AKTIENGESELLASCHAFT, KUNHLE KOPP & KAUSCH Vs. CIT

JUDGEMENT

(1.) THE assessee is on appeal as against the order of Tribunal for the assessment year 1983-84. The above appeal was admitted on the following questions of law.

(2.) THE assessee herein is a non resident assessee represented through its agency BHEL. The said non resident company had an agreement with the Indian company for passing on technical knowhow to manufacture industrial boilers and fans. The first agreement between the company for transfer of technical knowhow was entered into on 26.11.1973 for a period of seven years. Subsequently, on the expiry of the term, the same was extended under another agreement dated 21.8.1981 having retrospective effect from 26.11.1980. The agreement dated 21.8.1981 related to transfer of technology for three new products and the royalty payable thereon. The agreement dated 26.11.73 was approved by the Government of India on 18.2.1974. The agreement was to remain in force for a period of seven years from the date of signing of the agreement and could be renewed for a further period of six years. Thus, the agreement entered into on 26.11.73 was renewed by an agreement dated 21.8.81 for a further period of seven years from 16.11.80. According to the assessee, the two agreements are separate agreements and the latter agreement dated 21.8.81 would not be construed as an amendment to the agreement dated 26.11.1973.

(3.) THE assessee objected to the proceedings contending that the agreement dated 21.8.81 was a new agreement and it was not an agreement extending the period of the agreement. The agreement entered into on 21.8.81 covered new products and the royalty payable thereon. Hence, the agreement dated 21.8.81 entered into after 1.4.76 and the rates as prescribed in Section 115A of the Income Tax Act were correctly applied and the relevant Finance Act rates were not applicable. In the alternative, the assessee contended that if the agreement dated 21.8.81 was to be treated as part of the earlier agreement dated 1.4.76, then the assessee be granted the relief of deduction of 20% towards expenses, further deduction of 20% towards training and exemption in respect of lumpsum royalty and royalty on export sales.