TaxTMI 
TaxTMI 
1985 (2) TMI 76
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.... Government of India. At this stage, it is enough to mention that a sum of Rs. 2,62,500 was payable to the English company as consideration for the supply and delivery of the 'know-how'. Initially, there was a prohibition on Indian company to cater export market, but it was, however, relaxed under certain conditions and as per the terms, the Indian company had to pay engineering fees at 5 per cent on the net selling price of YDA engines exclusive of sales tax, packing, freight and insurance charges. There was a similar condition in regard to export of YWA engines. 3. In the assessment year 1972-73, the Indian company had paid the English company engineering fees of Rs. 28,498. The authorised capital of the Indian company was formerly Rs. 29,38,500 and this was raised to Rs. 1 crore. As a consequence, 29,385 shares of Rs. 100 each were issued. The Indian company paid Rs. 2,62,500 to the English company by issuing equity shares in India towards the supply of know-how of YWA engines. 4. The assessment of 1972-73 had the chequered career. An assessment passed at the first instance by the ITO under section 143(3), read with section 144B, of the Income-tax Act, 1961 ('the....
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.... know-how to the Indian company, somehow remained unanswered by him. But the Commissioner (Appeals) held that the know-how had not been delivered in India. The assessee was entitled to succeed on the basis of the CBDT Circular No. 21 of 1969, according to the Commissioner (Appeals). 7. The taxability of Rs. 2,62,500 may be considered in various manners. Section 5(2) provides the income of a non-resident being brought to charge if such income is either (a) received or deemed to be received, or (b) if such income accrues or arises or is deemed to accrue or arise in India during the relevant year. First, it has to be seen from the point of section 5(2)(b). The income can be said to have been accrued or arisen or deemed to accrue or arise in India, if, under the contract, the obligations of the English company had to be, or had been performed in India. 8. Clause 4(2)(a) of the agreement reads : "The English company shall supply and deliver to the Indian company the necessary 'know-how' for the manufacture of the YWA Engines and shall receive in payment, therefor, Rs. 2,62,500." The English company had to supply the know-how. It had, further, to deliver the know-how to the I....
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....hird edn., para 1134 reads : "If the contract does not specify where performance is to take place, the place of performance depends upon the implied intention of the parties, to be judged from the nature of the contract and all the surrounding circumstances. If no place of performance is specified even by implication, but performance requires the concurrence of promise, the general rule is that the promisor must seek the promisee and perform his promise wherever the promisee may be." In Doe v. Rias [1832] 8 Bing. 178, Tindal, CJ. said : "We are to look at the words of the instrument and to the acts of the parties to ascertain what their intention was, if the words of the instrument be ambiguous, we may call in the aid of the acts done under it as a clue to the intention of the parties." In Chamman v. Bluck [1838] 4 Bing. N.C. 187, Park, J. said : "The intention of the parties may be collected from the language of the instrument and may be elucidated by the conduct they have pursued." Positing that the intention is to be gathered from the subsequent conduct, the place of delivery was England, as James Greaves & Co. had received the know-how for and on behalf of the....
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....decided that no attempt should be made by the department to bring to tax the profits or gains on such transaction merely on the ground that the situs of the shares is in India. However, if any operations are effected or services are rendered in India, the income will to that extent, accrue or arise in India and will be chargeable to tax in India. If payments of royalty are made by way of a free issue of equity shares, the value thereof will of course be liable to tax. It is only those shares which are issued at the time of incorporation of the Indian company in lieu of a lump sum payment for the technical know-how delivered abroad, that will be exempt from income-tax as well as the tax on capital gains. . . ." 16. Now, the first part of para 11 favours the argument of Shri Pooran. The latter part is specific to say that only chose equity shares which are issued at the incorporation of the Indian company in lieu of lump sum payment for the technical know-how delivered abroad that will be exempt from tax. The present is not a case answering to the latter conditions. The Commissioner (Appeals) states : "I find that to distinguish the assessee's case in the manner in which the In....