Diva Singh, J.M. - (1.) THIS is an appeal filed by the Revenue against the order dt. 4th Nov., 1993, of CIT(A)-I, New Delhi. It pertains to the asst. yr. 1989-90.
(2.) The Revenue has raised the following grounds before us : "On the facts and the circumstances of the case, the learned C1T(A) has erred in deleting the amount of Rs. 1,11,33,650 representing payments for the user of the rights, know-how technology, etc., despite the definition of royalty in Article VIIIA of DTA and the facts of the case being different from M/s DCM Ltd. relied upon." Learned Departmental Representative places strong reliance on the assessment order and invited our attention to page 3 of the same. It was submitted by her that the issue revolves around the finding whether the transaction is a case of transfer of technology or user of technology and the AO has made a categorical finding after examining the issue in detail that this is a case of user of technology and as such it is taxable. It was contended by her that there was no dispute over the fact that the provision of the Double Tax Avoidance Agreement between India and Federal Republic of Germany would override the provision of Section 9 of the IT Act and merely because the payment was a lump sum payment, it cannot be said that it was made for transfer of technology. It was further argued by her that the CIT(A) at page 4 of the impugned order had not discussed the critical portion of the agreement by which the technology was conveyed and the relief had been granted by him by placing reliance only upon the decision of the Delhi Bench of the Tribunal in the case of DCM Ltd. v. ITO (1989) 29 ITD 123 (Del). It was her contention that the facts of the said case were distinguishable from this case and as such not applicable to the issue at hand. It was argued by her that the assessee says that Clause III of the agreement between the assessee and M/s Apollo Domain Computers, GmbH, Germany, is for the right to user. Hence, the amount was taxable in India.
(3.) OUR attention was invited by the learned Departmental Representative to the paper book p. No. 1 for the contention that the approval is obtained by the assessee from the Govt. of India where the payment has been described as a "fee". Special reference was made to Clause (ii) of the said letter from the Government of India, Ministry of Industry to M/s HCL Ltd., the assessee before us which reads as under: "(ii) Lump sum know how fee : US Dollar 11 lakhs of taxes) with tax liability to be borne by the Indian Company." [Emphasis, italicised in print, provided by us] 4.1. On the basis of this, the contention was put forth that the same is the lump sum know-how fee and the assessee has at the time of obtaining the approval, not clarified to the Govt, of India that it is not a "fee" but a payment for transfer to technology which is what the assessee is trying to pass it off now. It was argued by her that the word "fee" connotes the right to user. The terms clearly shows that the payment is not on account of sale or transfer of technology. Thus, since the approval got from the Government of India was clearly for "fee" i.e. for user of the technology, consequently it cannot be accepted that it was a case of transfer of technology.;