9911796707
TMI Blog2015 (3) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee as an 'assessee in default' u/s. 201(1) of the Act and levying interest u/s. 201(1A) of the Act on the tax not deducted at source for the assessment year 06-07. 3. All these appeals involve common issues and arise for consideration on same facts and circumstances. Having heard these appeals together, we deem it appropriate to pass a common order. The facts and circumstances giving rise to these appeals are as follows. 4. An Indian company by name 'M/s. Biocon India Ltd.,' registered under the Companies Act, 1956 [hereinafter called as "BIOCON"] is a pioneer in biotechnology and was engaged in the manufacture and marketing of various enzymes, active pharmaceutical ingredients and specialty chemicals. 5. CIMAB SA, Cuba [hereinafter referred to as "CIMAB"] is a Cuban company engaged in research, development, manufacturing and marketing of biopharmaceuticals. CIMAB had developed technology for some products which are necessary for manufacture of drugs for treatment of cancer. "Technology" means :- (a) know-how viz,, information required for scientific, technical and technological evaluation of production of the products; (b) technical information viz., info ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal contribution to the JVC. 9. The assessee filed an application u/s. 195(2) of the Act on 13.01.2005, a copy of which is at page Nos.338 to 348 of the assessee's paperbook. The application narrates various circumstances under which shares ought to be issued to CIMAB and that the consideration paid by the assessee to CIMAB in the form of shares is not a payment which could be said to be "royalty" within the meaning of the definition given in the Act. In the application, the assessee prayed for grant of permission to issue equity shares against transfer of technology without deduction of tax at source. It should be mentioned here that this application was made by the assessee on 13.01.2005. Even prior to this date, the assessee had already issued 4,21,400 and 17,24,800 equity shares to CIMAB i.e., on 30.03.2004 and 30.09.04 respectively. There is no reference to the fact that certain shares had already been issued to CIMAB in its application dated 13.01.2005. The Assessing Officer passed an order dated 22.02.2005, a copy of the same is at pages 333 & 334 of the assessee's paperbook. The AO in this order, purported to have been passed u/s. 195(2) of the Act, was of the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to why he should be treated as an "Assessee in default" in respect of taxes not deducted at source (on the value of the shares) while issuing shares to CIMAB and also show cause notice u/s.201(1A) of the Act asking the Assessee to show cause why interest on tax not deducted from the date on which tax ought to have been deducted at source till the date on which taxes are paid to the Government should not be levied. 12. According to the assessee, the consideration paid by it to CIMAB was for transfer of capital asset viz., "technology", which would be income chargeable under the head 'capital gains' falling within the exception contemplated by Explanation 2 to section 9(1)(vi) of the Act. The assessee's further contention was that even capital gains is not chargeable to tax in India because the transfer of the capital asset viz., the technology took place outside India and therefore section 45 of the Act read with sections 4 & 5 of the Act was not attracted. Hence there was no obligation to deduct tax at source. 13. According to the Revenue, the value of the shares issued by the assessee to CIMAB is nothing but consideration paid by a person resident in India in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , delay in passing order us/. 195 of the Act and its other consequences have been raised by the assessee. We will deal with each of the above contentions of the assessee separately. 18. ISSUE NO.1: Whether the provisions of Sec.195(1) of the Act are not applicable when shares are issued to a Non-resident (which is a foreign company in the present case) because it cannot be said to be a payment of "any other sum chargeable under the provisions of this Act" within the meaning of the said expression used in Sec.195(1) of the Act? 19. The argument of the learned counsel for the Assessee on the above issue was that Sec.195(1) of the Act casts obligation on the person responsible for paying to a non-resident, any other sum chargeable under the provisions of the Act, to deduct tax at source at the rates in force at the time of crediting such income to the account of the payee OR making payment by cash, cheque, draft or any other mode, whichever is earlier. It was his submission that when shares are issued in consideration for transfer of technology to CIMAB it is not a payment of "any other sum" within the meaning of Sec.195(1) of the Act. According to him those provisions will apply on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT 325 ITR 540 wherein the question was whether income accrued in India to a Non-resident who had hired trawlers to an Indian company and the hire charges had to be quantified at 85% of the value of fish caught or 600000 US $ whichever is less. The Hon'ble Supreme Court held that the Indian company carried out fishing in economic zone of India and the charter fee was paid to non-resident equivalent to 85% of the value of the fish caught. The quantification was also done in India and therefore income accrues to non-resident in India. The learned DR laid emphasis on the point that even when consideration is quantified otherwise than in terms of money, income accrues or arises. 22. We have considered the rival submissions. Sec.80-G of the Act grants deduction while computing total income "any sums paid by the Assessee in the previous year as donation". The question before the Hon'ble Supreme Court in the case of H.H. Sri Rama Verma (supra) was as to whether donations in kind are also entitled to deduction u/s.80-G of the Act. The Hon'ble Supreme Court took note of the context in which the expression "sums paid by the Assessee" was used in Sec.80-G of the Act which gave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application, the assessee has prayed for grant of permission to issue equity shares against transfer of technology without deduction of tax at source. It should be mentioned here that this application was made by the assessee on 13.01.2005. Even prior to this date, the assessee had already issued 4,21,400 and 17,24,800 equity shares to CIMAB i.e., on 30.03.2004 and 30.09.04 respectively. There is no reference to the fact that certain shares had already been issued to CIMAB in its application dated 13.01.2005. The Assessing Officer passed an order dated 22.02.2005, a copy of the same is at pages 333 & 334 of the assessee's paperbook. The AO in this order, purported to have been passed u/s. 195(2) of the Act, was of the view that the assessee's stand that issue of shares against of transfer of technology would be in the nature of capital contribution of CIMAB and CIMAB would not earn any income was correct. The concluding portion of the order of the AO reads as under:- "In view of the above, I hereby authorise the applicant to issues equity shares against transfer of technology without deduction of tax at source. This order will be effective for issues of shares agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, if the assessing authority is of the view that no tax is chargeable, a certificate to that effect could be issued to the person responsible for making payment. Once a certificate is issued, the liability of the person responsible for paying under the aforesaid provision ceases and without any deduction he may make the payment to the non-resident. Insofar as Section 197 is concerned it provides for a similar application being made by the recipient of the income. On such an application being made under Section 197(1), the assessing officer can give to him such certificate as may be appropriate. If such certificate states no tax is deductible, until such certificate is cancelled by the assessing officer, the person responsible for paying the income is under "No obligation" to deduct tax while making payment. In fact the language employed is "Shall". Therefore, it is mandatory in nature. What is the effect of such a certificate was the subject matter of interpretation." "When LLAH approached the Assessing Officer and made the aforesaid representation, a certificate under Section 197(1) came to be issued. On the fact of the certificate issued under Section 197(1) being made availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n application in respect of payments to a non-resident is where the payer considers that the whole of the payment will not be income chargeable in the case of the recipient. The payer can only call upon the AO to determine the appropriate proportion of sum chargeable to tax in India and the tax that the payer has to deduct on that proportion which is chargeable to tax in India. The provisions of Sec.195 of the Act is reproduced for the sake of better appreciation and clarity and it reads thus: "SECTION 195 : Other sums : (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries" shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23D) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). (4) A certificate granted under sub-section (3) shall remain in force till the expiry of period specified therein or, if it is cancelled by the Assessing Officer before the expiry of such period, till such cancellation. (5) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (3) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith. (6) The person referred to in sub-section (1) shall furnish the information relating to payment of any sum in such form and manner as may be prescribed by the Board. (7) Notwithstanding anything contained in sub-section (1) and sub-section (2), the Board may, by notification in the Official Gazette, specify a class of persons or cases, where the person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall make an application to the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and case laws referred to in this regard. In none of the case laws elaborated by the ld. Counsel for the assessee in his written submissions deal with the scope of section 195(2) in the context of a payer making an application for Nil deduction of tax at source. We are of the view that the submissions made by the assessee in the written submissions are a desperate attempt to justify the Nil deduction of tax granted by the AO which fortunately for the revenue did not operate at the relevant point of time when the assessee issued shares to CIMAB. 32. The question for consideration would be as to what is the effect of the order dated 22.02.2005 passed by the Assessing Officer u/s. 195(2) of the Act holding that no tax is deductible by the payer. In our view, when there is no power u/s. 195(2) of the Act to hold that no tax is deductible at source, on an application filed by the person making payment to a non-resident, the order passed by the AO holding that no tax is deductible at source would be non est in law. In fact, this aspect is clear from the decision of the Hon'ble Supreme Court in the case of GE India Technology Centre (P.) Ltd. v. CIT 327 ITR 456 (SC), wherein the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at because the Revenue did not dispose the application of the Assessee u/s.195(2) of the Act, within a reasonable time, the permission prayed for is deemed to have been granted? 35. The next contention of the ld. counsel for the assessee was that in respect of issue of shares after 31.03.2005, the assessee made an application on 17.10.2005 and 10.07.2006 for issue of no tax deduction at source, that application was not disposed of the by the AO. It was submitted that in the light of the earlier view of the AO that there is no income chargeable to tax in the hands of the non-resident in India, the assessee entertained a belief that there was no requirement of tax deduction at source. It was therefore submitted that in respect of shares issued by the assessee on 30.09.2005 and 31.03.2006, the assessee did not deduct tax at source. It was argued that the revenue is precluded from initiating proceedings u/s.201(1) of the Act on the principle of estoppel. 36. On the alternative issue, it was submitted that on the failure on the part of the AO to pass an order on the assessee's application u/s. 195(2) of the Act, the assessee can presume that the request made by it must be granted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1.2005 in which the Assessee did not disclose the facts regarding issue of shares to CIMAB on 30.3.2004 and 30.9.2004. Therefore the Assessee cannot take any benefit under the order dated 22.2.2005 for any issue of shares to CIMAB. 38. As already stated the order dated 22.2.2005 is not in accordance with law because that order which was passed u/s.195(2) of the Act, was in response to an application by the person responsible for making payment in which the dispute can be only with regard to the rate of tax and not the question whether tax at all is deductible at source or not, which remedy is available only to the recipient of the payment u/s.195(3) or 197 of the Act. Law is well settled that there cannot be an estoppel against a statute. The CBDT Circular No.774 dated 17.3.1999 referred to by the ld. counsel for the assessee will not have any operation to the present case, as the provisions of section 197 are not attracted in the present case at all. Reliance placed by the ld. counsel for the assessee on the decision of the Delhi Special Bench of the Tribunal in the case of Bhagwad Swarup Shri Shri Devraha Baba Memorial Shri Hari Parmarth Dham (supra) is also misplaced because t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payments to non-resident or foreign company requires specific order, unless there is any other general order operating for an indefinite period of time. We therefore reject the arguments advanced on this issue and hold against the Assessee on issue No.4. 43. ISSUE NO.5: Whether the issue of shares by the Assessee to CIMAB would constitute a payment of "Royalty" by the Assessee to CIMAB which can be said to accrue or arise in India to CIMAB and therefore taxable in the hands of CIMAB in India and consequently the Assessee be held as liable to treated as an Assessee in default u/s.201(1) of the Act? 44. Another issue that may require consideration as an alternate to the above issue will be as to whether CIMAB is liable to tax on capital gain on transfer of technology. Consequently, whether assessee can be said to be 'an assessee in default' to the extent of tax on capital gain? 45. On the above issues, the first aspect to be seen is the definition of "royalty" under the Act. The second aspect to be seen is the terms of the JVA and the TTA. 46. "Royalty" is defined by Expln. 2 to sec.9(1)(vi) of the Act, as under:- 'Explanation 2. - For the purposes of this clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the Assessee made a claim before the AO that the transfer of technical know-how took place outside India. We also asked him as to how in his written submissions he claims that transfer of technology took place outside India and evidence if any to show that transfer of technology took place outside India. In his elaborate submissions filed after the hearing in which such queries were raised, there is no whisper on this aspect except a plea that situs of know-how would be Cuba and therefore the transfer of the know-how should also be considered as having taken place outside India. We will deal with this aspect later. If the exclusion clause is not found to be applicable in the present case, then we have to examine as to whether any of the clauses referred to in Explanation 2 to section 9(1)(vi) of the Act are attracted. The AO proceeded on the footing that clause (i) and clause (ii) of Explanation 2 to section 9(1)(vi) of the Act would be attracted and this conclusion is based on certain terms of the terms of the TTA. The CIT(A)'s order is silent on which clause of Explanation 2 to section 9(1)(vi) will apply, but he seems to be in agreement with the conclusions of the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the JVC. The cost so borne will be 51% of the issued, subscribed and paid up capital of the JVC and based on the above 49% of the paid-up capital had to be allotted to CIMAB which will be the value of the technology brought in by CIMAB for use by the JVC. 51. Under clause 2.1 of the JVA it is provided that the JVC will manufacture cancer drugs using the technology developed by CIMAB The JVA in Clause 11 provides as follows:- "Article 11. Technology Transfer 11.1 The Technology that CIMAB will transfer to JVC in terms of this JVA shall consist of consist in the following: 11.1.1 The Technical Information, including the Know-how for production and the entire documentation required for making possible the manufacture of the Product as per the specifications, to be finalized and signed off as Annexure 4 in a supplement agreement to be executed within 60 days of execution of this JVA. 11.1.2 The conceptual design required for the project for basic solution engineering needed for building and erecting the Biotechnological Plant in accordance with scope as determined in this JVA. 11.1.3 The project for basic engineering solution required for the detailed engineering project nee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the preamble to this Agreement, CIMAB claims that it owns right to transfer technology in relation to commercial manufacture and marketing of products [viz., (a) Human Recombination Crythroposeon, (b) Granulocyte Colony Stimulating factor, and (c) TheraCIM hR3 Humanised Monoclonal Antibody against Epidermal Growth factor receptor]. It is further mentioned that the same is being transferred in terms of the said Agreement to the assessee. The area for which transfer was valid is India for products (a) and (b). For product (c), the area is India, Bangladesh, Bhutan, Nepal, Pakistan and Sri Lanka. Technology has been defined in clause 1.14 of this Agreement as follows:- '1.14 "Technology" shall mean (i) conceptual and basic engineering for the Facility based on current Good Manufacturing Practice (cGMP) (ii) procurement, construction, design, assembly, start-up and managing of the Facility (iii) confidential information related to the manufacturing of the Products (iv) the patents including information contained in the patents relating to the Products, manufacture of the Products and the Technology and shall include Improvement, Know How, Technical Advise and Technical Informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the JVA & TTA make it clear that apart from know-how CIMAB was also required to render Technical Service in India. 57. We should keep in mind that there can be mixed contract for supply of know-how and technical services in consideration of lump sum payment. The lump sum consideration must be broken down into parts and that part of the consideration attributable to know-how has to be brought to tax as 'royalty' assuming that the consideration paid is for imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill. That part of the consideration attributable to providing 'technical services' has to be brought to tax as fees for technical services rendered. Such apportionment has to be on the basis of the information specified in the contract itself or on some other reasonable basis. If, however, one element constitutes 'by the principal purpose of the contract' and the other element is "only of an ancillary and largely unimportant character", the whole amount paid should be treated as relating to the primary element. 58. Keeping in mind the observations in the earlier paragraphs, let us see as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovement/Improvements, BBPL will grant a royalty free license to BBPL in perpetuity subject to CIMAB agreeing that during the term of this Agreement it will not disclose/transfer/licence the same to any Third Party (excluding regulatory authorities), except on such terms as may be mutually agreed between BPPL and CIMAB. Article 6 Improvement & Improvements 6.2 Any Improvement or Improvements made in the Territory by BBPL will be property of BBPL and shall be licenced royalty free in perpetuity to CIMAB outside the Territory subject to CIMAB agreeing that during the term of this Agreement CIMAB will not disclose/transfer/licence the same to any Third Party (excluding regulatory authorities), except on such terms as may be mutually agreed between BPPL and CIMAB. Article 7 Confidentiality 7.1 During the term of this Agreement, all the Technology, as well as data, instructions and any other information related to them and supplied or to be supplied by the CIMAB to BBPL shall be only used by BBPL (i) in the Facility for manufacture and marketing of the Products and (ii) as per the terms of this Agreement, and shall be considered and treated as confidential information. 7.2 During t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of issue of shares in the JVC. Accrual of income from the second part of the contract has to be brought to tax subject to fulfillment of conditions specified in section 9(1)(vi) of the Act. The fact that the consideration payable under the Agreement is discharged by issue of shares in a JVC will have no effect on accrual of income in India and its taxability in India. 61. Having held that there was a right to use the technology falling within the section 9(1)(vi) Explanation 2(iv) of the Act by the assessee for which payments were made to CIMAB, we need to see as to whether the JVA read with TTA is a composite contract by which the right to use the know-how was provided together with technical services. This exercise, in our view, need not be carried out for the reason that both royalty and fees for technical services are taxed at the same rates under the Act. Expln.-2 to Sec.9(1)(vii) of the Act defines Fees for Technical Services as follows: "Explanation 2 : For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t rates of tax on royalty and fees for technical services was a sample study made by the IT Department, prior to the enactment of these provisions w.e.f. 1st June, 1976, which showed that the expenses claimed against royalty income, (then being taxed at the rate of fifty per cent on net basis) were around twenty per cent and hence the flat rate of tax at forty per cent was determined. In view of the position that the lump sum consideration paid to foreign companies for the supply of technical know-how, drawings, designs and documentation etc. abroad were not taxable prior to 1976, it was decided that such lump sum amount should be taxed at the concessional rate of twenty per cent of the gross amount of such payments. 34.3 It may be mentioned that when the provisions of s. 115A of the IT Act were enacted, it was felt that it might be difficult to segregate the royalty payment relating to the supply of know-how simpliciter from the payment relatable to the technical service. This is because of the fact that a number of our technical collaboration agreements envisage composite situations where the collaborator tenders various types of services of technical nature apart from making av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be covered by the aforesaid clause. (ii) Consideration paid for use of any patent, invention, model, design, secret formula or process or trade mark or similar property. As already stated, Know-how is not specifically referred to in this clause but it would be "similar property" like secret formula or process. Even transfer of part of the right comprised in the bundle of rights in the intellectual property i.e., know-how, would be covered by the aforesaid clause. (iii) Consideration paid for the imparting of information concerning technical, industrial, commercial or scientific knowledge, experience or skill, falling within the ambit of Expln.-2(iv) to Sec.9(1)(vi) of the Act. (iv) Consideration for conceptual design required for the project for basic solution engineering needed for building and erecting the biotechnological plant. (v) Consideration for basic engineering solution required for the detailed engineering project needed for building and erecting the biotechnological plant. (vi) Consideration for training of selected biocon personnel required for manufacturing the products. (vii) Consideration paid for supervising the detailed engineering and construction of the bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee" other than those specifically excluded. One of the items of exclusion is "stock-in-trade". In the JVA CIMAB is stated to be engaged in research, development, manufacturing and marketing of biopharmaceuticals. As to whether the technology transferred under the JVA and TTA would be stock-in-trade of CIMAB or not cannot be ascertained without the presence of CIMAB. This is another reason why we feel that in proceedings u/s.195(1) of the Act, the person making payment cannot ask for a "nil" deduction of tax at source. For example if it is held that the receipt would constitute business income of the recipient as to whether the recipient has a permanent establishment in India or not cannot be decided in proceedings initiated by the person making payment as he cannot give the required details. In the present case, we cannot proceed under any assumption that technology is not "stock-in-trade" of CIMAB as was sought to be argued by the learned counsel for the Assessee. Another connected argument of the learned counsel for the Assessee was that even if one assumes that know-how was stock-in-trade of CIMAB, since it was brought in as capital contribution to the Joint Venture, it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was opined that the entry of Rs. 11.50 crores being the value of land credited in assessee's capital account was not imaginary or notional and that it was chargeable to tax. We are of the view that the ratio laid down in the aforesaid decision cannot be applied to the present case as the issue was decided on the provisions of Sec.45(3) of the Act. The technology was given by CIMAB to a company that was to be formed and in lieu of payment of consideration for such transfer in terms of money, shares had been issued in the company formed. We are of the view that the principles applicable in such cases will be to look at the transaction as comprising of two contracts. The first contract is one for sale of technology and the second contract is for the mode in which payment of consideration for sale of technology has to be discharged. We are therefore of the view that the aforesaid decision will not be of any assistance to the Assessee in the present case. 70. It was submitted ownership of know-how comprises of a bundle of rights viz., the right to use it exclusively and restricting others from using it, the right to part with such right in part including the right to use a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court thereafter found that the Tribunal held that the transaction was in substance a parting by Wolf company with its property for the purchase price, the property being its connection or goodwill in India and its fund of confidential material and the transaction was not of "the nature of a technique for exploiting the Indian market to provide trading income". The Court also found that the finding recorded by the Tribunal was by virtue of the transaction Wolf company had parted with its property, being its connection or goodwill in India. The Hon'ble Court found that the company's exports to India amounted to 10 per cent of its total exports by volume and even greater percentage by value and that this volume of business with India represented the assessee-company's largest export market outside the countries where it maintained its own branches. The Court held that if this business was given up as a part of the arrangements arrived at in the agreements then it would be a case of disposal of capital asset not imparting knowledge and therefore receipt was capital receipt. In the present case, as we have already seen, there was no source given up or capital asset dispose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioning of the plant etc. etc. There are also different ways of imparting technical know-how which may be :- (i) through outright sale of designs, know-how etc.; (ii) by lending the services of foreign technicians; (iii) by giving technical assistance during the period of agreement; (iv) through royalty or licensing agreements; or (v) through foreign capital participation. A further important aspect is whether or not the nomenclature used in the collaboration agreement really indicates the correct nature and purpose of the payment. In such cases, the real nature and purpose of the payment has to be ascertained and taken into account. 4. Broadly speaking, the tax problems arising under technical collaboration agreements are of two kinds, viz., those relating to the admissibility of the expenditure incurred in the assessments of the Indian participant, and those relating to the taxation of the amounts in the hands of the non-resident participant. As regards the former, i.e., the admissibility of the expenditure in the hands of the Indian participant, the question would be whether the expenditure has been incurred for acquiring or brining into existence an asset or advantage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -how abroad. On the other hand the circumstances suggest that there has been delivery of technical know-how in India. The learned counsel for the Assessee had placed reliance on the decision of the ITAT Mumbai Bench in the case of Dy. CIT v. Lyka Labs Ltd. 310 ITR (AT) 427. That was a case where the question was whether receipts from imparting know-how for 3 years was capital or revenue receipt. The Tribunal held that there was no transfer of a capital asset and that there was only a right to use the information. It was further held that the Assessee was in the business of imparting of information and therefore the receipt was revenue receipt chargeable to tax. In the aforesaid decision the Tribunal held that if by the terms of the transfer of an intangible asset, the transferor is not restrained from use the intangible asset transferred then there is no transfer of the intangible asset. The learned counsel for the Assessee has relied on the above ruling and submitted that in the present case, the Assessee could restrain CIMAB from using the technology in India and therefore there was transfer of intangible by the CIMAB to the Assessee. We do not think that the stand taken by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such use shall be treated as confidential information and will not be revealed to any person. The ld. Counsel relies on the aforesaid clause in the agreement and the fact that such a right to use is for 20 years contends that there was an absolute transfer of technology. We have already held in the earlier part of order that there was no transfer of know-how, but only a right to use the know-how. 79. Some arguments were advanced by the ld. Counsel for the assessee that technology transfer was not stock-in-trade of CIMAB and therefore it was a capital asset in the hands of CIMAB. We have already observed in the earlier part of the order that CIMAB is not a party to the present proceedings in which the assessee is treated as an assessee in default. Such questions cannot be decided in the absence of CIMAB being a party to the proceedings and in their absence. There is nothing on record to show that the technology in question was not stock-in-trade of CIMAB. 80. Some arguments were advanced by the ld. Counsel for the assessee that technology was transferred within the meaning of the term 'transfer' as defined in section 2(47) of the Act. We have not dealt with this submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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