Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment years 1978-79 and 1979-80, the following question of law has been referred to this court : "Whether, on the facts and in the circumstances of the case, the agreement dated December 19, 1978, is a separate new agreement entered into after April 1, 1976, or it was the same agreement as entered into on March 12, 1964, that is, prior to April 1, 1976 ?"
(2.) Shortly stated, the facts are that the assessee is a non-resident company deriving income from royalty. The dispute before the Tribunal related to the question as to at what rate the royalty would suffer tax. The question, in its turn, depended on the fact as to whether the agreement under which the royalty was received was made after March 31, 1976. If the royalty was received under an agreement entered into on a date prior to April 1, 1976, then the rate of tax applicable would be 50 per cent. On the other hand, if the aforesaid agreement was entered into on a date after April 1, 1976, then the rate of tax would be 40 per cent.
(3.) The assessee had entered into an agreement with an Indian concern on March 12, 1964, in respect of Durgapur Unit of the Indian concern. Subsequently, by another agreement dated January 12, 1972, between the same parties, the original agreement dated March 12, 1964, was made applicable to the Bangalore Unit of the Indian concern. The agreement dated March 12, 1964, was to be in force for a period of ten years. Clause 11 of this agreement clearly stated that the intention of the parties was that the said agreement shall be renewed after the expiry of the aforesaid ten years for a further period of five years upon the terms and conditions to be mutually agreed by the parties. It so happened that the effective date from which the period of ten years was agreed to be reckoned was December 23, 1967. Hence, the said agreement expired on December 22, 1977. However, another agreement dated December 19, 1978, was entered into by the same parties by which the original agreement was deemed to have been extended for a period of five more years with effect from December 23, 1977. The royalties received by the assessee during the two years under consideration were paid under the agreement dated December 19, 1978.;