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TMI Blog1986 (10) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... and 1970-71 ? " On November 24, 1959, an agreement on economic co-operation was entered into between the Government of India and the Government of Czechoslovakia, Socialist Republic, concerning the establishment of certain industrial plants in India. On November 30, 1965, another agreement was entered into between the President of India and the Techno export, Praha, Czechoslovakia, for the establishment of a plate and vessels plant in India. Bharat Heavy Plate Vessels Ltd., Visakhapatnam, a Government of India undertaking, was incorporated in June, 1966. The assessee entered into two agreements with M/s. Skoda Export, Praha, Czechoslovakia, on February 27, 1968, and August 2, 1968, respectively. In this case, we are concerned with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of this clause is that the purchase price was to be paid outside India. A number of questions arose in the assessment proceedings, one of which was whether a business connection existed between the non-resident and the assessee. This question was concluded by the decision of this court in Bharat Heavy Plate and Vessels Ltd. v. Addl. CIT [1979] 119 ITR 686, where it was held that a business connection did exist. It was held that a combined reading of the two agreements entered into in the year 1968 does establish a real and intimate connection between the assessee and the non-resident within the taxable territories, which amounts to a business connection. It was observed that there is an element of continuity between the business of both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (a) in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India; (b) in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export; (c) in the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Explanation, in the case of a business of which some operations are carried out in India and some outside India, the income of the business deemed under section 9(1)(i) shall be " only such part of the income as is reasonably attributable to the operations carried out in India" The Explanation contemplates a business comprising several operations, some of which are carried out outside India. In such a situation, only the operations carried out within India shall be taken into account and a reasonable portion thereof shall be treated as income accruing or arising in India. The operations which are carried out outside India shall not be taken into account for this purpose ( CIT v. Toshoku Ltd. [1980] 125 ITR 525 (SC) at pp. 530-531]. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and the non-resident. . The sale of machinery was in pursuance of and one of the things to be performed under and in pursuance of the agreement entered into between them. This is also the view expressed by a Bench of this Court in Bharat Heavy Plate and Vessels Ltd. v. Addl. CIT [1979] 119 ITR 986. The same view is expressed in the subsequent decision in Skoda Export v. Addl. CIT [1983] 143 ITR 452 (AP) as well. We may also mention that learned standing counsel for the Department challenged the finding of the Tribunal that the sale of machinery was completed outside India. According to him, the sale was completed only in India, inasmuch as the assessee was entitled to inspect and satisfy itself about the quality and standard of the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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