1982 (7) TMI 26

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....this agreement Bamag was entitled to license the use of the Winkler process by third parties and Bamag was to pay a royalty as per art. 7 of the agreement. Bamag entered into a contract with a company in India, namely M/s. Neyveli Lignite Corporation Ltd. for construction of a chemical plant in which the Winkler process was used. The OBSF received Rs. 1,47,333 on account of royalty under the agreement with Bamag. This amount was received in India and not in Germany and was deposited by OBSF in the State Bank of India by opening an account in the bank. After making an allowance of 20% for estimated expenses attributable to the work done by OBSF in West Germany for earning this amount, the balance was treated as taxable income of the asses....

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.... and as such was not income taxable in India ? " Mr. Joshi, learned counsel appearing on behalf of the Revenue, has placed reliance on the provisions of s. 5(2)(a) of the I.T. Act, 1961, the material part of which reads as follows: " Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from what ever source derived which (a) is received or is deemed to be, received in India in such year by or on behalf of such person." Mr. Joshi contends that admittedly the amount is paid on account of royalty and the fact that it has been received in India is sufficient to bring the receipt within s. 5(2)(a) of the I.T. Act and must, therefore, be treated as income. M....

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.... is deemed to have received in the relevant previous year any income in India. It can hardly be disputed that the OBSF was entitled to royalty from Bamag on account of the licences granted by Bamag to the Indian company. The amount has admittedly been received in India. It is difficult to see how this receipt can be said to be involuntary in character in so far as receipt in terms of rupees is concerned. As a matter of fact, the clause relied upon by Mr. Dastur itself seems to contemplate that Bamag shall pay royalty in foreign exchange only " if this is possible under the German foreign exchange regulations ". This must necessarily imply that if it was not possible to pay royalties in foreign exchange under the German foreign exchange regu....