1989 (2) TMI 11 - HC - Income Tax

Summary

Issues Involved:
1. Inclusion of amounts Rs. 7,12,268 and Rs. 9,90,000 in the assessee's total income.
2. Entitlement to relief under section 80MM(1) of the Income-tax Act, 1961.
3. Qualification of the entire remuneration received by the assessee-company as provision of technical know-how under section 80MM.

Detailed Analysis:

Issue 1: Inclusion of Amounts in Assessee's Total Income
The Tribunal examined whether the amounts of Rs. 7,12,268 and Rs. 9,90,000 were liable to be included in the assessee's total income for the assessment years 1971-72 and 1972-73. The assessee contended that these amounts, paid under agreements dated September 2, 1969, and November 25, 1969, represented the income of the non-resident company, Sofremines (Paris), and were not liable to be included in the assessee's total income. The Tribunal upheld the Appellate Assistant Commissioner's decision to delete these amounts from the assessee's total income, following its earlier decision for the assessment year 1970-71. The Tribunal concluded that the amounts were not assessable in the hands of the assessee, as the income was diverted at the source to Sofremines (Paris) for services rendered.

Issue 2: Entitlement to Relief Under Section 80MM(1)
The Tribunal addressed whether the assessee was entitled to relief under section 80MM(1) for the assessment years 1971-72 and 1972-73. The Tribunal noted that the agreement between Tata Iron and Steel Co. (TISCO) and the assessee was approved by the Government of India, which recognized the role of Sofremines (Paris) in the colliery expansion scheme. The Tribunal found that the services provided under the agreement fell within the scope of "provision of technical know-how" as defined in section 80MM(2). The Tribunal upheld the Appellate Assistant Commissioner's decision to allow relief under section 80MM, as the agreement involved the transfer of technical know-how, training of TISCO employees, and other technical services.

Issue 3: Qualification of Entire Remuneration as Provision of Technical Know-How
The Tribunal considered whether the entire remuneration received by the assessee-company qualified as provision of technical know-how under section 80MM. The Tribunal observed that the agreement with TISCO was for detailed engineering and consultancy supervision, which required sophisticated technical know-how. The Tribunal agreed with the Appellate Assistant Commissioner's analysis that the services for supervising the job were an indispensable part of the provision of technical know-how. The Tribunal concluded that the entire remuneration received by the assessee-company was for the provision of technical know-how and was entitled to relief under section 80MM(1).

Conclusion:
All three questions referred by the Tribunal were answered in the affirmative and in favor of the assessee. The amounts of Rs. 7,12,268 and Rs. 9,90,000 were not included in the assessee's total income, and the assessee was entitled to relief under section 80MM for the entire remuneration received for the provision of technical know-how. There was no order as to costs.