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TMI Blog1990 (10) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing data, test reports and other information available with Daimler-Benz (except such documents and information which Daimler-Benz are under an obligation not to divulge or communicate) which may reasonably be required by Telco for the manufacture, inspection, test and sale of the licensed products and undertake to authorize the use by Telco for the duration and purposes of the licence any patents and patent rights applicable to the licensed products. " Clause 4(a) obliges Daimler-Benz to communicate to Telco promptly and freely all technical information relating to improvements in the licensed products, which, in the opinion of Daimler Benz are not having the effect of significantly altering the nature of the licensed products. Clause 5(a) relates to the technical co-operation. It states that without affecting the provisions of Article 4 of the agreement and in order to impart technical know-how, working committees of Daimler Benz and Telco will discuss technical problems connected with the licensed products, so that Daimler-Benz may grant the necessary technical assistance and may advise Telco on the developments of the licensed products. Clause 6(a) concerns persona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arks. (b) : Telco shall to the best of its ability and without incurring any liability to Daimler-Benz for its failure to do so notify Daimler-Benz of any infringement or violation within the Union of India of the name, trade marks, or proprietary rights of Daimler-Benz which come to Telco's knowledge or attention. " Clause 15 appoints Telco as Daimler-Benz's sole selling agents for all the products in India for five years on usual terms. Clause 16 relates to representation for Daimler-Benz on Telco's Board and disposal of Daimler-Benz shareholding. It reads as under : " Tata shall to the best of its ability arrange for the appointment of one representative of Daimler-Benz on the Board of Directors of Telco from time to time so long as Daimler-Benz continue to hold not less than 2.5% of the equity capital of Telco. " Clause 17 obliges Telco to inform Daimler-Benz, in advance of any licences in the field of commercial vehicles or major parts thereof which the former intends to take from other companies. Clause 18(a) states that the agreement shall be deemed to have come into force from 1st April, 1969 and will operate in the case of OM 352 engine for a period of five years, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and industrial profits. He held that such amounts, as they arose to the assessee in India, would have to be taxed and since no separate payment was contemplated, according to him, an apportionment of the same was called for. He referred in this connection, to the decision of the Supreme Court in the case of CIT v. Toshoku Ltd. [1980] 125 ITR 525 wherein it was held that in case of a business of which all the operations were not carried out in India some part of the income should be deemed to accrue in India through and from the business connection and such part should be the part which could reasonably be attributable to the operations carried out in the taxable territories. Having regard to all the terms and conditions of the agreement, the CIT(A) held that fifty per cent of the payment made to the assessee during the year should reasonably be considered as attributable to the operations carried out in India and such income shall be brought to tax as the income arising to the assessee from its business operations carried on in India. Both the parties are aggrieved by the said order of the CIT(A). 4. We have heard the parties and considered their rival submissions. The receipt by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... schaft v. ITO [1987] 22 ITD 87 (Bom.) and not by the definition as contained in Explanation 2 to section 9(1)(vi). The general meaning of royalty, in the opinion of the Special Bench, is as stated in paragraph 45 of the order, after considering the Calcutta High Court decision in CIT v. Stanton & Stavely (Overseas) Ltd. [1984] 146 ITR 405, its definition meaning given in Encyclopaedia Britannica (1972 Edition) and Gujarat High Court decision in CIT v. Ahmedabad Mfg. & Calico Printing Co. [1983] 139 ITR 806 and others, as under : " It is thus clear that the general concept of the term 'royalty' does not rule out 'lump sum payments' being considered as 'royalty' as well as payments made for know-how. The mere fact that a particular knowledge which is imparted may not be statutorily protected as in the case of a patent or trade mark would not take it outside the purview of the term 'royalty'. It may be that the knowledge imparted is only contractually protected. It may even be that there is no protection for the knowledge so granted. Even so the observations which we have set out above clearly show that the form of legal protection has no conclusive impact in determining whether paym ..... X X X X Extracts X X X X X X X X Extracts X X X X
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