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SUPREME COURT OF INDIA
B P Jeevan Reddy, Suhas C Sen
INCOME TAX OFFICER AND OTHERS, APPELLANTS
VERSUS
SRIRAM BEARINGS LTD. AND OTHERS, RESPONDENTS.
Civil Appeals No. 2350 of 1986 with No. 6943 of 1995, decided on September 26, 1996.
Taxability - Sale of Trade Secrets - The court held that the consideration for the sale of trade secrets stipulated in a two-part agreement was not earned in India and therefore not taxable.
Fact of the Case:
The court considered the taxability of the consideration for the sale of trade secrets stipulated in a two-part agreement between the respondent and M/s. Nippon Seike Kabushiki Kaisha (NSK).
Finding of the Court:
The court found that the consideration for the sale of trade secrets was not earned in India and therefore not taxable.
Issues: The main issue was the taxability of the consideration for the sale of trade secrets stipulated in the agreement.
Ratio Decidendi: The court analyzed the agreement and concluded that the consideration for the sale of trade secrets was stipulated to be earned in Japan, and therefore not taxable in India.
Final Decision: The appeal was dismissed with no costs.
ORDER
Civil Appeal No. 2350 of 1986
1. We have heard the counsel for the appellant and respondent.
2. We are not prepared to agree that the High Court has not correctly understood the purport of the agreement between the respondent and M/s. Nippon Seike Kabushiki Kaisha (NSK). The agreement is in two parts. It is true that the two parts are interdependent but yet the consideration for the sale of trade secrets and consideration of technical assistance is separately provided for and mentioned under separate sections. So far as the consideration for the technical assistance is concerned, its taxability is not in doubt. The only controversy is with respect to the taxability of 1,65,000 US Dollars which is stipulated as the consideration for sale of trade secrets. The agreement specifically says that the said sale is effected in Japan. We are unable to see on what basis it can be said that any part of the said amount has been earned in India.
3. The appeal is dismissed. No costs.
Civil Appeal No. 6943 of 1995
4. For the reasons given in Civil Appeal No. 2350 of 1986, this appeal is also dismissed. No costs.
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