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TMI Blog1982 (7) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... by the American company and it reads as follows : " UNIROYAL will furnish or cause to be furnished to PREMIER detailed information, as set forth in Appendix A hereto, on manufacturing equipment, methods, process and formulas, followed and used in regular production by UNIROYAL and any subsidiary of UNIROYAL in the manufacture of Agreement Products, and will continue, subject to Section 2-8, to furnish or cause to be furnished to PREMIER such information from time to time during the term of this agreement. Appendix A is hereby incorporated by reference and made a part of this Agreement. Nothing in this agreement shall be construed as requiring UNIROYAL to furnish or cause to be furnished any information, the disclosure of which would be in violation of an obligation of secrecy owed to another by UNIROYAL or any subsidiary of UNIROYAL having to make any payment to a third party (not a subsidiary of UNIROYAL). " Apart from the above provision, the American company is also required, if it considers necessary, to send to the Indian company one or more persons for 30-man working days to advise and assist the Indian company in establishing the use of the information furnished and for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee appealed. It appears that the contention of the company was that no services were rendered in India and, therefore, no income arises in India. It was submitted before the Commissioner (Appeals) that whenever there were any difficulties in manufacturing or technical problems, the Indian company carried on correspondence with the American company and assistance during the year was wholly rendered through correspondence. It was next submitted that no income could be deemed to accrue or arise in India because there was no business connection between the Indian company and the assessee. For this purpose, reliance was placed on the decision of the Bombay High Court in CIT v. Tata Chemicals Ltd. [1974] 94 ITR 85. It was also submitted that section 9(1)(vi) would not apply and for this purpose a Gujarat High Court decision in Meteor Satellite Ltd. v. ITO [1980] 121 ITR 311 was relied on. The Commissioner (Appeals), however, held that the income is taxable in India. He had held that the provisions of section 9(1)(vi) would apply and any payment of royalty would be considered as income arising in India. He further pointed out the decision of the Gujarat High Court in the case of Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tside India. For this purpose he relied on the decision of the Supreme Court in the case of Carborandum Co. Assuming that the deeming provisions of section 9 apply, he submitted that sub-section (1) will not apply because there is no income accruing or arising from any business connection in India. He further submitted that clause (vi) also will not apply because the payment is by way of technical fees and such payment is covered by clause (vii) and not by clause (vi). According to him, what was paid was only for technical services and in respect of such payments the proviso to clause (vii) exempts them from taxation. The proviso states that an agreement made before 1-4-1976, as approved by the Central Government, would not be taxable under that clause. With reference to the point made by the Commissioner (Appeals) regarding the visit of Mr. Hubbers, he submitted that his visit had nothing to do with the agreement. If at all it has to be construed as giving certain services then since he stayed in India only for two weeks, only that proportion of the receipts should be treated as deemed income under section 9. 10. Shri Makhija, for the department, submitted that the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome would become taxable in India. The agreement itself shows that for considerations received, the American company is under an obligation to render the services to the assessee. Article II, which has been reproduced in para 2 of this order, would show that Uniroyal will furnish or cause to be furnished to the Indian company detailed information as set forth in the Appendix to the agreement regarding the processes and formulae followed and used in regular production by the American company. So, it is the duty of the American company to furnish the information to the Indian company. The American company may depute some one to India to give this information or they may utilize an agent to convey the information. That agent can be the post office. It was stated that the problems were being referred to the American company which were being solved by them in America. For this submission, no factual background has been given. In any case, it is against the tenor of the agreement which requires the American company to furnish information to the Indian company. If the information has been sent through post, then the post office was only acting as the agent of the American company. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission that the payments are in the nature of fees for technical services which are covered by section 9(1)(vii). To our mind, fees for technical services is a larger concept, of which royalty could be one such. A royalty payment can also be considered as a payment of fees for technical services. In other words, 'technical services' is the general expression which takes in also special services for which royalties would become payable. Section 9(1) deals with both royalties, which are special services, as well as technical service fees which are general services. When in the same section separate provision has been made for special services and for general services, the provision with regard to special services must apply when considering those cases which are specifically provided for. It is, therefore, clear to us that we have to consider the payment of fees as royalty, which is only a specie of the payment of fees for technical services under clause (vi) only. Since under clause (vi), the income would be deemed to have accrued or arisen in India, the amount received has to be considered as taxable unless it gets exempted under any of the provisions in clause (vi) itself. For t ..... 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