9911796707
TMI Blog1979 (4) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... 79/81, Mortimer Street, in the county of London. Some of the relevant clauses of the said agreement are as follows: "(1) One of the objects of the Indian company is to act as managers and consultants to companies and other business concerns and undertakings engaged in any of the business of hotel, restaurant, cafe, tavern, refreshment room and lodging-house keepers especially outside India. (3) Mr. Ghai and Mr. Lamba in their own right are experienced in the successful management of catering establishments in India and abroad. (4) The English company Mr. Ghai and Mr. Lamba and an Indian partnership firm by the name of Kwality Restaurant and Ice Cream Co. have been working an agreement since the year one thousand nine hundred and sixty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in consideration of these presents and the agreement hereinbefore contained the English company, the Indian company and Mr. Ghai and Mr. Lamba for themselves and on behalf of the Indian company hereby mutually agree as follows: 1. The Indian company and/or Mr. Ghai and Lamba will use their best endeavours and their experience and expertise to promote and establish the English company in accordance with its memorandum and articles of association and in order to carry out their duties to the best advantage. Mr. Ghai and Mr. Lamba (or such substitutes as shall be nominated by the Indian company with the consent of Mrs. Kaul) together with Mrs. Kaul shall have such powers and authority as shall be agreed from time to time including sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res floated by M/s. G. L. Restaurants P. Ltd., London, is 20,000 and out of these 20,000 shares, 6,400 shares are held by the petitioner-company. The petitioner-company along with its letter dated September 21, 1972, addressed to the Central Board of Direct Taxes submitted an application on the prescribed pro forma along with a copy of the agreement for rendering technical services with G. L. Restaurants P. Ltd., London, for approval of the agreement under s. 80-O of the I.T. Act, 1961. While giving details of technical services rendered or agreed to be rendered outside India by the petitioner-company, the petitioner-company stated " Technical Collaboration Management of the Gaylord (India) Restaurant, 79-81, Mortimer Street, London W-l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi) ]. After considering the entire scheme of s. 80-O, it was held in that case that the significant features of s. 80-0 were as follows (p. 316): "(1) The provision of deduction applies only to royalty, commission, fees or any similar payment. These payments are received by a company either for supplying information or for rendering technical services. This postulate that the Indian company, does not become a part of the foreign enterprise. If the two merge together then the identity of the Indian company would be lost and what would be paid would be not royalty or commission or fees, but rather a share in the profits. (2) The identity of the Indian company being distinct from that of the foreign enterprise, the Indian company must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. It was also pointed out that the Indian company has no power to appoint any employee in the English company without the previous approval of Mrs. Kaul. In our opinion, taking the totality of the clauses of the agreement, these two clauses are very insignificant. It is a clear case of joint venture and the management is practically left with the petitioner-company. The petitioner-company is entitled to dividends on its shareholding and is getting 25% of the annual net profits. In the circumstances, the said payments cannot be termed as royalty, commission, fees or any similar payment. The last contention of the counsel for the petitioner was that the approval has been denied by the Central Board of Direct Taxes after an inexplicable an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Central Government before the first October of the relevant assessment year. After the agreement is executed, it may be submitted to the Department of Revenue for approval. In our opinion, this letter cannot be said to be any definite assurance given to the petitioner. In any case, the Central Board of Direct Taxes acting as quasi-judicial authority is not bound by any such letter issued by the Director, Ministry of Finance, Department of Economic Affairs, New Delhi. For the reasons stated above, the cases are fully covered by the ratio in our judgment in Civil Writ Petition No. 901 of 1975 [J.K. (Bombay) Ltd. v. CBDT [1979] 118 ITR 312 (Delhi)] and we are of the opinion that the respondent No. 1 was full justified in refusing to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
