Commissioner of Income Tax vs Sofremines (India) Ltd.

Suhas Chandra Sen, J.—The following three questions have been referred by the Tribunal u/s 256(1) of the Income Tax Act, 1961 ("the Act"), as under :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the amounts of Rs. 7,12,268 and Rs. 9,90,000 were not liable to be included in the assessee''s total income of the previous year relevant to the assessment years 1971-72 and 1972-73 respectively on the ground that the assessee had divested itself of the right at the very inception of those amounts ?

(2) Whether, on the facts and in the circumstances of the case and on a correct interpretation of the agreement dated September 2, 1969, entered into between Tata Iron and Steel Co. Ltd. and the assessee, the Tribunal was right in holding that, during the relevant years, there was provision of technical know-how within the meaning of Clause (i) of Section 80MM(1) of the Income Tax Act, 1961, and the assessee is entitled to relief under that section for the assessment years 1971-72 and 1972-73 ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the entire remuneration received by the assessee-company was for the provision of technical know-how within the meaning of Sub-section (2) of Section 80MM and as such was entitled to relief u/s 80MM(1) ?"

The assessment years involved are 1971-72 and 1972-73. The facts of the case as stated by the Tribunal are as under.

The assessee-company is an Indian company and 50 per cent of its shares are held by a non-resident company known as Sofremines (Paris). In the previous years relevant to the assessment years 1971-72 and 1972-73, Sofremines (Paris) received directly from Tata Iron and Steel Co. Ltd. (TISCO), Rs. 7,12,268 and Rs. 9,90,000, respectively, in terms of the principal agreement dated September 2, 1969, entered into between the assessee-company and Tata Iron and Steel Co. Ltd. and also in terms of another agreement dated November 25, 1969, entered into between the assessee-company and Sofremines (Paris).

In terms of the aforementioned agreements, Sofremines (Paris) directly received from TISCO a sum of Rs. 7,30,770 in the previous year relevant to the assessment year 1970-71. The assessee-company contended that all these amounts paid under the aforesaid agreements represented the income of the non-resident company, Sofremines (Paris) and were, therefore, not liable to be included in the assessee''s total income. The Income Tax Officer rejected this contention of the assessee and held in the assessment for the assessment year 1970-71 that those amounts were assessable in the hands of the assessee herein. He, accordingly, included the sum of Rs. 7,30,770 in the assessee''s total income of the previous year relevant to the assessment year 1970-71. In the appeal by the assessee, the Appellate Assistant Commissioner confirmed the inclusion of the sum of Rs. 7,30,770 in the assessee''s total income of the previous year relevant to the assessment year 1970-71. In further appeal by the assessee for the assessment year 1970-71, the Tribunal, for the reasons mentioned in its order, reversed the finding of the authorities below and decided the point in favour of the assessee.

The Income Tax Officer, following his order for the preceding assessment year, included the amounts of Rs. 7,12,268 and Rs. 9,90,000 in the assessee''s total income of the previous years relevant to the assessment years 1971-72 and 1972-73, respectively.

Against those assessment orders for the assessment years now under reference, the assessee preferred appeals before the Appellate Assistant Commissioner who disposed of the appeals for both these assessment years by a consolidated order. Following the order of the Tribunal in the assessee''s appeal for the assessment year 1970-71, the Appellate Assistant Commissioner deleted the addition of the two amounts, Rs. 7,12,268 and Rs. 9,90,000, from the assessment for the assessment years 1971-72 and 1972-73, respectively.

Aggrieved by the action of the Appellate Assistant Commissioner in deleting the aforesaid additions and in giving some other reliefs to the assessee, the Department preferred appeals before the Tribunal for both the assessment years under reference. Aggrieved by the action of the Appellate Assistant Commissioner in confirming certain other additions made by the Income Tax Officer in the assessments for those two assessment years, the assessee preferred two appeals before the Tribunal against the same order of the Appellate Assistant Commissioner. The two appeals of the assessee and the two appeals of the Department were disposed of by the Tribunal by a consolidated order.

As regards the deletion of the addition of Rs. 7,12,268 and Rs. 9,90,000 from the assessments for the assessment years 1971-72 and 1972-73, respectively, both sides urged before the Tribunal the same contentions as were urged in the appeal in the preceding assessment year 1970-71 and submitted that the facts of the case for the two years under appeal were the same as for the earlier assessment year. Following the earlier decision of the Tribunal on this very issue in the appeal for the assessment year 1970-71, the Tribunal held that the two disputed amounts of Rs. 7,12,268 and Rs. 9,90,000 were not assessable in the hands of the assessee herein. The Tribunal accordingly upheld the action of the Appellate Assistant Commissioner in deleting the additions of Rs. 7,12,268 and Rs. 9,90,000 from the assessments for the assessment years 1971-72 and 1972-73, respectively.

In the appeals of the Department for the two assessment years under reference, the action of the Appellate Assistant Commissioner in allowing relief to the assessee u/s 80MM of the Act in respect of the assessee''s agreement entered into with Tata Iron and Steel Co. was also challenged. At the hearing of the appeals for the assessment years under reference, it was brought to the notice of the Tribunal that the identical issue arose for consideration in the assessment for the assessment year 1970-71 in the case of this very assessee, that in the appeal for that assessment year the issue was decided by the Appellate Assistant Commissioner in favour of the assessee and that, in the appeal by the Department against the decision of the Appellate Assistant Commissioner, the Tribunal upheld the decision of the Appellate Assistant Commissioner on this issue.

At the hearing of the appeals for the two assessment years under reference, both sides merely adopted their respective contentions urged in the appeal of the Department for the assessment year 1970-71. It was submitted that the facts of the case for the two assessment years under consideration were in no way different from the facts of the case of the earlier assessment year. Respectfully following the earlier decision of the Tribunal in the Department''s appeal for the assessment year 1970-71, the Tribunal upheld the finding of the Appellate Assistant Commissioner on this issue and rejected the ground taken by the Department in each of the appeals.

On April 23, 1964, Sofremines (India) Ltd. was incorporated. The Indian company was a subsidiary of Sofremines (Paris), a French company. The French company held 50 per cent, of the issued share capital of the new firm, Indian company.

On July 1, 1964, the Indian company entered into an agreement with Sofremines (Paris). In terms of the agreement, the French company was appointed as the consulting and technical adviser of the Indian company. Under Clause 6 of the agreement, the Indian company was to pay the French company such fee as might be determined in relation to the business executed in India by the French company and as may be permitted in this regard by the Reserve Bank of India. On April 11, 1969, the Government of India permitted Tata Iron and Steel Co. to sign a contract for the expansion of their coal mines for which Tata Iron and Steel Co. was granted a loan by the World Bank through the Industrial Credit and Investment Corporation of India Ltd. The Government of India approved the payment of Rs. 72 lakhs in French francs to the French company towards consultancy fees.

On September 2, 1969, Tata Iron and Steel Co. entered into an agreement with the Indian company by which the Indian company was appointed as the consulting engineers in connection with their programmes of expansion at their collieries in Jharia. Under Clause 43 of the agreement, the remuneration to be paid by the TISCO to Sofremines (India) was to be divided into two parts :

(i) Francs 47,52,000 to be paid in foreign currency ;

(ii) Rs. 41 lakhs to be paid in Indian currency.

The amount of Rs. 41 lakhs included the cost of travel estimated at Rs. 8,80,000 of Sofremines'' French engineers and technicians including their families in case of a long period of stay, travelling between France and India in connection with the project. The amount of remuneration to be paid by Tata Iron and Steel Co. to Sofremines was to be in 20 equal instalments as laid down in Clause 45 of the agreement. Clause 56 of the agreement provided that the contract shall not come into force until and unless, inter alia, the first payment as provided for in the remuneration clause had been duly received by Sofremines (India) and Sofremines (Paris) respectively.

Under the agreement, Sofremines (India) undertook to :

"(22) Organise and supervise the training of twelve officers of Tata Iron and Steel Co. for a period of six months each in mines, undertakings, laboratories or engineering offices in France, through their principals, Societe Francaise d'' Etudes Minieres, Paris, France (called ''Sofremines, Paris'').

(23) Arrange to bring to Jharia :

(i) expert French and other technicians for rendering consulting, engineering and construction supervision services at site in such number and for such time as may be required for the satisfactory completion of the project ;

(ii) an adequate number of qualified specialists, mining engineers and technicians (French and Indian) to provide Tata Iron and Steel Co. with the necessary information and technical help to enable Tata Iron and Steel Co. to carry out underground preparatory works and put into operation satisfactorily the new mining methods recommended in the project report in respect of only one working phase for each category of mining methods. The total number of new methods shall not exceed three ;

(iii) a specialised French engineer to study the problem on the site and thereafter prepare a detailed report on the programme and the methods of professional training to be introduced by Tata Iron and Steel Co. Ltd. in the Jharia Coalfields ;

(iv) one French engineer and three specialised French technical instructors to assist Tata Iron and Steel Co. in organising and starting Tata Iron and Steel Co.''s training school at Jharia provided that Tata Iron and Steel Co. shall have taken previously the necessary steps at site regarding personnel and equipment required for the training school.

(24) Appoint one of their officers as head of the Sofremines'' project team in Jharia. The members of the team will at all times maintain good liaison with officers appointed by the Tata Iron and Steel Co. to look after the project....

(43) The remuneration to be paid by the Tata Iron and Steel Co, to Sofremines (India) for the services listed in Part-11 thereof shall be divided into two parts :

Francs 47,52,000 to be paid in foreign currency and Rs. 41,00,000 to be paid in Indian currency. The above amount of Rs. 41,00,000 includes the cost of air travel estimated at Rs. 8,80,000 of Sofremines'' French engineers and technicians, including their families in case of a long period of stay, travelling between France and India in connection with this project....

(46) The amounts payable in French francs will be credited to the account of Sofremines, Paris, in Banque de l'' Union des Mines Le Henin in Paris. The amounts payable in Indian rupees will be credited to an account to be opened by Sofremines (India), in a bank at Calcutta and designated to Tata Iron and Steel Co. in due time.

(47) In case of any delay in making available in Paris and/or in Calcutta to the funds due to Sofremines Paris or Sofremines India, according to the present agreement, interest on the amounts involved will be credited to Sofremines (Paris) or India at the bank rate prevailing in France or India on such date, as the case may be, starting one month after the due date ....

(52) Sofremines (India) guarantee that in fulfilling the present contract, they will fully utilise the services of their principal, Sofremines (Paris). Sofremines (India) will also be entitled to associate with this work any of their subsidiary organisations after obtaining Tata Iron and Steel Co.''s written permission. If any part of the present contract is sublet to any other party, Sofremines (India) shall furnish to Tata Iron and Steel Co. a guarantee guaranteeing the satisfactory performance of the part of this contract which may have been sublet to any other parties.

(53) The plans, designs and documents prepared by Sofremines (India) and Sofremines (Paris), for the present project are the property of Tata Iron and Steel Co. for their own use and the use of any associated company in the TATA Group.

''The present contract shall not come into force unless :

(a) the present agreement has been duly signed by both parties,

(b) the approval of the Indian and French Governments or other authorities concerned, if any, has been obtained, and

(c) the first payment as provided for in the ''remuneration'' clauses has been duly received by Sofremines (India) and Sofremines (Paris), in Calcutta and Paris ...

The present agreement will terminate 60 months after it is put in force. However, should one or several interruptions arise as a result of force majeure or as a result of undue delays from the Indian Constructions, the validity of the present agreement would be extended for a period equal to the total of one of several complete interruptions.

In the event of the agreement being extended beyond 66 months as a result of delays or interruptions (excluding delays or interruptions caused due to the fault or negligence of Sofremines), the remuneration remaining due and payable to Sofremines in francs shall be increased or decreased, depending on the change in the index of wages of the French miners as prevailing in the 67th month after commencement of the agreement, as compared to the index of wages prevailing in the 60th month. Provided that if the agreement is extended by a period of more than a year, the extent of revision of the remaining fees may be settled by mutual agreement."

Pursuant to the aforesaid contract between Tata Iron and Steel Co. and Sofremines (India) Ltd., a supplemental agreement was entered into by and between Sofremines (India) Ltd. and Societe Francaise d'' Etudes Minieres, Paris, France (the French company). In that agreement, it was recorded that the Indian company had entered into a collaboration agreement with the French company in July, 1964, whereby the French company had agreed to act as a consultant and technical adviser to the Indian company and to make available to the Indian company technical information and personnel and know-how on the terms and conditions contained in the said collaboration agreement which was still in force.

It was recorded in the said agreement dated November 25, 1969, that the French company owned and held 50 per cent, of the issued share capital of the Indian company and that the agreement dated November 25, 1969, was supplemental to the earlier agreement dated September 2, 1969 made between Tata Iron and Steel Co. and the Indian company. It was also recorded that the "Indian company had agreed to act as consulting engineers in association with the French company in the principal agreement (the agreement dated September 2, 1969, between Tata Iron and Steel Co. and the Indian company). It was recorded in the supplemental agreement that the French company had agreed to associate itself with the Indian company as a consultant in relation to the principal agreement and had undertaken to provide all necessary technical personnel with all technical know-how and information for the carrying out of the duties and obligations under the principal agreement in its entirety". It was further recorded that : "Notwithstanding that the Indian company is the direct contracting party with the Tata Iron and Steel Co. in the principal agreement, the French company shall assume full responsibility for the performance and execution of the duties and obligations of the Indian company under the principal agreement and shall also assume full control thereof. . . In assuming this control, the French company will have the right to appoint a head of project."

It was further recorded in the supplemental agreement that the expenses of executing the project with Tata Iron and Steel Co. should be shared in the following manner :

"1. Sofremines France shall bear all the expenses arising out of the Tata Iron and Steel Co., contract in France, United Kingdom and Europe, while Sofremines India shall bear all the expenses arising in India, including air fares of French experts and their families between Paris and Calcutta either at the beginning and at the end of their assignment or for their leaves, should the period of stay exceed an agreed period of time.

With reference to Articles 4 and 5 of the agreement between the two companies, it. is further agreed that each company shall bear the cost of the stay in its own country of the personnel of the other one, in the form of daily allowance."

The remuneration clause of the supplemental agreement specifically provided :

"3. Remuneration :

It is hereby agreed that Sofremines France will be remunerated directly by Tata Iron and Steel Co. for the assistance rendered to Sofremines India in terms of the principal agreement."

The two agreements dated September 2, 1969, and November 25, 1969, have to be read together. It will be wrong to treat the agreement between the Tata Iron and Steel Co. and the Indian company to be an independent agreement to which the French company was not a party at all. In fact, while granting approval to the scheme of colliery expansion of the Tata Iron and Steel Co., it was stated that the Government of India. Ministry of Steel and Engineering, recognised the role to be played by Sofremines (France) in the colliery expansion scheme of Tata Iron and Steel Co. Approval was specifically recorded for payment of Rs. 72 lakhs in French francs to Sofremines (France). The letter is as follows :

"Government of India Ministry of Steel and Engg. Dated New Delhi, 11th April, 1969, Tata Industrial (P.) Ltd, Jeevan Tara Building, New Delhi-1.

Sub. : Colliery Expansion Scheme of Tata Iron and Steel co. Ltd., Jamshedpur--Payment of fees to Sofremines (France)

Gentlemen,

I am directed to refer to the correspondence relating to your letter No. TIS/603 dated the 7th March, 1969, on the above subject, and to say that the Government of India approve the payment of Rs.72 lakhs (rupees seventy-two lakhs only) in French francs to Sofremines (France) towards consultancy fees by Tata Iron and Steel Co. Ltd., Jamshedpur, in respect of their colliery expansion scheme for the additional production of 0.3 million tonnes of washed coal per annum and to cover the subsequent expansion on the produce 2.1 million tonnes to clean coal per annum estimated to cost of Rs. 28.70 crores. I am also to say that Tata Iron and Steel Co. Ltd., Jamshedpur, have been permitted to sign the main contract for the expansion scheme with Sofremines (India) and a copy thereof may please be sent to this Ministry.

Kindly acknowledge receipt.

Yours faithfully, Sd. (S. Venkataramani) Deputy Secretary to the Government of India."

Therefore, the consultancy fees paid to the French Company was pursuant to the scheme of expansion of the colliery by Tata Iron and Steel Co. and was approved by the Government of India specifically. The two agreements were signed with the permission of the Government of India.

Mr. Bhattacharyya, on behalf of the Revenue, has contended that services have been rendered in India by an Indian company. The remuneration that is to be paid is in respect of services rendered by the Indian company. Tata Iron and Steel Co. had not entered into any agreement with the French company. The entire income payable to Sofremines (India) Ltd. accrued to the assessee-company in India. Although the agreement between the Indian company and the Tata Iron and Steel Co. provided for payment of a sum of Rs. 72 lakhs approximately in French currency to the French company in Paris, this payment was made on account of services rendered pursuant to the agreement between Tata Iron and Steel Co. and the Indian company. The entire income arose out of the execution of this agreement and, therefore, was assessable in India.

I am unable to uphold this contention for several reasons. The agreement that was entered into by and between Tata Iron and Steel Co. and the Indian company was pursuant to a scheme sanctioned by the Government of India. In that scheme, payment of fees to Sofremines (France) was approved and the payment was described as "consultancy fees by Tata Iron and Steel Co., Jamshedpur, in respect of their colliery expansion scheme."

Moreover, the agreement between the Indian company and Tata Iron and Steel Co. specifically envisaged that the French company would have to play an important role in executing the contract. The officers of Tata Iron and Steel Co. had to be trained by the French company in France. Experts and other technicians from France had to come over to India and supervise the contract at site in such number and for such time as might be required. At Tata Iron and Steel Co.''s request, officers in excess of the number and period mentioned in Clause 22 were to be trained in mines, undertakings, laboratories or engineering offices in France. The Indian company guaranteed fulfilment of the contract and undertook to fully utilise the services of the French company. The plans, designs and documents prepared by the Indian company and the Sofremines (Paris) would be the property of the Tata Iron and Steel Co. group. The agreement could come into force provided the consent of the Indian and the French Governments had been obtained and the first payment as provided in the "remuneration clause" in the agreement had been duly received by the Indian company and Sofremines (Paris) in Calcutta and Paris. The remuneration remaining due and payable to Sofremines (France) was to be increased or decreased depending on the change in the index of wages of the French miners. The amount payable by the Tata Iron and Steel Co. to the French company under the agreement had to be paid directly to the French company in Paris. Even if this agreement is viewed independently and separately, it will be seen that the French company had an important role to play in the execution of this contract. The contention made on behalf of the Revenue that any payment pursuant to this agreement must be remuneration for the services rendered by the Indian company only cannot be upheld. The French company, even on the terms of this agreement dated November 25, 1969, had an important role to play.

Moreover, the agreement cannot be viewed independently of the supplemental agreement or the sanction granted by the Government of India for payment of money to the French company for rendering services. The sanction of the Government of India, the agreement dated September 2, 1969, and the supplemental agreement are to be taken into consideration together. The two agreements are inextricably linked up. If the French company did not have any role to play, the agreement between the Indian company and the Tata Iron and Steel Co. would become inexecutable. Engineers and other men belonging to the Tata Iron and Steel Co. had to be trained in France. The French engineers could be brought from France to India. The designs, drawings, etc., of the French company could be used by the Tata Iron and Steel Co. and thereafter could become the properties of the Tata Iron and Steel Co.

Having regard to the terms of the agreement and the scheme approved by the Government of India, it cannot be said that this is a case of diversion of income of the Indian company after accrual. The agreement dated September 2, 1969, itself envisaged payment to the French company directly in Paris. The payment was clearly on account of services rendered by the French company.

I was referred by Dr. Pal to the judgment of the Supreme Court in the case of Fatehchand Murlidhar and Another Vs. Commissioner of Income Tax, Calcutta, . That was a case of a sub-partnership where a superior title was created by the terms of the partnership deed and the income receivable from the main firm was diverted even before it became the income of the partners. In other words, the partner in the main firm received the income not only on his own behalf but also on behalf of the partners of the subpartnership..

In my view, this judgment does not throw any light on the dispute raised in the instant case. Here, we have a case of an Indian firm executing a contract in India. The contract is of a technical nature. The French company with which the Indian company was very closely linked, helped the Indian company to execute the contract and was directly involved in the execution of the contract. The contracting parties had arranged that a certain sum of money would be remitted directly to the French company in Paris. In the facts of this case and having regard to the services that have to be rendered by the French company under the agreement, this amount cannot be treated as the income of the Indian company.

The Supreme Court in the case of The Commissioner of Income Tax, Kerala, Ernakulam Vs. The Travancore Sugar and Chemicals Ltd., dealt with the question of allowability of an amount of expenditure as deduction u/s 10 of the Indian Income Tax Act, 1922. This cage which was cited by Dr. Pal is also not relevant for the determination of the controversy that has been raised in the instant case.

Having regard to the terms of the agreement set out hereinabove, I am of the view that this is not a case of diversion of income after accrual.

Question No. 1, therefore, must be answered in the affirmative and in favour of the assessee.

So far as questions Nos. 2 and 3 are concerned, the Tribunal found that the Income Tax Officer had included the amounts of Rs. 7,12,268 and Rs. 9,90,000 in the assessee''s total income for the previous years relevant to the assessment years 1971-72 and 1972-73, respectively. The Income Tax Officer had merely followed his orders for the preceding assessment years. The Appellate Assistant Commissioner deleted the addition of the two amounts in view of an order passed by the Tribunal in the assessee''s own case for the assessment year 1970-71. The Tribunal, on further appeal, followed its previous decision and upheld the order of the Appellate Assistant Commissioner. The point of law that came up for determination before the Tribunal in the assessment year 1970-71 was as to the scope and effect of Section 80MM which lays down :

"Deduction in the case of an Indian company in respect of royalties, etc., received from any concern in India. -- (1) Where the gross total income of an assessee, being an Indian company, includes any income by way of royalty, commission, fees or any other payment (not being income chargeable under the head ''Capital gains'') received by the assessee from any person carrying on a business in India in consideration for -

(i) the provision of technical know-how which is likely to assist in the manufacture or processing of goods or materials, or in the installation or erection of machinery or plant for such manufacture or processing, or in the working of a mine, oil well and other source of mineral deposits, or in the search for, or discovery or testing of, mineral deposits or winning of access to them, or in carrying out any operation relating to agriculture, animal husbandry, dairy or poultry farming, forestry or fishing, or

(ii) rendering services in connection with the provision of such technical know-how, under an agreement entered into by the assessee with such person on or after the 1st day of April, 1969, and approved by the Board in this behalf, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction from such income of an amount equal to forty per cent, thereof, in computing the total income of the assessee :

Provided that the application for such approval is made to the Board before the 1st day of October of the relevant assessment year :

Provided further that approval of the Board shall not be necessary in the case of any such assessment which has been approved for the purposes of the deduction under this sub-section by the Central Government before the 1st day of April, 1972, and every application for such approval of any such agreement pending with the Central Government immediately before that day shall stand transferred to the Board for disposal.

(2) For the purposes of this section, ''provision of technical know-how'' means,--

(i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or similar property ;

(ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or similar property ;

(iii) the use of any patent, invention, model, design, secret formula or process or similar property ;

(iv) the imparting of any information concerning industrial, commercial or scientific knowledge, experience or skill.

(3) The provisions of Sub-section (1) shall not apply in relation to any income in respect of which the assessee is entitled to the deduction specified in Section 80-O."

In the order passed by the Tribunal in the assessee''s own case for the assessment year 1970-71, the Tribunal recorded that the assessee had claimed relief u/s 80MM on the ground that all the conditions laid down in Section 80MM had been fulfilled in respect of the income that arose as a result of the execution of the contract with Tata Iron and Steel Co. The Government of India, by letter dated November 12, 1970, had approved the agreement of the assessee with Tata Iron and Steel Co. for this purpose. The Income Tax Officer was of the view that the agreement was in two parts. The assessee had to work as consulting engineer and also supervise the actual completion of the work. According to the Income Tax Officer, the remuneration payable for supervising the job could not be considered to be technical know-how within the meaning of Section 80MM. The Tribunal held that the Government of India had approved the agreement dated September 2, 1969, for the purpose of Section 80MM. The Tribunal observed ;

"Section 80MM only states that the gross total income of an assessee should include the income by way of royalty, commission, fees or any other payment received by it from any person carrying on business in India in consideration of the provision of technical know-how which is likely to assist in the manufacture or processing of goods, etc. Clause (ii) of Section 80MM(1) of course says that such receipts should be in consideration of rendering services in connection with the provision of such technical know-how. Clause (i) of Sub-section (1) of Section 80MM, therefore, does not make it necessary that the assessee must render services before it could be entitled to the relief allowed by the section. In our opinion, the assessee''s case can easily fall under Clause (i) of the section."

The Tribunal also rejected the contention made on behalf of the Department that the benefit of Section 80MM could not extend to the income attributable to the supervision of the work. The Tribunal held :

"We also do not find any merit in the second submission of the learned departmental representative that the benefit could not extend to the income attributable to the supervision of the work. In this connection, we entirely agree with the view of the Appellate Assistant Commissioner and that of the assessee as canvassed before us that the supervision of the technical know-how and the utilisation thereof were so intimately related to each other that they could not be supplied or provided independent of each other."

We are of the opinion that the Tribunal has taken a right view of the matter. The benefit of Section 80MM(1) is available where the gross total income of an Indian company included any income by way of royalty, commission, fees or any other payment received by the assessee from any person carrying on business in India in consideration of various services enumerated in Clauses (i) and (ii). The contract, in the instant case, is for expansion of the colliery belonging to the Tata Iron and Steel Co. Clause (i) of Section 80MM(1) specifically mentions "the provision of technical know-how which is likely to assist in ... processing, or in the working of a mine, oil well or other source of mineral deposits, or in the search for, or discovery or testing of, mineral deposits or winning of access to them,. . .". There is no dispute that the agreement has been approved by the Central Government. The various clauses of the agreement which have been set out hereinabove clearly indicate that the assessee had to render services in connection with the expansion of the collieries. The term "provision of technical know-how" used in Clause (i) of Section 80MM(1) is of wide amplitude and includes transfer of any right including the granting of a licence in respect of, inter alia, any patent, design or similar property. In this case, the agreement envisaged user as well as transfer of patent, design, etc., of the assessee-company. The agreement also envisaged training of employees of the Tata Iron and Steel Co. in India and also in France. This will come within the ambit of "the imparting of any information concerning industrial, commercial or scientific knowledge, experience or skill."

Imparting of information concerning the working or use of a patent, invention, model, design, secret formula or process or similar property has also been brought within the ambit of the definition of "provision of technical know-how". Therefore, the various services under the agreement which have to be rendered by the French company will clearly come within the wide amplitude of the definition of "provision of technical know-how" in Section 80MM(2).

The Appellate Assistant Commissioner has analysed the agreement after referring to the various clauses of the agreement and observed in his order :

"It is to be noted that the agreement in question was meant for providing detailed engineering and consultancy supervision by_ the appellant company for the collieries expansion scheme for which Tata Iron and Steel Co. needed such detailed expertise, viz., introduction of new underground methods and related works and installation including pumping and ventilation, modern winding installation and shaft equipment and special hydraulic stowing equipment. It would be incorrect to think that the above work could be done by the appellant company simply by handing over to Tata Iron and Steel Co. certain inventions, models, designs or by imparting to the company the information concerning the working or the use of such inventions, models, designs, etc. The work undertaken by the appellant company under the agreement is a highly sophisticated one which, in the present case, needed technical know-how and the assistance of a foreign concern which had earned international reputation in mining engineering. While the inventions, models, drawings, designs, etc., are of great importance in connection with the work of the colliery expansion, the services in connection with the provision of such technical know-how cannot be treated as less important than the drawings, designs, etc. In fact, in such sophisticated constructional work, the services of experts having considerable knowledge of the drawings and designs are; absolutely necessary throughout the period of work. Therefore, the services for supervising the job which the Income Tax Officer has treated as not covered'' by Section 80MM are, in fact, to my mind, an indispensable part and parcel of the provision for technical know-how which the company was to supply to Tata Iron and Steel Co. under the agreement."

The Tribunal has also taken the view that the work that has to be done under the agreement is of a highly technical nature and supervision of the work was an integrate and indispensable part that was to be done. If merely models, designs and drawings were handed over to Tata Iron and Steel Co., the Tata Iron and Steel Co. would have been unable to execute the project.

The finding of fact made by the Tribunal has not been challenged in any way. Mr. Bhattacharyya, appearing on behalf of the Revenue, has come forward with an argument that, in the calculation of relief, account has not been taken of the amount which had to be paid to the French company. According to him, the entire payment made by the Tata Iron and Steel Co. cannot be the basis for computing relief u/s 80MM. That part of the payment which was made to the French company will have to be excluded for the purpose of computation of the relief.

This argument was not raised before the Appellate Assistant Commissioner or the Tribunal. This controversy also does not come within the ambit of the questions raised. We decline to go into this controversy at this stage.

Under those circumstances, questions Nos. 2 and 3 must, be answered in the affirmative and in favour of the assessee.

All the three questions referred by the Tribunal are answered in the affirmative and in favour of the assessee.

There will no order as to costs.

Bhagabati Prasad Banerjee, J.

I agree.