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TMI Blog1986 (7) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... sistance in engineering, in procurement in supervision of the erection, installation and start up and commissioning of plant. It is not necessary to give the details of this contract. The only point to be noted is that FCI should pay the assessee certain fees for the services to be rendered. Similar contracts had been entered into by the assessee with Atul Products Ltd. On 28th Jan., 1977, Ashok Paper Mills Ltd. on 12th Sept., 1973 and Travancore Cochin Chemicals Ltd. on 27th Jan., 1972. 3. For the asst. yr. 1981-82, the payments made by the Indian companies on the basis of the contracts are by FCI on the contract dt. 28th May, 1974 and Kothari (Madras) P. Ltd. 4. According to the assessee, the payments made by these Indian companies fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. and Travancore Cochin Chemicals Ltd., for the asst. yr. 1980-81 and the payments received in the asst. yr. 1981-82, the assessee has come on appeal. The Department has objected to the findings of the Commissioner(A) that the payments received from FCI and Atul Products Ltd. for the asst. yr. 1980-81 were exempt from taxation. 8. We have heard Shri Palkhivala for the assessee and Shri Thomas for the Department. Shri Palkhivala submitted that the only issue to be considered is whether all these payments would be covered under the provisions of the Double Taxation Avoidance Agreement with West Germany. He submitted that it is an admitted position that the assessee had no permanent establishment in India. Only if the non-resident company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of IT Act they are to be treated as royalty and therefore taxable. The Tribunal, however, further found that these payments could not be considered as royalty for the purpose of Double taxation Avoidance agreement. The Tribunal found that the expression "royalty" used in the Double Taxation Avoidance Agreement is of that type which excludes business receipts and since in these cases the receipts arise from the business of the assessee they are to be treated only as commercial profits. They have also held that the expression "royalty" used in the Double Taxation Avoidance Agreement has to be understood with reference to the law as it stood at the time of the agreement and it cannot be unilaterally changed with the amendments ..... X X X X Extracts X X X X X X X X Extracts X X X X
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