TaxTMI 
TaxTMI 
2000 (10) TMI 8
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....ners through shell mounted apparatus, as is described in U.S. Patent No. 3,966,560 which is called "Method of Calcining Coke in a Rotary Kiln". Under clause 1.2 of the agreement, "technology" shall mean processes. technical information and knowhow relating to the design, engineering, installation, operation and maintenance of blowers with Alcanint as in possession on the affective date of the agreement. Under the said clause, "engineering" shall mean ail necessary designs, drawings, instructions and technology which is required to enable Goa to procure, install and operate blowers on a particular rotary calciner. Clauses 2, 3 4 and 5 of the agreement read as under "2,0 Grants : Alcanint hereby grants to Goa and Goa hereby accepts a non-exclusive licence with full rights to use the technology in India and to use or -sell the resulting calcined coke for use anywhere in the world. Goa shall not have the right to grant sub-licences hereunder. 3.0 Disclosure of technology and rendering of assistance 3.1 Goa shall provide Alcanint with ail necessary specifications and other data in respect of the specified calciner which is required to effectively engineer blowers for it. 3.2 Alcani....
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....sp; Technical engineering consulting charges 12,000 ------- 183,000 &nbs....
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.... virtue of clause (ii) of sub-section (1) of section 115A, the petitioner contended that the rate of tax applicable to the transaction is only 20 per cent. of the total amount because all the designs and drawing which were delivered out of India were handed over by Alcan International Ltd. vide letter dated March 3, 1983, to the chairman of the company, Shri Vasantrao Dempo, while on foreign tour at Parklane Hotel, New York, U.S.A. Therefore, the entire transaction attracts tax only at the rate of 20 per cent. Another alternate contention taken by the petitioner is that even by going through Explanation 2 to section 9, the remittances were not in respect of fees for technical services but they were in respect of royalty and, therefore, the rate of tax applicable to the agreement is 20 per cent. For better appreciation of the contentions of counsel for the petitioner, it is necessary to extract section 115A of the Income-tax Act and also section 9, Explanation 2, of the aforesaid Act. "115A. Tax on dividends, royalty and technical service fees in the case of foreign, companies.-(l) Subject to the provisions of sub-section (2), where the total income of an assessee, being a foreig....
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.... before the 1st day of April, 1976. 9. Income deemed to accrue or arise in India.-. . . . Explanation 2.-For the purposes of this 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; (iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property ; (iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill ; (v) the transfer of all or any rights (including the granting of a licence) in respect of any copyrights literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radi....
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....f the agreement and contended that under clause 3, the foreign companies are obliged to provide necessary site assistance up to 15 days for start-up and initial operation of the blowers at the site of the specified calciner and it cannot be termed as "fee for technical services". Mr. Usgaonkar drew our attention to what is "fee for technical services" as explained in Explanation to clause (vii) of Explanation 2 to section 9 of the Income-tax Act. The aforesaid Explanation has explained the "technical services" as "managerial, technical or consultancy services including the provision of services of technical or other personnel." According to the counsel, so long as there is no provision in the agreement for doing such services, it cannot be said that the agreement between the petitioner and the foreign company is an agreement to transfer technical services. Learned counsel for the Department has contested this contention and argued that on the petitioner's own showing what has been transferred is only the documents and the design, engineering, operation and maintenance of blowers. The transfer of the related documents occurred only outside India and, therefore, that part of the co....