HC : Cannot treat FTS as royalty merely citing general IP protection clause in agreement

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