TaxTMI 
TaxTMI 
2009 (10) TMI 38
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....holding that the payment of 15 million yen equivalent to Rs.18,13,786/-cannot be treated as a royalty under the provisions of Section 9 of the Income Tax Act, 1961 and in allowing remittances without deduction of tax at source?." 2. The brief facts of the case are that the assessee-company is engaged in the manufacture of Audio Magnetic Sound Heads. This product is used for manufacturing of various types of audio system like taperecorders, stereos, sound systems, telephone answering machines etc. The assessee company entered into an agreement with M/s.Sankyo Seiki (Singapore) Pvt. Ltd. at Singapore on 16.11.1989. This agreement was approved by the Government of India and the Reserve Bank of India. Under the agreement, the foreign company....
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.... - (1) Plant Know-How and (2) Product Know-How. It held that since the payment in dispute related to the acquisition of Plant Know-How in the form of technical and engineering data, design data, drawings, sketches, photographs etc. and these in fact had been purchased by the assessee from the foreign company at Singapore, no part of the income by the foreign company arose in India. It further held that this amount of 50 million yen cannot be treated as royalty even in terms of the extended definition of royalty. Thereafter, reference has been made as above. We have heard Sh.Vinay Kuthiala, learned counsel for the revenue and Sh.Vishal Mohan, Advocate appearing vice Sh.Pankaj Jain, learned counsel for the assessee. 4. To under....
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.... 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 copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection wit....
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....e Plant Know How was defined in Clause 1(a) of the agreement and included all inventions, processes, patents, engineering and manufacturing skills about plant and machinery and other technical information for manufacture of the product. This plant was transferred for a consideration of 15 million yen to be paid in three instalments as mentioned above. Clause 10(a) of the agreement reads as follows:- "10(a) This agreement shall remain effective for a period ending five years from the date of signing the agreement. Upon the expiry of this agreement, the know how THEREFORE delivered to 'A' shall remain its property for its full and free use thereof." 9. The question which arises is whether the agreement to transfer all such know how fall....
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....ng within the guidelines of the various authorities referred to here-in-above could be treated as 'plant'. The various authorities referred to above also indicate that very wide amplitude has been given to term 'plant'. The definition of 'plant' engulfs within its ambit many diverse subjects, such as, ships sailing on the high seas, books used by lawyers or engineers and scalpels used by doctors." 11. Thus there can be no manner of doubt that a plant was purchased. In Income Tax Officer and Others v. Shriram Bearings Ltd. 1987 (164) ITR 419, a Division Bench of the Calcutta High Court considered the question which is virtually similar to one which arises in the present appeal. In that case, the Indian assessee had entered into an agre....
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....er the Income Tax Act and do not constitute industrial and commercial profit. It would be relevant to mention here that in this case the agreement provided that the Indian company would not be entitled either directly or indirectly to make use of the documents supplied to it by the foreign company beyond the works to which the contract relates. In the present case, clause 10(a) which we have quoted above clearly shows that the title in the documents stood transferred to the Indian Assessee and it became the owner and could use the same for any purpose albeit after a period of five years. Therefore, in our considered opinion, the learned Tribunal was right in holding that the Indian assessee had purchased Plant Know How at Singapore an....