These five appeals filed by same assessee raise common point for decision. Hence, they are heard together and disposed of by this common order for sake of convenience. 2. assessee, Imperial Chemical Industries Ltd., London, is non- resident company having its head office in United Kingdom. In these appeals we are concerned with assessment years 1968-69 to 1972-73, both inclusive. assessee follows year ended 31st March as its previous year in respect of dividend income and year ended 31st December as its previous year for other income. other income returned by assessee comprised of interest, royalty and technical fees assessable under head 'Income from other sources'. 3. assessments for five years under consideration were completed under section 143(3) of Income-tax Act, 1961 ('the Act') on different dates on basis of returns filed by assessee. Subsequently, these assessments were reopened under section 147(a) of Act on ground that certain incomes chargeable to tax had escaped assessment due to omission of assessee to disclose fully and truly all material facts necessary for its assessments. assessing officer found from file of Fertiliser and Chemicals Travancore, Indian company (FACT) that said FACT had entered into on agreement on 24-4-1965 with Power Gas Corporation of United Kingdom ( non-resident company PGC). Under this agreement PGC was to render certain services to FACT for designing and constructing Synthesis Gas Plants in consideration of certain fees. services were to be rendered by PGC in order design and erect plants of FACT and FACT was to pay fees to PGC in consideration for above services. It is stated in agreement that PGC have know-how for erection of aforesaid plants based upon process developed by assessee, i.e., Imperial Chemical Industries (ICI). This agreement also stipulates that PGC will provide services to FACT while erecting plants according to ICI process. FACT was to pay to PGC fee for transmission to ICI specified in clause 7 of agreement. Apart from above, FACT was also to make certain other payments PGC as per clause 9 of agreement. In other words, fee payable by FACT has been divided into two components-a portion representing amount that PGC was liable to pay to assessee and another portion which was not to be so paid to assessee. Clause 10 of agreement states that taxes leviable under Indian Tax Laws for services rendered under this agreement would be borne by FACT and not by PGC. Apart from above agreement dated 24-4-1965 between FACT and PGC, there was another agreement between PGC and assessee. This agreement is dated 1-1-1964. Under this agreement, assessee allowed PGC to commercially exploit process developed by assessee throughout world. assessee has undertaken obligation to solve any problem that may arise while PGC used aforesaid process in course of design and erection of plants. PGC was free to design and erect plants according to other processes also and assessee had nothing to do with such activity. According to agreement, if PGC designs and erects plant according to process developed by assessee, assessee is obliged to render aforesaid services to PGC on request and not otherwise. If in particular contract entered into by PGC with customer, no request for any services was made to assessee, then assessee was not obliged to render any such services as are envisaged in this agreement. Nevertheless, assessee would be entitled to its fee specified in this agreement if plant designed and erected by PGC for any customer anywhere in world is based upon process developed by assessee. This agreement dated 1-1-1964 was entered into in United Kingdom. All sums payable thereunder to assessee were payable in London in sterling. right to use process developed by assessee was thus passed on to PGC in United Kingdom by virtue of this agreement dated 1-1-1964 which was concluded in United Kingdom. case of assessing officer was that these two agreements together spell out business connection between assessee and FACT within meaning of section 9(1) of Act. Hence, fees paid by PGC to assessee under aforesaid agreement dated 1-1-1964 must be deemed to accrue in India. assessing officer has also recorded that fees must be deemed to have accrued in India because services were rendered in India. According to him, only because agreement for services was made through PGC in London, it cannot be said that no services were rendered in India by assessee. Reliance was placed on clause 7 of agreement dated 24-4-1965 which says that part of fees payable by FACT to PGC had to be transmitted by latter to assessee because of prior agreement of PGC with assessee. It is case of assessing officer that since part of fees received by PGC was to be transmitted to assessee in London, said fees must be deemed to accrue in India. assessing officer observed that agreement between PGC and FACT is dependent upon agreement between PGC and ICI and secondly, assessee has made available its technical information to FACT through PGC. Thirdly, assessee has received certain payments from FACT through PGC for imparting indirectly its technical know- how. Fourthly, assessee appears to be, though implicitly, partly to agreement made between PGC and FACT. Fifthly, FACT has made payments both to ICI and PGC at different rates. On basis of above reasoning, assessing officer held that fees received by assessee must be deemed to have accrued in India and so taxable in India. As assessee had not shown these amounts in original returns, these amounts had escaped tax. Hence, he made reassessments under section 147(a) read with section 143(3) by including amounts paid by FACT to PGC under clause 7 of agreement dated 24-4-1965 in total income of assessee. 4. assessee appealed to Commissioner (Appeals) and contended that reassessments made by assessing officer were not called for because assessee had not omitted to disclose any material facts necessary for its assessments. Even on merits, it was urged that assessee did not render any services to FACT in India and so no portion of fee earned by it under agreement concluded in United Kingdom on 1-1-1964 can be deemed to accrue in India. Commissioner (Appeals) did not agree with above contentions of assessee. He held that 'as fees accrued by virtue of appellant's business connection with Indian company and also as appellant was real beneficiary of job done in India, provisions of section 9(1) (i) were rightly invoked by IAC. Thus, grounds relating to reopening, reassessment and applicability of section 9(1) (i) are rejected'. 5. Aggrieved by above common order dated 25-3-1985 of Commissioner (Appeals) for five years under consideration assessee is in appeal before us. Shri N. A. Palkhivala, learned counsel for assessee, in appeal before us. Shri N. A. Palkhivala, learned counsel for assessee, urged before us that revenue authorities have grossly erred in their decision. According to him, revenue authorities have acted on grounds which are not even statable. He took us through pages 50 to 95 of compilation filed before us and pointed out that undisputed facts of case are that, firstly, no amount was received by assessee in India and, secondly, agreement dated 1-1-1964 to which assessee was partly was concluded in United Kingdom and so rights therein passed from assessee to PGC in United Kingdom. Thirdly, there was no relation whatsoever between assessee and FACT as there has been no contract between them. assessee did not, in fact, render any services to FACT in India in spite of fact that it was obliged to render certain services in case PGC requests it to do so. In point of fact, no such request was made in respect of contract between PGC and FACT and so none of services envisaged under agreement dated 1- 1-1964 was actually rendered while PGC was executing its contract dated 24-4- 1965 with FACT. He stated that when agreement dated 1-1-1964 was entered into by assessee, it was not even aware that PGC would, sometime in future, enter into agreement with concern in India. In fact, PGC has entered into similar agreements with parties in several other countries, namely, Australia, Czechoslovakia, Finland, France, Japan, Malaysia, South Africa, Spain, USSR, South Korea and Qatar. In this connection, he drew our attention to letter dated 28-10-1980 from assessee addressed to assessing officer which reads thus: "I am giving below answers to questions raised by you to my representative during hearing on 29-8-1980. 1. Whether ICI received any representation/letter from FACT regarding difficulties in utilising ICI techniques passed on through Power Gas? Answer: No 2. Whether ICI directly or indirectly sent any written solution to problems? Answer: No 3. Whether ICI sent any experts to solve problems? Answer: No 4. Details of correspondence between ICI and FACT directly or indirectly? Answer: None 5. Details of tour of ICI experts in connection with work of FACT? Answer: None In this connection, I would like to emphasize that ICI's only commitment was to UK company, i.e., Power Gas Corporation Limited and ICI had no commitment under any agreement with Fertilizers and Chemicals Travancore Limited whatsoever which required any of actions outlined in your above questions 1 to 5 to be undertaken by ICI." He urged that aforesaid facts stated by assessee before assessing officer have not been found to be untrue. assessing officer has merely proceeded on assumption that assessee must have rendered some services whereas in fact no such services were rendered by assessee so far as agreement of PGC with FACT was concerned. He clarified that he was not commenting on liability of PGC to Indian income-tax. All that he was saying was that assessee did not derive any income taxable in India from agreement dated 24-4-1965 as erroneously alleged by revenue authorities. He stated that only case of revenue authorities against assessee was that business connection was established between assessee and FACT by virtue of aforesaid two agreements. He emphatically denied existence of any such business connection as result of aforesaid agreements. In this connection, he posed question that if ICI, in its turn, had to pay some amounts to another concern, then could that other concern be brought within Indian tax net? According to him, it could not be, because in that case one has to go on and on till one finds inventor of original process. If PGC was to pay any amount to ICI, then it was nothing but expenditure incurred by PGC to earn income from FACT. It may be application of income of PGC or expenditure incurred by it just like other items of expenditure like salary, expenditure incurred by it just like other items of expenditure like salary, travelling, etc. By no stretch of imagination there could be business connection of assessee with FACT merely because agreement between PGC and FACT states that certain portion of amount payable thereunder has to be passed on by PGC to assessee. He explained that real reason for stating that fact in agreement dated 24-4-1964 was to convince FACT that they were not being overcharged. In order to make that position clear, PGC had to reveal its prior agreement with assessee under which portion of fees paid by FACT had to be parted with by PGC. Next, he stated that even if it is assumed for sake of argument that there was business connection between assessee and FACT, yet no amount is taxable in India because no operation was carried out by assessee in India vide Explanation to section 9(1) (i). 6. Regarding reopening of assessments, Shri N. A. Palkhivala urged before us that assessee did not omit to disclose any material facts necessary for its assessments. As amounts under consideration were not taxable in India, assessee did not think it obligatory to disclose them in returns. According to him, only those items which are normally taxable under Act but are exempt under some other provisions of said Act has to be declared in Part III of return prescribed for companies under Income-tax Rules, 1962. In any case, he urged that this ground would become infructuous in view of his arguments on merits of case since amounts are not taxable in India at all. 7. Shri B. K. Bagchi, learned counsel for department, on other hand, supported order of Commissioner (Appeals). He took us through various clauses of agreements dated 1-1-1964 and 24-4-1965. He relied on following decisions in support of his argument that amount under consideration has been rightly taxed-CIT v. Stanton & Stavely (Overseas) Ltd. [1984] 146 ITR 405 (Cal.), Carborandum Co. v. CIT [1977] 108 ITR 335 (SC), Bharat Heavy Plate & Vessels Ltd. v. Addl. CIT [1979] 119 ITR 986 (AP), Skoda Export v. Addl. CIT [1983] 143 ITR 452 (AP), CIT v. Dunlop Rubber Co. Ltd. [1983] 142 ITR 493 (Cal.), CIT v. Toshoku Ltd. [1980] 125 ITR 525 (SC), Murray (Inspector of Taxes) v. Imperial Chemical Industries Ltd. [1969] 71 ITR 661 (CA), Rolls-Royce Ltd. v. Jeffrey (Inspector of Taxes) [1965] 56 ITR 580 (HL), Caltex (India) Ltd. v. CIT [1952] 21 ITR 278 (Bom.), E. D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR 27 (SC) and McDowell & Co. Ltd. v. CIT [1985] 154 ITR 148 (SC). Shri B. K. Bagchi urged before us that name of assessee figures in many of clauses in agreement dated 24-4-1965. Clause 7 thereof specifically states that portion of fees received by PGC was to be transmitted to assessee. According to him, this fact shows that said income was diverted at source so that it became income of assessee. Next, he referred to meaning of 'fee' as explained in case of Stanton & Stavely (Overseas) Ltd. (supra). In this case, it has been held that payment made by Indian concern to non-resident company between which there was subsisting agreement amounted to royalty even though it is called 'commission'. Then, he took us through cases wherein it has been held that technical fees or royalty are taxable in India if patent or technical know- how is commercially exploited in India. Next, he referred to older cases wherein it has been held that real source of income had to be looked into to decide its taxability. According to him, source of income of assessee could not be said to be agreement dated 1-1-1964 but source extended to subsequent agreement dated 24-4-1965. Finally, he referred to decision in case of McDowell & Co. Ltd. (supra) for proposition that Court should not approve device set up to avoid tax. According to him, both agreements have to be read together and if it is so done then it was clear that assessee had earned income in India through agency of PGC. Hence, he urged that revenue is entitled to succeed on merits of case and so reassessments, as affirmed by Commissioner (Appeals), deserved to be upheld. 8. Regarding validity of reopening of assessments Shri B. K. Bagchi stated that reopening was validly done as assessee did not disclose all material facts necessary for its assessments inasmuch as amounts under consideration were not declared in original returns. 9. Shri N. A. Palkhivala replied that when assessee entered into agreement on 1-1-1964 with PGC it had absolutely no idea as to how and where and when PGC will put to use rights obtained by latter under said agreement. When assessee was not even aware of income to be received from FACT by PGC in future, it could not be said that two agreements constituted device for avoiding any tax. On contrary, he pointed out that in agreement dated 24-4-1965, tax, if any, payable under that agreement was duly taken note of and agreed to be paid by FACT. case of McDowell & Co. Ltd. (supra) does not apply to facts of this case because assessee did not, in any way, contravene provisions of Indian Income-tax Act, 1922 with view to avoid payment of legitimate tax payable under that Act. 10. We have carefully considered contentions of both parties, facts on record, agreements dated 1-1-1964 and 24-4-1965 as well as compilations filed by both learned counsels. We have gone through provisions of section 5 of Act. It says that non-resident is liable to tax on all incomes which are received or deemed to be received in India or which accrued or deemed to accrue in India. Admittedly, amounts under consideration were not received nor deemed to be received nor accrued in India. case of revenue is based solely on contention that amounts received by assessee under agreement dated 1-1-1964 concluded in United Kingdom must be deemed to have accrued in India. Now, section 9(1) lays down as to what are incomes which shall be deemed to accrue in India. One such income is income arising directly or indirectly through or from any business connection in India.'Business connection' has not been defined in Act but its connotation has been explained in various judicial decisions from time to time. For example, if non-resident maintains branch in India or comes to India for doing business or sends its employees to India for carrying out commercial assignment, etc., then, it has been held to be business connection within meaning of aforesaid section. Explanation to section 9(1) says that even if there is business connection, then income arising therefrom shall be taxable only to extent to which it could be attributable to operations carried out in India. In other words, in case where there is clear business connection but no operation whatsoever is carried out in India, then no income shall be deemed to accrue under section 9(1) read with Explanation thereto vide decision in case of Carborandum Co. (supra). In this case, there was direct agreement between non-resident and Indian company under which foreign company lent some personnel for carrying out business activities of Indian company in India and question was as to sat which place services were rendered by non-resident company so that that place would become place of accrual of income. It was held that activities of foreign personnel lent by foreign company did not amount to business activity by foreign company carried out in India. foreign company had made services of foreign personnel available to Indian company outside India. decision, thus, lays down important rule that income accrues where services were rendered and not where those services were subsequently used. particular income can accrue to person only once. If it has already accrued to him outside India, it can no longer accrue again within India. In that reported case, it was also held that even assuming that there was business connection between earning of fee and affairs of Indian company, no part of activity or operation could be said to have carried on by non-resident in India and so no part of fee could be deemed to accrue in India. 11. We have considered various decisions cited before us by learned counsel for department. We find that those decisions are distinguishable on facts from case before us. Those were cases where there was direct agreement between non-resident and Indian company which is not true in instant case. We find nothing on record to suggest that agreement dated 1-1-1964 was entered into by assessee keeping eye on subsequent agreement dated 24-4-1965 to be entered into in future by PGC and another party. On 1-1-1964 assessee was not aware of future places of activity of PGC. Nor is there anything on record to suggest that PGC was mere agent or stooge or conduit pipe acting for or on behalf of assessee, or that agreement dated 24-4-1965 was mere eye-wash. Whatever might be obligations of assessee envisaged under agreement dated 1-1-1964, in point of fact, assessee has not rendered any services whatsoever in India and this fact has not been controverted by revenue. Hence, case of McDowell & Co. (supra) is not applicable to facts of present case. Whatever assessee parted with under agreement dated 1-1-1964 was parted with at time when and at place where agreement dated 1-1-1964 was concluded. This was admittedly outside India. right to use ICI process anywhere in world was passed on by that agreement to PGC for fee. transaction was completed outside India. assessee did not do anything further in India in respect of contract dated 24-4-1965. Hence, we do not see any business connection between assessee and FACT so far as agreement dated 24-4-1965 is concerned. It is true that latter agreement refers to transmission of portion of fees received by PGC to assessee; but, in our opinion, that was done merely to keep fees payable by PGC to assessee separately quantified and recorded for purposes best known to PGC. Instead of stating fees as consolidated sum (which could have been very will done) PGC (and not assessee) chose to state it under two clauses. In our opinion, above fact alone cannot create business connection between assessee and FACT. That fact has no bearing on taxability of those sums in hands of assessee under provisions of Act. Looking at matter from another angle, let us assume that assessee had sold outright rights which it parted with under agreement dated 24-4-1965 for consolidated lump sum fee to be paid once for all. In that case, assessee would have been totally unconcerned with amounts earned by PGC thereafter anywhere else in world and would have been outside Indian tax net. Merely because mode of payment under agreement dated 1-1-1964 was related for purpose of quantification to subsequent earnings of PGC, it cannot be said that business connection was established between assessee and country in which PGC used rights it had purchased long after purchase was made. Evidently, mode of payment cannot decide place of accrual. place of accrual is place where services are rendered. These services have been rendered by assessee in United Kingdom and not in India. Consequently, there is no business connection and no income can be deemed to have accrued i n India to assessee under either of aforesaid two agreements. Even assuming, for sake of argument, that there is business connection, there has been no operation carried out by assessee in India in connection with execution of agreement dated 24-4-1965 and so by virtue of Explanation to section 9(1) (i), nothing can be deemed to have accrued to assessee in India. For above reasons, we come to conclusion that no income out of payments made by FACT to PGC can be deemed to have accrued to assessee in India and so on portion thereof was taxable in India. Hence, we agree with learned counsel for assessee that on merits these appeals are bound to succeed. In view of above conclusion of ours, grounds taken against validity of reopening of assessments have indeed become infructuous as rightly contended by him. Consequently, we delete additions made to total income in reassessments for five assessment years under consideration. 12. In result, five appeals are allowed. *** IMPERIAL CHEMICAL INDUSTRIES LTD. v. INSPECTING ASSISTANT COMMISSIONER