Sabyasachi Mukherjee, J. - (1.) Under s. 256(1) of the I.T. Act, 1961, the Tribunal has referred to us the following question of law : "Whether, on the facts and in the circumstances of the case, the amounts received by the assessed (English company) from M/s Dunlop Rubber Co (India) Ltd (Indian company) as per agreement dated 29th January, 1957, constituted income assessable to tax -
(2.) We may incidentally mention that four different questions were prayed for by the Revenue for reference in its application. The Tribunal thought that the question which has been referred to us would cover all the material aspects and, accordingly, referred the question to this court, as indicated hereinbefore. It was suggested that the Tribunal had no power to do so. We are not inclined to consider this aspect and we do not find any lack of jurisdiction of the Tribunal in referring the question to this court as if has done.
(3.) This reference relates to four different assessment years, viz, the assessment years 1965 -66, 1966 -67, 1967 -68 and 1968 -69 and the corresponding accounting periods were the respective calendar years. The assessed is an English non -resident company here. It holds 51 per cent shares in Dunlop Indian Ltd, which is called hereinafter as the Indian company. The Indian company. the statement of the case records, does not maintain any research department in India. The English company, which has a world wide net work of subsidiaries and associated companies, maintain in the United Kingdom extensive technical research establishments which is known as service departments for the entire Dunlop organisation through -out the world. The English company communicates the latest information, processes and inventions relating to goods manufactured by them to its subsidiaries and associated companies on certain terms and conditions. There was an agreement in the year 1949 between the English company and the Indian company and the said agreement was dated 26th April 1949. There was another agreement dated 29th January, 1957, between the English company and the Indian company which was operative for the years under reference. It would be necessary to refer to certain clauses of the said agreement. After reciting the relevant facts, the agreement, inter alia, provided as follows : "1. (A) The English company shall as and when it shall, from time to time, be requested by the Indian company so to do communicate to and make available for the Indian company all information, processes and inventions which have been applied or which the English company intended from time to time to apply to goods manufactured by the English company and which (in the opinion of the English company) relate to or may conveniently be used by the Indian company in connection with manufacture of similar goods being manufactured by the Indian company at the date of this agreement, a list of which is set out in the schedule hereto, such listed goods being hereinafter referred to as 'the listed goods'. (B) Subject always to clause 4 hereof the English company hereby grants to the Indian company the sole right to manufacture the listed goods or any of them in India, Nepal, Bhutan, the territories of Pondicherry, Mahe and Karaikal and the territories of Goa, Daman and Diu (here in after together called the 'Indian company's territory') and to use the processes and inventions of the English company communicated and made available to the Indian company hereunder subject to any limitation or restriction to which such use by the English company may be subject. 2. (A) if any of the said processes and inventions so communicated to the Indian company by the English company are protected by Letters Patent or other protection within the Indian company's territory, the English company will if and when requested by the Indian company so to do and subject to sub -clause (B) of this clause grant to the Indian company a royalty free license under Letter Patent or other protection for the unexpired residue to the term thereof. Any such license shall, subject to the provisions of sub -clause (C) of this clause and clause 4 hereof be non -exclusive. All renewal fees and other expenses in connection with the maintenance in force of any such Letter Patent shall be paid by the Indian company. (B) The Indian company shall pay to the English company in respect of each and every license granted to it by the English company pursuant of sub -clause (A) of this clause, a proportionate part of the cost of the acquisition by the English company of the patient, invention or right in respect whereof such license is granted. The cost of acquisition shall mean and include the price paid by the English company to any other party for the patent, invention or right and all costs and expenses in connection therewith and/or all costs and expenses of the English company of applying for and obtaining patent protection. The proportionate part of such cost of acquisition shall be mutually agreed or failing agreement shall be fixed by Messrs. Whinney Smith & Whinney, Chartered Accountants of London. If in any case the English company has (whether or not in addition to the cost of acquisition) to pay a royalty or periodical sum in respect of the use of the patent, invention or right, the license granted to the Indian company in respect thereof shall, in addition to the payment of any proportionate part of the cost of acquisition, be subject to the payment of such sum as shall, after deduction of any Indian Income Tax, remittance tax or withholding tax of a similar nature, amount to a similar royalty or proportionate part of such periodical sum.";