SUMITOMO MITSUI CONSTRUCTION CO. LTD. Vs. COMMISSIONER CONCERNED DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-II

JUDGEMENT

(1.) THE applicant is a company incorporated in Japan. It is engaged in construction activities and provides architectural and civil engineering services. SMCC Construction India Limited (SMCI) is an Indian Company and a subsidiary of the applicant and is operating as a construction company involved in general construction and civil engineering. The said Company provides industrial construction and related engineering consultancy services.

(2.) THE applicant had entered into a technical collaboration agreement with SMCI on 10th December 1997. It may be mentioned that the names of the two Companies have undergone a change. As per the Agreement, the applicant had agreed to furnish to SMCI under a license the technical know -how and technical information covering the provision of contract services and assistance for the marketing. It has also granted exclusive right to SMCI to provide contract services in India and non exclusive rights to provide contract services outside India. The applicant held patents in respect of basic designs, methods and turnkey contract management techniques. The applicant has been getting royalty from SMCI towards transfer of know -how and technical information @ 5% of the SMCI's turnover and such royalty payable by SMCI constitutes 5% of the 'net sales of SMCI separately for domestic as well as export market for a period of 7 years from the date of commercial production of SMCI. This agreement was renewed on 12.08.2004 for a period of 10 years, with the approval of Ministry of Commerce & Industry, Govt. of India. However, the percentage of royalty payable has been varied.

(3.) THE applicant's counsel has stated in the course of arguments that the reference to the year 2007 -2008 is an inadvertent mistake and it ought to be 2008 -09. In the written submission filed on dt 17th November 2009, this was again made clear. The applicant sought for substitution of the assessment year 2007 -08 with the assessment year 2008 -09 (financial year 2007 -08). This amendment has been permitted.