Case Law Details
Himachal Pradesh High Court holds that Outright purchase of plant knowhow in the form of technical / engineering data, design, drawings etc. is not royalty / fee for technical service, subject to withholding taxes.
The Assessee company is in the business of manufacturing audio magnetic sound heads used in a variety of audio systems. It entered into an agreement with a Singapore Company (M/s Sankyo Seiki Pvt Ltd.) for supply of plant knowhow and product knowhow. Supply of plant knowhow includes delivery of technical and engineering data, design, drawings, sketches and photographs.
The agreement was entered into in Singapore. The agreement is valid for a period of five years after which the data and technical knowhow would remain the property of assessee company for full and free use.
The agreement also provides for the foreign company making available services of technicians, if required, for setting up the plant and machinery. However, no such services were required and made available.
The assessee applied for No Objection Certificate (NOC) for remittance of amounts to the foreign company without deduction of tax at source on the ground that no income had accrued in India. NOC was denied by the Assessing Officer (AO) holding the same as fee for technical services under the Income Tax Act, 1961 (“the Act”).
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