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TMI Blog2012 (3) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... trademarks and other like property or rights -the amount received by the assessee was royalty covered under Article VII of the DTAA and therefore, taxable in India -Royalties derived by a resident of one of the territories from sources in the other territory may be taxed only in that other territory the questions raised were in favour of the revenue and against the assessee. - IT Reference NO. 139 OF 1996 - - - Dated:- 9-1-2012 - J.P. DEVADHAR AND A.R. JOSHI, JJ. H. Toor and Chitnis for the Applicant. Suresh Kumar for the Respondent. JUDGMENT 1. At the instance of the applicant-assessee, the ITAT has referred the following questions of law u/s.256(1) of the Income Tax Act, 1961, for the opinion of this Court. (1) Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T has referred the aforesaid questions for the opinion of this court. 4. On perusal of the order of ITAT particularly para 8 thereof it is seen that the Tribunal has considered the various clauses in the agreement dated 25/03/1985 and recorded a finding as follows :- "8. In order to decide whether receipt in question is capital or not the relevant terms of the agreement dated 25/3/1985 has to be considered. The preamble of the agreement states that the assessee company which had accumulated valuable technical know-how in the manufacture of screw type compressors out of its expertise and research work carried out by it, had agreed to supply and impart with the know-how to the Indian company as per the terms of the agreement. Clause-1(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty can terminate the agreement at any time by giving notice in writing on happening of certain events. Cl. 6(a) provides the consideration for use of such know-how in lump sum at US $ 1,80,000 payable in three instalments, with which we are concerned in the present appeal. Cl.9, which is an important clause states that the Indian Company shall not disclose the know-how to any other person and shall keep it as a secret. Cl. 10 authorises the Indian company to disclose the know-how to other parties with the prior consent of the assessee and subject to the approval of the Indian Government. Cl. 18 provides the period of agreement during which it shall remain in force. Cl. 20(ii) again stipulates that the Indian company shall respect the secre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee for allowing the right to use the knowhow constitutes 'royalty' and would be taxable in India. In the present case, the assessee has received the amount from an Indian Company on account of the assessee permitting the Indian Company to use its knowhow for the period specified in the agreement. Therefore, the amount received by the assessee being 'royalty' covered under Article VII of the DTAA, the ITAT was justified in holding that the amounts in question were taxable in India. 8. In the result, the questions raised in the reference are answered in the affirmative i.e. in favour of the revenue and against the assessee. The reference is accordingly disposed off with no order as to costs. - - TaxTMI - TMITax - Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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