano and that it was only by a subsequent arrangement, which was a tripartite agreement between Satellite Engineering Ltd., M/s. Meteor Pistons of Milano and petitioner-company, that the agreement of September 26, 1974, was treated as an agreement between the petitioner and the foreign collaborator. In our opinion, the novation or the tripartite agreement was entered into before April 1, 1976, and was binding between the foreign collaborator and the petitioner ; that agreement was made before 1st April, 1976, as the letter of May 17, 1975, from the Ministry of Industry and Civil Supplies (Department of Heavy Industries), Govt. of India, makes it clear. Even the Government accepted that the agreement of September 26, 1974, should be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 and he relied upon the observations of a Division Bench of the Calcutta High Court at page 89. There it was observed by the learned judges of the Calcutta High Court : " It is true that the alternative remedy is not a bar in cases where there have been allegations of infringement of fundamental right and/or illegal exercise of jurisdiction or assumption of jurisdiction by an authority not vested under the statute." And it was pointed out that if the case does not fall within that exceptional class, namely, infringement of fundamental rights or illegal exercise of jurisdiction or assumption of jurisdiction not vested in an authority, jurisdiction under art. 226 of the Constitution cannot be invoked. Similarly, Mr. Desai relied upon the decision in CIT v. Tata Chemicals Ltd. [1974] 94 ITR 85 (Bom) and this judgment, he pointed out, has been approved by the Supreme Court in Carborandum Co. v. CIT [1977] 108 ITR 335. The decision of the Supreme Court in Carborandum Co.'s case turned upon the question of business connection and it was pointed out that furnishing of technical information by post was a service rendered outside India and putting the information to use in India was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
