1997 (7) TMI 102

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....de by the resident company to the non-resident company for supply of designs and drawings (engineering for the kiln) did not constitute 'income' by way of royalty of the non-resident company, within the meaning of the provisions of section 9(1)(vi) ?" In the assessment year 1980-81, Klayman Porcelains Ltd., Hyderabad, hereinafter referred to as the Indian company, which has been treated as statutory agents for Keramische Industries of Berlin, West Germany, hereinafter referred to as the non-resident company (NRC), entered into a memorandum of understanding on December 20, 1979, which, inter alia, provided for three types of works. We are concerned only with the second type of works, which is numbered as "Kerabedarf's order No. 32911". Th....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....t. The submission of Sri Y. Ratnakar, learned counsel appearing for the assessee, is that the amount paid by the Indian company to the non-resident company amounts to a capital asset. To appreciate the contentions of learned counsel it may be useful to read here the relevant provisions of section 9(1)(vi)(b) of the Act which deals with "income deemed to accrue or arise in India" and it runs thus : "Section 9(1) The following incomes shall be deemed to accrue or arise in India--. . . (vi) income by way of royalty payable by--. . . . (b) a person who is a resident, except where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on b....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....deration paid for imparting 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 also the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill. It requires to be noted here that lump sum consideration paid which is in the nature of income chargeable under the head "Capital gains", is excluded from the meaning of royalty. In this case, if the amount in question has been paid by the Indian company to the non-resident for 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 simila....