Law:

Section:

Section 9 of the Income-tax Act, 1961 - Income - Deemed to accrue or arise in India - Assessment years 1967-68 to 1970-71 - Indian company for installing grey iron foundry entered into agreement with foreign company, for supply of necessary equipments and, for furnishing technical data and also for purpose of getting technicians so as to supervise construction of plant - As per terms of agreement supply of machinery was to be on F.O.B. terms and there was no operation by foreign company in India so as to constitute business connection - Whether, in aforesaid circumstances, receipts of foreign company were not liable to be taxed, in India in hands of Indian company as agent of foreign company - Held, yes FACTS The Indian company for installing grey iron foundry entered into an agreement with the foreign company, for supply of the necessary equipments and for furnishing technical data regarding the foundry and also for the purpose of getting technicians so as to supervise the construction of the plant. The machinery was to be supplied from Europe on F.O.B. terms. The foreign company, was also to supply drawings and also to supervise the erection of the gray iron foundry. 100 per cent of the contract price for the technical co-ordination in the supply of drawings was to be made in Germany and, on receipt of the contract price, the foreign company undertook to deliver the drawings to the Indian company. The entire work connected with the technical co-ordination and supplies of drawings with reference to the materials to be procured in India was to be carried out by the contractor in West Germany. The erection of the machinery and equipment was to be done by the Indian company under its responsibility. The foreign company had only to depute the specialists to advise, guide and supervise the erection work. Any damage to the plants, equipments, etc., caused by gross errors in drawings and documents supplied was to be made good by the foreign company. The liability of the foreign company for damages was restricted, however, to 50 per cent of the amount actually paid to it for technical collaboration and supply of drawings. In accordance with the terms of the agreement,…

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