A. KALYANSUNDARAM, A. M.: These are two appeals by assessee which involve common issue and therefore they are disposed of common order. assessee in instant case is foreign company based in U. K. with n o branches in India. assessee-company, by means of agreement dt. 20th Feb. 1970 with Indian Dyestuff Industries Ltd., Indian company; was to provided Engineering & Technical Know-how for manufacture of Sodium Hydorsulphite in India and also specify plant and equipment s necessary for manufacture of product requisite capacity and quality. assessee- company also entered into separate service agreement wherein it was provided that all drawings and specifications of various plants and equipment s were to be scrutinised and approved by assessee-company. issue involved in these two years appeals are about taxability of technical know-how fees received in lump sum by assessee in U.K. and also of service fees. Asst. Yr. 1971-72: For asst. yr. 1971-72, assessee-company had filed return, in which it showed income form service agreement only. assessment was completed on 1st Jan. 1975. quantum of income form service was disputed by assessee, which was settled by Tribunal in ITA. No. 2662/bom/1979, vide order dt. 18th Dec. 1980. copy of request made by ITO to CIT for issuing of notice under s. 148 vide his letter dt. 10th Jan. 1977 and t he endorsement of CIT according sanction has been filed by ld. Departmental Representative. Shri S. E. Dastur, ld. authorised representative of assessee, submitted by referring to copy of service agreement filed at pp. 23-32; that at p. 24 cl. (ii) specific reference to technical know-how agreement was very much contained therein. He also referred to letter to IAC dt. 4th March 1975 wherein detailed particulars about agreement, approval of Government for entering into know-how agreement, amount already remitted to U. K. under permission of Reserve Bank of India, and by drawing reference of Circular No. 21 dt. 9th July 1969, according, to which any sum paid out of India in respect of services rendered out if India are outside scope of IT Act in India, it was requested that instruction by given to ITO to issue no objection certificate, for remittance of 3rd and last instalment was made. He further submitted that on 11th March 1975 ITO had granted certificate on basis of which 3rd and final instalment was received by assessee-company. According to him therefore, there was no failure on part of assessee-company at all. Alternatively, he submitted that in case it is failure by company in not disclosing fact of know-how agreement then since agreement was given effect to out of India as such no income accrued in India and therefore income could not be said to have escaped assessment, reopening accordingly under s. 148 was bad. He relied on decision of Supreme Court in case of Gemini Lether Stores vs. ITO 1975 CTR (SC) 127: (1975) 100 ITR 1 (SC) Referring to know-how agreement which is filed at pp. 1-22, he submitted that grievance of Department is due to misreading of cls. 10, 11 & 12 of this agreement. Clause 10 provides for guarantee that if India company had carried out creation and operation of plant in accordance with advice of assessee-company, then such plant shall produce product of quality specified by assessee-company and capacity as specified shall also be reached. Clause 11 provides for such tests to be undertaken by assessee to ensure itself that Indian company has acted in accordance with its directions. It also provided that, any flow in working of plant, shall be removed and modified with such additional guarantee. Clause 12 provides for liability clause with view to protect Indian company in case of failure by assessee-company in carrying out test for satisfactory performance, by which assessee-company shall be liable to maximum of 25 per cent of fee of know-how agreement. Shri Dastur submitted further that undisputed facts are: (a) agreement was entered into in U. K. (b) know-how was handed over to Indian company at U. K., and (c) payment was also made in U. K. Therefore, according to him, as per Departmental circular No. 21, of 9th July 1969 No. 23 of 23rd July 1969 and No. 202 of 5th July 1976, on basis of these undisputed facts, no part of income could said to accrue in India. He further added that cls. 10 & 11 only specify and provide for guarantee that any one who has acted in accordance with its directions will positively achieve target. It also proved for safety clause to assessee form being liable for any failure on its part as per cl. 12, by which it had agreed to provided for such modifications as are required on plant and its operations so that target as specified in know-how agreement is achieved According to Shri Dastur, such tests are merely for ensuring itself that Indian company has acted in accordance with its directions and, this act cannot be said to bring in any business connections at all or lead to conclusion that part of fee for know-how attracts tax in India. He relied on decision. in cases of Carborandum Co. vs. CIT 1977 CTR (SC) 209: (1977) 108 ITR 335 (SC), CIT vs. Toshoku Ltd.(1980) 122 ITR 525 (SC), with specific reference to p. 531, Anglo-French Textile company Ltd. vs. CIT (1953) 23 ITR 101 (SC)., CIT vs. Hindustan Shipyard Ltd. 1975 CTR (AP) 97: (1977) 109 ITR 158 (AP) and also Tribunal decisions at pp. 63-64 ld. Departmental Representative , Shri P. L. Roongta, submitted that t h e service agreement only made reference to certain technical know-how agreement form which no one could draw any inference to factotum of agreement as also taxability of amounts involved. According to him primary fact which is know-how agreement not having been filed at all along with original return, ITO did never had any opportunity of examining it and as such there was failure on part of assesses to disclose fully and truly material facts. He further added that clause II required specific performance which could be carried out in India only and therefore some income reliable to that activity could be only said to have accrued in India, and thus income to that extent has escaped assessment, action under s. 148 was therefore, justified. He also added that letter dt. 11th March 1975 addressed to IAC was form Indian Company requesting for remittance, though with reference to agreement with assessee-company, was never before ITO who had jurisdiction over assessee-company and as he had no knowledge of assessee, could not have considered it at all. He then added that in view of cls. 11 and 12, portion of activity had to be necessarily carried out in India which has been estimated by ITO at only 10 per cent is very reasonable under circumstances. We have heard parties at length and have also considered various materials on record. We shall first take up first issue whether assessee- company could be said to have made full and true disclosure of primary fact or not. According to assessee-company, service agreement contained reference to separate technical know-how agreement and since contract was executed out of India, no part of fee could be said to have accrued in India and therefore, there was neither any failure on its part to disclose primary n d material facts, nor it could be said that any income has escaped assessment. Whereas according to Department, some passing reference in service agreement about know-how agreement cannot be said to be proper and full disclosure and that ITO had no chance of applying his mind at all. It is therefore, necessary to consider service agreement which was before ITO at time of passing of original assessment. Clauses 1 (i) to (iv) 3,4,5,6,7,8,9, and 10 have been reproduced below: 1.i.IDI has entered into agreement hereafter called "purchase Agreement dated twentieth day of February 1970 with Mafatlal Limited Spiral Houses, Oxford Cirecus, London WIR 5 DA England. hereinafter called "MAFATALAL , copy of which has been seen by AW. ii. Plant shall mean Plant defined in Engineering Agreement (hereinafter called " Engineering Agreement") of even date made between same parties hereto manufacture Sodium Hydrosupphite of quantities and qualities therein set out. iii. Plant included equipment be supplied by MAFATLAL as detailed in First Schedule to Engineering Agreement and other equipment to be purchased and fabricated locally in India as detailed in Second Schedule of Engineering Agreement. All equipment s shall conform to Engineering date and specifications furnished to IDI by AW in UK. iv. AW is in position to render technical assistance and advice in supervision of erection and establishments and operation of plant to IDI in India including engineering services, traintin services, approval of equipment and erection and start up of Plant and making available suitable qualified technicians for these purposes. W s Duties in India AW will scrutinise and advise on technical aspects of tenders for Indian equipment receive by IDI. AW shall review specifications construction drawings, working drawings, assembly drawings. Construction programmes to be presented through IDI to AW by local contractors and suppliers of IDI. AW will examine and given technical advice as to contents of such presented date and arrange same. AW shall be informed of construction and working plans of Plant programmes by local contractors of IDI and AW shall given necessary comments on such plans. If non-compliance of such advice given by AW is feared to hinder timely construction or performance of Plants and to be prejudicial to ultimate benefit to IDI. IDI force local contractors and suppliers to follow such advice. ii. AW shall approve form time to time that machinery and equipment s fabricate indigenously at manufacturers site are in accordance with drawings of machinery and ecumenist obtained by IDI form AW. iii. IDI shall procure that AW shall be allowed access to factories of local contractors and suppliers of IDI. In case their factitious are found fit to take part in this project. AW shall advise it to IDI. iv. IDI shall made arrangements for receipt and shall inform AW of all deliveries and AW shall scrutinise in conjunction with IDI unpacking of all imported equipment s and such other equipment s as AW shall consider necessary. In case either pray finds any defector damage in incoming goods. AW shall give advice to IDI on appropriate measure of repair or replacement. W shall certify that equipment purchases is in accordance with AW s drawing and specifications. AW shall approve, assist and be responsible for proper technical reaction of Plant. AW shall, after approval and assistance during, erectin confirm accuracy of installation of equipment. (a) AW shall ensure with help of IDI Technicians that detailed log book of progress during erection of Plant is kept and reports are prepared as mutually agreed. (b) after installation of equipment and before operation of Plant. AW shall certify accuracy of installation to its satisfaction. (c) AW shall advise on proper maintenance of each equipment to be observed until test operation of Plant. Technical assistance after plant start up: AW will give free of charge in U. K. for period of two years form start up of Plant and all technical assistance require for better operation of Plant provided IDI sends to AW operating logs and any other information concerning performance of equipment. It is hereby agreed by parties herein that such technical assistance does not include sending of AW s personnel to India. But in event IDOI requires services of such technicians. AW will recommend and depute them on such terms and conditions as mutually agreed upon, subject to approval of Government. Office for AW IDI shall provide at its own expense Office for use of AW and by Vistial Engineers hereinafter mentioned with reasonable space, equipment and utilities including potable water electricity, air-conditioning, sanitary apparatus and other office requisites. expenses connected with other work, such as telephone cables, mail and services of typist will be at IDI s charge. IDI shall provide liaison office in Mafatlal House and/or at office of Works at Kalyan for use of AW and Visitant Engineers. Visitant Engineers In connection with work to be done by AW as provided in this Agreement, AW will make available for temporary employment up to 5 experienced Technicians for establishment of Plant as acceptable to both parties to Agreement for aggregate period of seventy two man months. said foreign engineers are hereinafter called "Visitant Engineers" IDI shall inform AW one month in advance as to date IDI wither to have Visitant Engineers arrive in India and IDI shall take note of AW s wishes in this matter. IDI agrees to reimburse local living expenses and Social costs in British Isles of Visitant Engineers as stipulated in clause 12 hereof. IDI should make available transport facilities for Visitant Engineers. in addition thereto, IDI shall bear and pay following expenses of said Visitant Engineers. i. Travelling (a) IDI shall pay air fares, tourist economy for Visitant Engineers between place of departure abroad and Bombay and Bombay to place of return. ticket for said return trip shall be made available to Visitant Engineers at place of departure not later then two weeks before departure of Visitant Engineers. (b) Expensed for any other travelling to be made for purpose related to purchase of project shall be borne by IDI with following accommodation: Facility: Aeroplane Tourist Economy Train Air Conditioning First Class Boat First Class (c) Travel insurance shall be effected for Visitant Engineers at Expenses of IDI. Security of Life and Property IDI shall take proper measure of life protection, health preservation and property security for Visitant Engineers IDI shall effect at its own expenses such personal accident insurance for Visitant Engineers in line with IDI s own Senior Staff scheme to enable them or their designated beneficiary to receive compensation payable in English currency subject to Government regulations prevalent at time of efficient such insurance and paying such claim. Medical Assistance In case Visitant Engineers suffer form illness or injury. IDI shall procure for them emergency rescuer and proper medical treatment including, in necessary, hospitalization in fist close hospital. expenses incurred thereof shall be born by IDI except when due to recklessness of Visitant Engineers or injury occurs in environment absolutely unrelated in their duties. iv. Duty Hours following provisions shall also apply as duty hours, holiday and vacation and suspension of service period: (a) duty hours of Visitant Engineers will be in accordance with IDI Senior Technical Staff at Plant. (b) Vistant Engineers shall be deemed to have worked duty hours referred to in 6 iv (a) if they represented from working these hours die to cause beyond their control. (c) Vistant Engineers shall not be required to work on holidays or in offduty hours, unless required by needs of Project. v. Suspension of service perid AW reserves right to replace Visitant Engineers only valid reason as may be mutually agreed upon with IDI and in such event, substitute shall arrive in India before departure of former and all costs and expenses tinctured will be borne by IDI. Erection and Start up of Plant erection and starting up of Plant will be carried out by IDI at its expense and with its own personnel in accordance with AW s instructions and supervision. AW will supervise and assist IDI in technical erection and start yo adb carrying out he performance test of Plant. AW will aid in training of further operators of plant. AW shall give to IDI s technicians all assistance, training facilities and practical operating experience of various sections of plant. Plant completion In accordance with this Agreement, after Plant has been rejected and subjected to satisfactory mechanical testing and after completion of pre commissioning testing it is to be considered completed and only at that time AW will notify IDI that Plant is ready for start up in writing. After issue of such completion certificate, Plant will be started. Performance AW in this project guarantees that Plant and equipment s erected under their supervision and engineering assistance s could be of standard employed by AW in its owens plant and in accordance with most recent engineering standards know to AW in order to enable production of products of such qualities and quantities as specified in Engineering Agreement provided Plant is operated in accordance with AW s insurrections and operating manuals. Guarantee Performance Test and Plant Acceptance. In order of verify fulfilment of guarantees herein, guarantee performance test shall be carried out as specified in Engineering Agreement . IDI shall within 7 days of fulfilment by AW of guarantee contained in Engineering Agreement given to AW Certificate of Acceptance of Plant. Notwithstanding anything to contrary contain din this Agreement AW s liability under Agreement shall no exceed that contained in Engineering Agreement. If by any act or action, wilful or otherwise of IDI including use of Plant, there is delay in carrying out performance tests within six months from date of completion of mechanical testing Plant shall be deemed to be accepted by IDI. Fees In consideration of obligations of AW under this Agreement, IDI shall p y in U. K. to AW Pounds Sterling 5518 (five thousand five hundred and eighteen pounds) subject to Indian taxes. if any payable in three equal instalments at following times: (a) On signature of this Agreement. (b) Within one year of date of this Agreement. (c) After 60 (sixty) but not later than 61 (sixty-one) months of date of this Agreement." Clause 1(ii) & (iii) talk of engineering agreement of even date but do not provide that such agreement was with assessee-company. Clause 1(iv) then mentioned about technical assistance to be provided by assessee in connection with supervision of erection. which included approval of equipment, etc. Clause 3 (ii) talk of drawings of machinery and equipment s provided by assessee. Clause 10 talks of guarantee performance tests wherein it was provided that Indian Company shall notify assessee-company of its fulfilment of guarantee contained in engineering agreement and issue certificate to that effect. In instant case, assessee held felt that it need not inform ITO about engineering know how agreement as according to it, contract having been effected out of India, no income liable to tax in India. This felling was perhaps based on some expert advice which may be accordance with law. but it was never before Revenue officials for examination as to whether t h e assessee was right in its view that there was no income under that agreement, which is liable to tax in India. Any passing reference made in service agreement abourt such agreement, under no circumstances can be said to be equal to placing of that agreement itself. This become evidently clear when we read Supreme Court in case of Gemini Leather Stores vs. ITO 1975 CTR (SC) 127: (1975) 100 ITR 1 (SC) in that case drafts which were apparently unexplained credits was before ITO who by oversight did not bring same to tax. Their Lordships were considering taxability of same as of sec. 148 proceedings. Their Lordships observed that sine factum of draft was known of ITO and as he had carried out examinations but by sheer overusing omitted to bring them to tax it could not be considered under s. 148 at all. They had further observed that salient duty of assessee is to provide necessary information and assessee s duty stops at that and that he cannot be expected to tell ITO what inference he should draw. Thus it can be seen that duty of assessee is to provide complete information abourt all his incomes of which some part may be taxable and some exempt under specific sections and some others not attracting tax at all. Only in that situations, assessee can claim that he had made complete and full disclosure of all primary facts. In instant case, therefore, we are o f view that assessee had failed to disclose primary fact for engineering know-how agreement had due to probability of some income escaping tax, action taken under s. 148 is entirely in accordance with law. This issue is therefore decided against assessee and in favour of Department. We shall now consider merits as to jurisdiction action of ITO on taking 10 per cent of engineering know-how agreement as accruing in India. We reproduce below salient clauses of agreement: Clause 1. (iii) AW is in position to supply in UK to IDI such engineering date specifications and know-how for establishing and operating Plant and provide such services as are hereafter mentioned. iv. "AW s present processes" means processes to which AW is at present entitle for production of Predictors. v. "AW s further processes" means any further processes for production of product which may be developed by AW s present processes prior to expiration of term of this Agreement. vi. "AW s processes" means AW s Present Processes and AW s Further processes and each and every of them. viii "AW s Technical Information" means all information in form of Know- how, operating techniques and process design information bases on research development on operating experience relating to or primarily useful in practice of AW s Processes at present pressessed by AW or hereafter acquired by AW prior to expiration of terms of this Agreement. Scope of technical date to be furnished by AW (a) Approximate capital cost of Plant covering buildings, plant and equipment, piping, insulation, electrification s instrumentation s and auxiliary items for plant under British conditions. (b) Preliminary general law out of building including outline, follows and section but excluding foundation details or accurate land date. approximate equating weights of plant items will be included in date sheet. (c) Detailed list of plant and equipment and accessories with specifications that are required to imported, as listed in fist Schedule to this Agreement (d) Detailed list of plant and equipment with specifications that are required to be purchased indigenously together with working drawings and designs, and material of construction which would to necessary for fabrication of plant indigenously as per second Schedule to this Agreement. (e) Engineering flow sheet and design date sheets with sketch of suppliers specifications for all plant items as considered necessary by AW to enable detailed working drawings to be prepared by IDI or its contractors. (f) Estimated consumption figure relating to raw materials, auxiliaries and utilities along with detailed specification: (g) Broad specifications and characteristics of finished products according to AW standards. (h) Engineering flow sheet with specifications, material of construction and relevant information relating to plant and equipment for indigenous fabrication. (i) Final lay out of Plant including main outdoor equipment. (j) Basis buildings drawings with operating Wight s and/or design load data of equipment and machinery with construction and architectural date. (k) Line diagram showing layout and scaling for plant effluents. Specification of anti-corrosive coating for building and plants based on UK standard. (1) Schematic electrical diagram including interlocks wherever necessary within battery limits, general specification and layout for piping, instrumentation and layout for piping, instrumentation and cables required for plant and lighting together with instrumentation line diagram and schedule of instruments required for whole plant in each case within battery limits. (m) Preliminary list and specifications of spar parts required for two years of normal operation of plant. (n) Final flow sheets. (o) Operating manual advising on efficient operation of Plant with all its equipment. (p) Advice on routine and extra ordinary maintenance of plant equipment. Prior to completion of Plant, AW shall give free of charge training in AW s processes, maintenance and control techniques for period not exceeding two calendar months of not more than five Indian technicians (present at same time) Selected by IDI (and approved by AW) at AW s plant for production of Sodium Hydoro sulphite at Bromtorough, Cheshire, England. IDI will bear and pay all expenses of such technician s including their salary, travelling expenses and living expenses. Technical information to be furnished by AW AW shall (to extent that it shall not have disclosed to IDI pursuant to Clause 4 of its processes and Technical Information) disclose to IDI in London AW s processes and Information within one month after completion of mechanical testing of plant. Guarantee Provided that Plant has been constructed and operated in accordance with advice and approval of AW and raw materials used meet specifications set out in Third Schedule hereto. AW guarantees that plant will produce product of such capacity and of such quality as that specified in Fourth Schedule hereof. Guarantee performance tests In order to verify fulfilment of guarantee herein, guarantee performance tests shall be carried out at AW s request and under its supervision in presence of such personnel as AW shall approve as soon as possible after completion of mechanical testing of plant but in any event not later then two months form same. AW will give 15 days notice to IDI in writing stating date on which such tests will begin and also give at same time detailed and complete list of all basis raw materials and other materials and their quantities and other facilities required for operating plant for period of at lest twelve days as well as facilities required for carrying out tests and to enable IDI to make necessary arrangements for such tests. ii. For above purpose IDI shall provide free of charge such raw materials, labour, electricity fuel and water as may be required form time to time and as may be reasonable deemed necessary to carry out efficiently such tests. iii. Guarantee performance tests shall cover productions capacity of plant, quality of product and consumption of utilities and raw materials. iv. AW shall be deemed to have fulfilled guarantee provisions set out in Clause 10 when plant shall have produced during such period 54 consecutive batches of dried product (averaging during such period not less then 9.4 tonnes per twenty four hours) of quality specified in Fourth Schedule hereto when analysed by methods specified in cl. 11. v. v. Analytical methods to be used under supervision of AW in connection with performance tests shall be methods specified in operation manual provided by AW to IDI pursuant to cl. 4 (o). vi. If results of performance tests carried out pursuant to cl. 11 iv do not meet opacity and quality specifications set out in Fourth Schedule hereto, AW shall as soon as possible advise IDI of modifications required to achieve AW shall as soon as possible advise IDI of modifications required to achieve such specifications and further guarantee performance tests shall be carried out in like manner to those specified in cl. 11 iv within one month of such modifications being made. i. AW Liability In event that guarantee referred to in Clause 10 hereto is not fulfilled in accordance with provisions of cl. 11. iv within six months of completion of mechanical testing of plant, fee paid or payable by IDI to AW pursuant to cl. 13 hereof shall be refunded or reduced in accordance with formula set out in Fifth Schedule hereto intent that maximum liability of AW to IDI shall not exceed 25 per cent of fee payable by IDI to AW pursuant to cl. 13 hereof after deduction of AW s expenses in connection with its performance of this Agreement such expenses to be determined in default for Agreement by AW s auditors. ii. AW does not assume responsibility for any direct contingent or consequential damages (including in particular but without prejudice to generality of foregoing for loss of production costs of operating plant or damages or loss of use of any equipment or installation including plant) nor give or make any guarantee or warranty for performance of services rendered by its personnel representation in connection with plant or give any performance guarantee or warranty save as mentioned in cl. 10 hereof and then only in event of breach subject to terms of cl. 12. i hereof which guarantee or warranty shall be in lieu of any other explicit or statutory responsibilities, guarantees warrantees and representation. Fee to AW In consideration of obligations of AW herein contain, IDI shall pay to AW in London, England, free of 82,800 (Eight two thousand eight hundred pounds) (Free of Indian taxes and all other deductions whatsoever) payable in three equally instalments at following times: (a) on signature of this agreement. (b) within one year of date of this Agreement (c) After 60 (sixty) months but not later than 61 (sixty-one) months of this Agreement. fee referred to above is based on plant having designed output capacity of 3,000 Tonnes per annum. No additional fee shall, however be payable to AW by IDI for tongue produced on plant upto 4,000 tonnes per annum. in effect IDI wish to produce more than 4,000 Tonnes per annum such production shall be on terms to be mutually agreed." claim of assessee-company was that no part of income in India, as entire documentation was done out of India and they were also delivered out of India. According to Department, since assessee- company was to carry out certain guarantee tests in India to that extent, income did accrue in India. We have reproduced salient clauses of agreement above. Clauses 10, 11 and 12 on which Department is laying emphasis indicate that assessee-company had undertaken grantee that plant constructed and operated upon by India company would give results as specified in know-how agreement. company in order to ensure itself that Indian company has acted in accordance with its directions and advice had specified in agreement certain tests which it would he taking, which testes have to be undertaking within period of two months form date of completion of mechanical testing of plant. guarantee tests have been provide with view to protect assessee-company against liability that may arise on it which as been provided for in cl. 12. In cl. 11, sub-cl. (b), assessee-company had also undertaken to provide such modifications as may b e necessary for know-how already provided to suit conditions of Indian company at no additional cost. Reading of these clauses tougher, gives indication that cl. 11 is only protection clause provided for benefit of assessee. According to assessee, this was purely incidental to main know-how agreement and therefore no income accrued to it. On this issue, reliance was place in case of CIT vs. Hindustan Shipoyard Ltd. 1975 CTR (AP) 975: (1977) 109 ITR 158 (AP). In this case, Indian company entered in t n agreement with polish company for purchase of diesel engines with accessories. property was to pass to purchaser on delivery on board of vessel. agreement also provided for inspection, testing and acceptance of engines. engines were to be erected by staff of purchases for which purpose supervising engineer was placed by Polish company at disposal of Indian company. Polish company also agreed to carry out creation and also provided free of cost one guarantee engineer. Polish company also provided various guarantees including organising of training course in Poland. question which their Lordships of A. P. High Court were considering was whether there was any business connection at all and whether income could be assessee as having accrued in India. observation of their Lordships was: "To conform with requirements of expression "business connection" which have been fairly settled by judicial decisions, it is necessary that common thread of mutual interest must run through fabric of trading activities carried on outside and inside taxable territory and same has been described as "real intimate connection". commonness interest may be by ways of management. control or financial control or by way of shirring of profits. It may come into existence in some other manner but there must be something more than mere transaction of purchase and sale between principal and appeal in order to bring transaction within purview of expiation "business connection" within meaning of s. 9 (1) (i ) and s. 163 (1) (b) of IT Act. In instant case, thought Polish company agreed to render certain limited services, services were connected with effective fulfilment of contract of sale and were merely incidental to contract and were usually included in all such contracts by way of guarantee of efficient working of products sold On fact of case, therefore. there was no business connection between assessee and Polish company. In instant case before us, facts and circumstances are almost identical with that in date before their Lordships of Andhra Pradesh High Court. guarantee provided is therefore, only incidental to main technical know-how. In instance case also assessee-company had agreed to provided training of Indian technicians on assessee s plant at U. K. Therefore, on these facts which are identical with facts before their Lordships of A. P. High Court we are of view that merely for reason that certain incidental facts are done in India cannot lead to conclusion that there was any business connection in India. Therefore, even to extent of 10 per cent of technical know-how fees is not taxable under IT Act. even referring to Board s circular dated July 1979, goes only to clarify such situation. Circular No. 202 dt. 5th July 1976 is also claridictory to extent that no part of know-how could be said to be attributable such services in India if unless know-how was develop by acts which are done in India. This only means that no part of know-how as such should be developed in India. as such should be developed in India. Therefore, if entire know-how is supplied out of India and certain acts, if they are done with view to ensure correct appreciation of know-how by Indian company then, under no cur stances they could be said to be attributable to any services rendered in India. We are therefore of view that even to 10 per cent income of technical know-how which has been brought to tax is bad in law and same is accordingly quashed. This disposes of common issue involved in both years of appeal. second ground in asst. yr. 1971-72 is in relation to levy of interest under s. 139 (8). which has not been pressed before us and therefore treated as dismissed. In this year one of issue involved is regarding 50 per cent of service agreement income brought into tax. Shri P. L. Roongta, ld. Departmental Representative submitted that issue of income on service agreement was considered by Tribunal for 1971-72. In that year, claim of assessee was allowing of certain expenses against 50 per cent of service fees. Tribunal in ITA. No. 2662 (Bom)/1979 for asst. yr. 1971-72 vide order dt. 19th Dec. 1980 had considered certain expenses as allowable and out of 1840 representing 1/ 3rd of service fees, after allowing of expenses, of 700 was considered to be net income for year under review. quantum of expenses has not been brought out by assessee in this year and herefore, ITO did not allow deduction. Therefore, issue is fully conferred by decision of Tribunal for earlier years. On other hands, Shri by decision of Tribunal for earlier years. On other hands, Shri Dastur s argument was that since part of service agreement was rendered out of India, which was to tune to 50 per same could not be brought to tax in India. We have heard parties. In our opinion, submission of assessee cannot be accepted, as reading of service agreement which have been reproduced earlier clearly indicates that service had to be carried out in India though part of service might be by ways of collection of date form U. K. Since this matter has already been settled by Tribunal in in asst. yr. 1971-72, for reasons mentioned therein, with which we are in agreement, we uphold action of CIT (A). Since quantum of expenses having not brought out by assessee cannot claim any deduction on this issue. We confirm order of CIT (A). last issue in this appeal is regarding claim of Rs. 5,030 representing payment of professional fees for consultation. Shri Roongta, ld. Departmental Representative submitted that Rs. 12,530 was claimed by professional vide their bill, dt. 8th May 1975. Referring to copy of bill, Shri Roongta, submitted that entire matter related to determination of tax rate or penalty or interest. However, CIT (A) while considering para 3 of said letter which related to matters of obtaining tax clearance certificate, further relief of Rs. 2,500 was given. According to him assessee is not entitle to any further relief. According to Shri Dastur, para 3 totally be outside ambit of s. 80VV and even para 2 should be considered as not falling within s. 80BB. We have heard parities. letter of 8th May 1975 is reproduced below: "T. No. 6270 DEPT. Taxation Manager, Albright and Wilson Ltd., Knightbridge Green. London SWIX 7QD, ENGLAND. Dear Sir. We append memo of our charges for Rs. 12,530 being professional services rendered for which we shall be glad to receive remittance. Yours faithfully, For A. F. Ferguson & Co. Sd/- Fees for taxation services rendered upto 31st March 1975 in respect of: (a) 1971-72, 1972-73, 1973-74, 1974-75 assessments. (b) Interview with ITO regarding penalty sough to be imposed for failure to furnish estimate for advance tax and failure to furnish return of income for 1971-72. For attending to appeal matters: Filing appeal to AAC against ITO s order for 1971-72. Conferences and correspondence with Mr. N. Dandkar regarding capital g in s tax liability on sale of share and remittance of sale proceeds. Submitting application to tax authorities for tax clearance certificate: interviews with tax authorities form time to time in this connection, interview with IAC of IT and obtaining tax clearance certificate as desired. Rs. 12.500.00 Add: Airmail Postages Rs. 12,530.00 RUPEES TWELVE THOUSNAD FIVE HUNDRED THIRTY ONLY." In view of fact that separate amount in respect of various services rendered not being available, it purely question of estimate. We are of view that CIT (A) was reasonable in giving relief to assessee and no further relief is called for. In result, both appeals of assessee are partly allowed. *** WILSON LTD. v. INCOME TAX OFFICER