TaxTMI 
TaxTMI 
TaxTMI 
2009 (7) TMI 170
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.... biturox process from OMV and has a right to grant license in favour of third parties. 3. IOC approached Porner for setting up a plant for manufacture of bitumen by using Bilurox process and the agreement dt. 7th Aug., 2000 in this regard was entered into between them. The plant was to be designed to suit particular purpose and specification and the same is set out in ss. 1 and 2 of technical part of the agreement. The scope of work is set out in s. 3 of technical part of the agreement. The scope of the work consists of several parts: (a) Basic engineering design package (BEDP) (i) which consists of supply of design for installation and operation of the reactor section, including process layout for the reactor section. (ii) Design basis (iii) Process description (iv) Process flow diagram (v) Process central description (vi) Equipment list (vii) Safety and environment related information (viii) Piping and instrumentation diagram (ix) Piping specification (x) Instrument data sheet (xi) Electrical data (xii) Supervisory, operating and maintenance manual (xiii) Lincensor standards, etc. The time schedule for supply of the BEDP was as follows: &n....
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....nbsp;US $ 181,300 Level indicator US $ 15,013 Oxygen analysator US $ 36,358 Pressurisation equipment US $ 9,329 Sub-total (this amount includes 2% rebate) US $ 242,000 (5.3) Commissioning and start up The minimum duration for commissioning and start-up including performance test and training on site is 30 working days (10 hours basis) based on this period. Proner charges a: Lump sum of US $ 35,225 Lu....
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....wed IOC to use Biturox process and, therefore, the payment in question was for use of process in India and, therefore, was royalty according to the Indo-Austrian treaty. Therefore, under art. 6 of the Indo-Austrian treaty, the same was taxable in India. Article 6 of the treaty is as follows: "Royally derived by a resident of one of the territories from sources in the other territory may be taxed only in that other territory. In this article, the term 'royalty' means any royalty or other like amount received as consideration for the right to use copyrights, artistic or scientific work, cinematographic films, patents, models, designs, plans, secret process or formulae, trademarks and other like property or rights." The Dy. CIT, TDS Circle 1(1), Mumbai, accordingly, directed IOC to deduct tax at 20 per cent before making remittances to Proner. The said three orders arising out of rejection of the three applications of IOC under s. 195(2) of the Act, were confirmed by the learned CIT(A) giving rise to these three appeals by IOC before the Tribunal. 7. We have heard the submissions of the learned counsel for the assessee, who reiterated the stand as taken before the Revenue authoriti....
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....of plant that will be designed, constructed and operated as per the technical know-how supplied by Proner. The Authority of Advance Ruling in the case of Advance Ruling P. No. 30 of 1999, ABC, In re (1999) 154 CTR (AAR) 246 : (1999) 238 ITR 296 (AAR) making reference to the Dr. Vogel's Commentary held at p. 308 as under: "It would appear that there are three main ingredients which partake of the character of royalty payment- (1) It is the payment made in return for a right to exercise a beneficial privilege or right. (2) The payment is made to 0e person who owns the right. (3) The consideration payable is determined on the basis of amount of use." In the present case, the amount paid by IOC is for creating asset in the shape of plant. The consideration is for passing of information concerning the design of plant which is tailor-made to meet the requirements of a buyer. Proner has granted the right to use the Biturox process, which is embedded in the plant to be set up based on basic design engineering package and not the right to use the license. The consideration is not based on the amount of use. Applying the principles laid down by AAR in the above case, the impugned (amoun....