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TMI Blog2001 (3) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into on 19-7-1977. Under the agreement, SEMT was to supply all the technical know-how including drawings and designs for the Engines for which a production based royalty for a period of IO years from commercial production was payable to them. The assessee had been manufacturing these Engines based on the technical know-how provided by SEMT since last 12 years or so. The royalty payments also were being made accordingly. During the financial year 1990-91, the assessee received an order from M/s, Garden Reach Shipbuilders Engineers Ltd. (GRSE for the sake of brevity) for 2 PIELSTICK Engines. These Engines were to be fitted on the Naval Ship Landing Ship Tank that the GRSE was building for Indian Navy. The assessee had the necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the necessary expertise. SEMT agreed to provide the necessary Calculation Report for a fee of FF 45,000. The assessee Company made an application to The Special Committee for the Technical Development, Department of Heavy Industries, Government of India, for necessary approvals, (page 2 of the paper book). SEMT provided the necessary Calculation Report (copy placed on record) and payment of FF 45,000 was to be made against their Invoice. It is noted that all the exercise was done by SEMT in France and no part was carried out in India. It is also to be noted that the required software was to be prepared on the basis of Calculation Reports furnished by SEMT, by the assessee only. 4. While the assessee Company argued before the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the ITAT, Calcutta Bench E in the case of ITO v. Voest Alpine Industrieanlagenbau GMBH, Austria [1998] 67 ITD 219. He submitted that Article VII of the DTAA deals with Royalties and Article XVI deals with the fees for professional services. He then drew our attention to the term 'Royalty' as defined in Article VII(2) of the DTAA and submitted that the definition makes it clear that consideration for which the Royalty is paid is of, or is likely to be of, an extended or perpetual use for the payee. He submitted that in the instant case, the assessee-company had all the know-how to manufacture the required Engine. It was only the special type of application and conditions that forced the assessee-company to obtain the expertise from S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DTAA between India and France deals with Royalties and sub-section (2) of Article VII defines 'Royalties' as under: "(2) In this Article, the term 'Royalties' means payment of any kind received as consideration for the use of; or for the right to use, any copyrights of literary, artistic or scientific works, cinematographic films, patents, models, designs, plans, secret processes or formulae, trade marks or for the use of, or for the right to use, industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific experience, but does not include any royalty or similar payments in respect of the operation of mines, quarries, or other places of extraction of natural resources." From the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Reports to meet a specific problem is essentially rendering of a technical service and cannot be equated to 'imparting' information for a consideration in the nature of Royalty. In the case before us, the assessee Company had all the know-how to manufacture the required Engine. It was only the special type of application and conditions that forced the assessee Company to obtain the expertise from SEMT. This expertise, which was in the form of detailed Calculations, was suitable and useful only for a given purpose and that too in given parameters and conditions. The Report does not have any other use for the assessee-company. Thus, this payment is nothing but fees for technical services and no other meaning can be imported into it. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Cochin Bench in Hindustan Latex Ltd.'s case relied upon by the learned D.R. deals with an entirely different issue. In that case, specific definition of the term 'Royalty' under the ADT Agreement with Japan was not even considered and the entire discussion related to the definition in section 9(1)(vi) and (vii). In the case before us, there is no consideration paid for the right to acquire use of any patents, models, designs, secret processes or formulae so that they can be exploited on a regular basis. This is simply a case of referring a technical difficulty encountered in the course of business and obtaining advice and solution thereof. 11. In the second decision of the Delhi Bench in Munak Galva Sheets Ltd.'s case relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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