2001 PLP 3007 (PTD)

Tax Cases Petitions Nos. 537 to 546 of 1997 are relatable to the assessment years 1978‑79 to 1982‑83, while Tax Cases Petitions Nos. 418 to 429 of 1997 are relatable to assessment years 1983‑84 to 1990‑

91. In Tax Cases Petitions Nos.418 to 429 of 1997 the terms of collaboration agreement were set out in a deed, which was signed by the assessee on February 26, 1971; while Bharat Heavy Electricals Limited signed the same on March 10,1971. Consequently, the agreement so signed was to be taken as if the agreement came into existence on March 10, 1971, between the parties. The collaboration agreement covered by Tax Cases Petitions Nos.537 to 546 of 1971 came into existence on March 10, 1971, by both the parties signing the agreement on one and the same date, namely, March 10, 1971. Both, the agreements, viz., the agreement concerning Tax Cases Petitions Nos.418 to 429 of 1997 and the agreement concerning Tax Cases Petitions Nos.537 to 546 of 1997 were for a period of ten years. Both the agreements, it appears, were renewed for a further period of ten years, by a common agreement, dated September 25, 1979. The later agreement, viz., dated September 25, 1979, simply renewed the original agreements for a further period of ten years, in the sense of the terms of the earlier agreements not at all having been altered. Both the original agreements, it appears, had been approved by the Government of India on March 10, 1971. This apart, as earlier stated, both the agreements came into existence on March 10, 1971. Section 9 of the Income Tax Act, 1961 (Act No.43 of 1961)‑‑‑For short "the I.T. Act"), deals with a situation, when, income deemed to accrue or arise in India. So far as the instant cases are concerned, we are concerned with section 9(1)(vii) of the Income‑tax Act, which reads as under: "9.(1) The following incomes shall be deemed to accrue or arise in India‑‑.. (vii) income by way of fees for technical services payable by‑‑‑ (a) the Government, or (b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside, India or for the purposes of making or earning any income from any source outside India; or (c) a person who is a non‑resident, where the tees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or canning any income from any source in India: Provided that nothing contained in this clause shall apply in relation to any income any way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government..." In these instant cases, the collaboration agreements and also the approval of those agreements happened, much earlier to April 1, 1976, the targeted date, as had been prescribed by the proviso, appended to section 9(1)(vii) of the Income‑tax Act. It is thus crystal clear that the fees for the technical services were payable only pursuant to the agreements, dated March 10, 1971, and approved by the Government of India on March 10, 1971, itself, much earlier to the 1st day of April, 1976, as had been specifically provided in the proviso appended to section 9(1)(vii) of the Income‑tax Act. Taking these aspects into consideration, the Tribunal recorded a finding of facts stating that the assessee is entitled to the benefit of exemption in respect of the fees paid for technical services, pursuant to the salient provisions adumbrated under the proviso appended to section 9(1)(vii) of the Income‑tax Act. The findings so recorded by the Tribunal are factual findings and, therefore, it is, the Tribunal refused to refer the questions stating that question No.(1) is not a referable question of law. So far as question No.2 is concerned, the Tribunal recorded a finding, as below: "Since the royalty is received for supply of know‑how designs, drawings, information regarding secret processes, etc., expenditure to be allowed as a deduction would have to relate to paper work, courier and corresponding salaries of staff; etc., mainly because the information is already developed and available to the assessee. We consider that for such expenses, a deduction of 20 per cent. in respect of each amount, which we have held to be taxable, would be in order. The Revenue is not able to show any difference in the facts of the present case to avoid the application of the above observations. We, therefore, direct that a deduction of 20 per cent. should be allowed in respect of the royalty which is taxable. The other question is the rate of tax which will be the rate declared by the relevant Finance Act. We direct the Assessing Officer to recompute the total income and the tax payable for all the assessment years." As such, the second question had also been decided on the factual matrix of the instant case. Therefore, such a question is also not a referable question of law, in the view of the Tribunal. We are in full agreement with the view of the Tribunal on both the questions. In this view of the matter, all these tax cases petitions are dismissed. There shall, however, be no order as to costs, on the facts and in the circumstances of these cases. M.B.A./293/FC Petition dismissed.