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TMI Blog1977 (12) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... cipient, the trade mark itself not having been parted with. The trade mark continued to remain the property of the assessee and was only liable to be exploited in the particular territory by the Indian company. He also rejected the contention of the assessee that the agreement having been signed abroad, the income if at all accrued should be regarded as accruing outside India to a non-resident and hence not taxable. On appeal, the AAC upheld the addition. He also held that in so far the Indian company has fully subscribed the shares of the value of Rs. 50,000, instead of paying cash of Rs. 50,000, the character of the receipt was not altered. The AAC also rejected the contention of the assessee with regard to the legality of the reassessment proceedings. It is against this order of the AAC that the present appeal is laid before us. 3. Before us the learned counsel for the assessee has pointed out that in so far as the assessee was not taxable in India, the ITO lacked jurisdiction to start proceedings for reassessment. With regard to the payment of Rs. 50,000 itself, reference was made to agreements, a tripartite agreement dt. 9th June, 1961 between Tube Investments Ltd., U.K. Tub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able had clearly escaped assessment and proceedings were properly taken. The ITO had information entitling him to reopen the assessment. The decision in Kalyanji Mavji Co. vs. CIT 1976 CTR (SC) : 1976 102 ITR 287 (SC) supported the Department in this regard. With regard to the transfer itself it is pointed out that what the assessee parted with was the user of an asset for a particular period. What is received therefore in return for the user was revenue. Several decisions were cited in support of this stand. Stress is laid on the fact that the agreement clearly provided for transfer of the asset only for a particular period. The assessee did not part with the asset for any long time but had only surrendered the user of the same for a consideration. What was received thus only a lease rent. The fact that this was paid in a lump sum would not make the payment which was otherwise of income nature capital. The trade mark utilisation was in India. The income, therefore, cannot be said to not have accrued in India. 5. The following portion of the agreement of 9th Oct., 1961 and the agreement of 15th Dec., 1961 are relevant: "A T.I. Miller Ltd. whose registered officer is situate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to use the trade name Miller during the period of this agreement and for a period of five years thereafter for the sale in the Territory of all goods similar to any motor car, scooter cycle or motor cycle products of incorporating any such product or product of such product at any time manufactured and sold by Miller elsewhere and no such goods or products shall be sold by T.I.M. in the territory under any name other than Miller during the period of this agreement. (2) Miller shall forthwith cause to be filed and prosecute with due diligence in the Indian Trade Mark registry on application to register T.I.M. as the sole registered user of Trade mark Miller registered in India under Class II in respect of the Licensed products and T.I.M. shall join in such application and Miller and T.I.M. shall do all acts and excute all documents necessary and proper for obtaining such registration and T.I.M. shall bear all expenses in connection therewith. XXX (4) This agreement shall continue from year to year without limit so long as an agreement dated the Ninth day of October One thousand nine hundred and sixty one made between Tube Investments Ltd. of the first part, Tube Investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axable income. They laid down the general principle by stating: "We must look to the substance of the transaction, as is disclosed in the agreement, read as a whole. If we find, as is contended by the assessee s learned counsel, that it was an out and out sale for an ascertained sum, the payment of which was spread over a number of years, we must hold that by this transaction his capital asset was transmuted from the form of a patent to a sum of money payable in fixed instalments. If, however, we come to the conclusion that it was nothing more than the grant of a working licence for a number of years on certain conditions, the property in the patent not being transferred absolutely to the grantee but still remaining in the grantor, the verdict must be against him." In Abdul Kayoom vs. CIT (1962), 44 ITR 689 (SC) the Supreme Court was considering the nature of payments made to obtain conch shells. Hidayathullah J. observed : "In obtaining the lease, the respondent obtained a speculative right to fish for chanks which it hoped to obtain and which might be in large quantities or small, according to its luck. The respondent changed the nature of its business to fishing for chanks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Whatever may be the result of granting rights partial in quantity or length of time in other cases, as to which I should desire to express no opinion, s. 5 of the Act permits the assignment of copyright either wholly or partially, either generally or subject to limitation of place, and either for the whole term or for any part thereof. Any such assignment is a parting with the whole rights limited, it is true, to a particular place or places, or for a particular period, but still to that extent a complete diverting of the property in the copyright from one owner to another. The Act itself in the same section marks the distinction between such an assignment of part of the copyright, and an interest in the right by licence by enacting that the owner shall also be entitled to grant such interest. Finally, it provides that in the case of a partial assignment the assignee shall be the owner of the right in the part assigned, and the assignor of the right in that not assigned. It is true that this provision is qualified by the words shall be treated for the purposes of this Act as the owner of the copyright, and the provisions of this Act shall have effect accordingly . But the rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable the Swiss Company did not part with any asset of its business, nor did the assessee acquire any asset or advantage of an enduring nature for the benefit of its business". At page 701 of the report the followings obtains : "In the case in hand it cannot be said that the Swiss company had wholly parted with its Indian business. There was also no attempt to part with the technical knowledge absolutely in favour of the assessee. The following facts which emerge from the agreement clearly show that the secret processes were not sold by the Swiss company to the assessee (a) the licence was for a period of five years, liable to be terminated in certain eventualities even before the expiry of the period; (b) the object of the agreement was to obtain the benefit of the technical assistance for running the business; (c) the licence was granted to the assessee subject to rights actually granted or which may be granted after the date of the agreement to other persons; (d) the assessee was expressly prohibited from divulging confidential information to third parties without the consent of the Swiss company (e) there was no transfer of the fruits of research once for all : the Swiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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