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TMI Blog2008 (5) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... gued by the Ld DR. There is also a fallacious argument made that since the orders are in the name of the assessee, the sales are deemed to have been effected in India. This argument has totally ignored the Sale of Goods Act and if such an argument was allowed to be sustained, then all the clarifications issued by the Board would be nullified and the very concept of export sales would disappear altogether. The Commercial information which the agent in our case is expected to provide to the assessee is not such over which the agent has an exclusive domain. It is merely a market informa-tion which any Tom, Dick and Harry can go into the market and obtain it. The definition given in the DTAA is also in consonance with the definition. It states that royalty means payment of any kind received as a consideration for information concerning industrial, commercial or scientific experience. It simply means that a person who has an exclusive right over a particular information and over which no one else in the world is a privy to it, can assign a right to use such information to the other. There is no such issue in the present case. Thus, the argument of the ld DR with regard to royalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s explanation was that it was remitting such commission since three decades without any deduction of tax at source and never had the department raised any objection for the same. It was contended that the agents did not render any service in India and reference was made to the Board s Circular Nos. 23 and 786, dated 23-7-1969 and 7-2-2000 respectively. The contention was that if the sum payable to the non-resident was not chargeable to tax in India, section 195 was not applicable. The assessee also relied on certain judicial pronouncements. The Assessing Officer was not convinced with the Explanation of the assessee. According to him, the income was clearly chargeable to tax in terms of section 5(2)( a ) and 5(2)( b ) of the Act. Further, according to him, either the payer or the payee ought to have resorted to section 195(2) or 195(3) as the case may be. The Assessing Officer further observed that the remittance was made through TTs through a bank of India and therefore the bank stepped into the shoes of the non-resident payee and became their agent. The Assessing Officer relied on the decision of the Hyderabad Bench of the Tribunal in the case of Cheminor Drugs Ltd. v. ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sales effected by the foreign agent but also for certain other services rendered by the latter. The services pointed out by him were to promote and popularize the products of the assessee, to secure orders for the assessee and it was argued that since the orders were in the name of the assessee and sales were made in India , income accrued to the payee in India. Further, he pointed out from the agreement that the agent was to provide commercial information to the assessee and also to provide after-sales service to the customer. Based on these facts, it was argued that it was a composite agreement because of various services to be provided by the payee and hence the income was chargeable to tax not only under the Act but also under the DTAA. Referring to Item ( iv ) in Explanation 2 to section 9(1)( vi ) of the Act, it was contended that payment made for imparting of any commercial information was royalty and hence taxable in India. To buttress this point he also referred to Article 12 pertaining to royalties in the DTAA. It was a case of, according to him, continuing service and not one-time service and therefore the payment per se was not in the nature of commission. Coming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. [2003] 262 ITR 110. 6. We have duly considered the rival contentions and the material on record. In the case of Sundwiger EMFG Co. ( supra ), an Indian company had entered into contract with certain foreign companies for supply of different types of capital equipment. Further, a separate contract was also entered into between the parties for providing technical services covering supervision of erection, start-up, putting into commission, etc. For the purpose of providing technical services, the non-resident had to send on deputation its employees who were specialists to India. Apart from the payment of DM 475 per day, the Indian company had to meet the expenses of travel, living and out of pocket expenses of the specialists coming to India. It was also agreed that all the payments to the contractor and the specialists were to be without deduction of taxes. The Assessing Officer was of the view that the amounts to be remitted towards technical fees were taxable under section 9(1)( vii ) of the Act. The court held that the two agreements could not be read in isolation. Both pertained to the same transaction. The services rendered by the experts and the payments made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese are general illustrations of the payment of royalty. In Jowitt s Dictionary of English Law , 5th Edition, Volume 2, on page 1595, royalty is defined as a payment reserved by the grantor of a patent, lease of a mine or similar right, and payable proportionately to the use made of the right by the grantee . This definition envisages that there must be an existing owner of the mining right or of the patent and so on. The owner of such a right can assign his right to another to use it and in consideration of which the payment made to the owner would be royalty. This royalty would generally be proportionate to the exploitation of the right used by it. The Commercial information which the agent in our case is expected to provide to the assessee is not such over which the agent has an exclusive domain. It is merely a market informa-tion which any Tom, Dick and Harry can go into the market and obtain it. The definition given in the DTAA is also in consonance with the definition discussed above. It states that royalty means payment of any kind received as a consideration for information concerning industrial, commercial or scientific experience. It simply means that a person who ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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