Commissioner of Income Tax vs Graf Sales Ltd.

R. Jayasimha Babu, J.—The Appellate Tribunal has held that the amount remitted to the assessee by the Indian company with whom it had

collaboration agreement on May 28, 1980 was for the transfer outside India of drawings, designs, documentation, etc., relating to the products

manufactured by the Indian company in collaboration with the Swiss company and, therefore, the payment made fell u/s 115A(1)(ii) and rejected

the Revenue''s argument that it falls under Sub-clause (iii) which sub-section refers to fees for technical services. The Tribunal referred to the

Explanation to Section 9(1)(vii) which defines ""technical services"" and pointed out that what is contemplated is payment for services rendered and

not for transfer of any technical know-how as such. The Revenue contends that that view of the Tribunal taken by it in the appeal by the assessee

for the assessment year 1981-82 is erroneous. We do not find any substance in that submission. The reasons given by the Tribunal are cogent and

as pointed out by it, the relevant clauses of the agreement practically re-produce the language of Section 115A(1)(ii). We have perused the

agreement. We are satisfied that the Tribunal has correctly understood the purport of it and the purpose for which the payment was effected. The

agreement clearly provides for the transfer of the technical know-how as contained in drawings of documentation at Switzerland.

We therefore answer the questions referred to us, namely :--

(i) Whether, on the facts and in the circumstances of the case and having regard to the provisions of Section 9 of the Income Tax Act, 1961, the

Appellate Tribunal is right and had valid materials to hold that the collaboration agreement with the company does not fall u/s 115A(1)(iii) of the

Income Tax Act, 1961 ?

(ii) Whether, on the facts and in the circumstances of the case and having regard to the provisions of Section 9 of the Income tax Act, 1961, the

Tribunal is right and had valid materials to hold that the collaboration agreement fell u/s 115A(1)(ii) of the Act and, therefore, only 20 per cent, of

the technical know-how fees received by the assessee to be brought to tax as income arising in India ?

in favour of the assessee and against the Revenue. The assessee shall be entitled to costs in the sum of Rs. 2,000 (rupees two thousand) only.