CIT Vs. WESMAN ENGG CO P LTD

JUDGEMENT

(1.) This appeal by grant of certificate under S.261 of the Income Tax Act, 1961 by High Court of Calcutta raises the following question for consideration:

(2.) Brief facts of the case are that the respondent assessee is a private limited company incorporated in India. The assessee company carried on some business in collaboration with M/s. Wilhelm Ruppmann, Industrieofenbau, Stuttgart W, Gutenbergstr. By an agreement entered on 1st January, 1963 it was agreed that the foreign collaborators would grant to the Indian company during the term

(3.) The assessment year involved in the case is 1964-65. In the matter of remittance to the non resident company, the assessee vide applications dated June 4, 1964 and 18-8-64 requested the Income Tax Officer to grant necessary certificate in order to enable them to approach the Reserve Bank of India for remittance to their collaborators. The said applications related to the invoice in regard to supply of drawings for manufacture of furnaces in India in accordance with their collaboration agreement. The Income Tax Officer placing reliance on the terms of the agreement came to the conclusion that the payments made by the applicant company to the non resident collaborators in Germany could be grouped under the heads Royalties and Remuneration for labour or personal services. According to the Income Tax Officer, neither the remittance fell within the exempted category nor did the agreement for avoidance of double taxation between India and the Federal German Republic apply to the facts of the instant case. According to him, the payment of the remittances in respect of which the applications had been made represented payment for supply of technical know-how and for use of trade name and manufacturing right of the licensor company. He did not agree with the submissions of the assessee company and disposed of the said applications vide order dated 5th September, 1964 under S.195(2)of the Income Tax Act, 1961 directing the assessee company to deduct tax @ 65% on the entire sum proposed to be remitted.