Madras HC dismisses
Revenue’s appeal against ITAT order holding that payment made by assessee
(automobile company) to the Austrian company for design of cylinder for
improvement of fuel efficiency is not royalty, but in the nature of fees for
technical services taxable only in Austria, as per provisions of India-Austria
DTAA; Revenue had relied on clause in the general terms and conditions of
the agreement which provided that know-how, patents and ideas introduced into
the project shall remain exclusive property of Austrian company and held that
since assessee had only a right to use such know-how, etc., payment was to be
treated as royalty; Noting that relevant clause in the general terms and
condition was generic in nature and application to all agreement entered by
Australian company with third parties, holds that “it will be an improper
manner of interpretation of the technical assistance agreement by reading
clause 7 of the general conditions to state that the agreement between the
parties was a licence for which the payment made is to be treated as royalty”;
Notes that engine was developed by assessee and scope of the technical services
agreement was only to design a new 3-valve cylinder head with a specified
combustion system, thus holds that Tribunal decision in assessee's own case for
earlier year holding payment to be FTS "would be applicable with full
force to the case on hand" :HC
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