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TMI Blog1984 (11) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... is not taxable, while the revenue claimed that the entire commission is taxable. 2. The relevant facts are that the assessee has received a sum of Rs. 11,87,683 as export commission from Ceat Tyres of India Ltd. and claimed before the ITO that this is not taxable. The assessee had entered into an agreement with Ceat Tyres of India Ltd. on 9-9-1977. As per the agreement, the Indian company was to pay to the assessee Rs. 11,87,683 for the services rendered under the agreement vide clauses (a) to (d), which read as below : " (a) The assessee would forego in favour of the Indian company exports in various markets and in certain cases export orders were to be transferred to the Indian company. (b) The assessee was to allow the use of channel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the services mentioned in clauses (a), (b), (c) and (d) of the agreement are not covered by the expressions 'royalty' and 'technical services fee'. He submitted that here the assessee has rendered four types of services. First is, that the assessee would forego in favour of the Indian company its exports in various markets, so far as the product of Indian company is concerned. In some cases, the assessee has transferred its export orders to the Indian company. The second is that the assessee has allowed the Indian company to use its channels of distribution in overseas markets and the third type of service is that the assessee will furnish detailed market information to the Indian company through their representatives in major intern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as can be seen from section 35B of the Act where the assessee gets a weighted deduction on exports. He also submitted that the meaning of the expressions 'royalty' and 'technical services fee' should not be taken to destroy the normal meaning. If such services are taken to be covered, that means the normal meaning of the expression is destroyed. He further submitted that at the most, services mentioned in clause (b) of the agreement can be taken as covered by the definition of 'royalty'. On the other hand, the submission of the learned departmental representative, Shri Roy Alphonso, was that the services mentioned in clauses (a) to (d) of the agreement are fully covered by the definitions given by the Legislature in sections 9(1)(vi) and 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vention, model, design, secret formula or process or trade mark or similar property ; (iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill ; (v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films ; or (vi) the tendering of any services in connection with the activities referred to in sub-clauses (i) to (v) ;" Similarly, the Legislature has defined the expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service and further to promote the goods of the Ceat brand in the overseas markets does not destroy the normal meaning of the words 'royalty and fees for technical services'. Here in fact, the assessee has a world-wide network of offices and it uses the offices for the purpose of the goods of the Indian company. To get the information from abroad regarding the market cannot be considered just an ordinary information. It requires a thorough experience and well-established organisation. A layman straightaway cannot go and get the order for selling his goods abroad. In their letter dated 4-12-1982, by the assessee to Ceat Tyres of India Ltd., they have pointed out that they have worldwide network of offices through which they will ascertain an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Indian company. In our view, merely by foregoing the export sales in the various markets abroad does not cover by any of the clauses in the definition of royalty/fees for technical services (sic). Clause (b) of the agreement provides that the assessee shall allow the use of channels of distribution in overseas markets to the Ceat Tyres of India Ltd. and also allow other after-sales services in those markets. In our view, this service is covered by the definition of royalty. As the assessee has provided the well established machinery for sale abroad to the assessee and its experience by helping in export of the Ceat Tyres of India Ltd., that is amounting to an imparting of information regarding sale or experience or skill which the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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