Bhagabati Prasad Banerjee, J. - (1.) The Tribunal has forwarded the following question of law to this court under Section 256(1) of the Income-tax Act, 1961 : " Whether the Income-tax Appellate Tribunal was, after finding that the agreement between the. assessee-company and the Indian companies did create a business connection and on the facts and in the circumstances of the case, justified in holding that no part of the payment of Rs. 22,50,000 received by the non-resident assessee-company from the Indian companies accrued or arose in India or was deemed to accrue or arise in India and was subject to tax ?"
(2.) The assessment year involved is 1976-77 for which the previous year ended on December 31, 1975. The facts of this case are as follows :
(3.) The assessee, a non-resident company, entered into an agreement with the West Bengal Industrial Development Corporation Ltd. for setting up a factory in West Bengal for production of automotive tyres and tubes. As per the terms of this agreement, the foreign company was to supply note and technical data for the construction of the factory in India as also to supply various items of plant and send technical personnel for supervision of the construction of the factory and commissioning of the plant. In return, the foreign company was to receive a total amount of Rs. 33.75 lakhs in three instalments, viz., the first instalment of Rs. 11.25 lakhs within 60 days of the approval date, the second instalment of Rs. 11.25 lakhs within 60 days of completion of the work by the foreign company and the third instalment of Rs. 11.25 lakhs within six months after the date of successful commercial production of tyres. A similar agreement was entered into by the foreign company with the Andhra Pradesh Tyres and Tubes Ltd.;