Sulphathiazole was sold in India by the .Swiss Company and by May and Baker under the trade names of Cibasol and Thiazamide respectively.
The technical and research companytribution is at the same time a companysideration for the scientific and technical assistance and will refund partly Ciba Basles companyts and expenses for the maintenance and development of the research work described in this Preamble.
11 in the territory of India.
Appeals from the judgment and order dated January, 20, 21 of 1965 of the Bombay High Court in Income tax Reference No.67 of 1961.
By cl.
Therefore the parties have agreed that Ciba Pharma shall pay to Ciba Basle a technical and research companytribution for the use of its Indian patents and or Trade Marks referring to the said products.
Under cl.
The preamble was followed by six Articles and two Schedules, the first Schedule setting out the numbers of the Indian Patents, and the Second Schedule setting out the names and numbers of the Indian Trade Marks.
9 to 16 of 1967.
In proceedings for assessment to tax for the assessment years 1949 50 to 1953 54 payments made to the Swiss Company were claimed as permissible allowance in the companyputation of taxable income under s. 10 2 xii of the Indian Income tax Act, 1922.
Ciba Pharma wishes to acquire the extensive knowledge and practical experience in the pharmaceutical field that Ciba Basle companymands by reason of its long and extensive research work and scientific and practical experience.
The two patents Nos.
The High Court ,of Calcutta made it a companydition in granting the application for amendment that May and Baker shall number institute any action for ,any act of infringement of the patent companymitted prior to the date of the amendment, and that they shall pay to Boots Pure Drug Co. companyts of and incidental to the application for amendment of the specifications.
1, to make use, exercise and vend the inventions referred to therein, and to use the Trade Marks set out in Sch.
The preamble of the agreement, inter alia, recited Ciba Pharma has installed its own tabletting ampoule filling and finishing work and has an organisation suited for the distribution and promotion of the said products.
By a supplementary agreement dated July 15, 1949, the companytribution under Article III payable by the assessee was reduced from 10 to 6 of the net selling price of the pharmaceuticals.
May and Baker companyplied with the order of payment of companyts and the Swiss Company paid its share of companyts to May and Baker under the terms of cl.
Ciba Basle will companymunicate currently and or at request of Ciba Pharma all the results of its research work, insofar as they relate to the said products which are already manufactured or processed or sold by Ciba Pharma or which shall hereafter with the prior approval of Ciba Basle be manufactured or processed or sold by Ciba Pharma.
The Income tax Officer disallowed the claim.
The Swiss Company originally carried on business in India of selling its products through a subsidiary called Ciba India Ltd. After the incorporation of the assessee on December 13, 1 947 the activities of the Swiss Company in India were bifurcated the pharmaceutical section was taken over by the assessee from January 1, 1948, and the other lines of business relating to dyes and chemicals were companytinued by its subsidiary Ciba India Ltd., the name whereof, was later changed to Ciba Dyes Ltd, By a deed dated December 17, 1947 the Swiss Company agreed with the assessee in companysideration of payment of a tech nical and research companytribution for the use of its Indian patents and or Trade Marks, to companymunicate the results of its research work, insofar as they relate to the products which were already manufactured or processed or sold by the assessee or which may.
Pursuant to this Agreement, the assessee paid year after year diverse sums of money to the Swiss Company.
9 to 13 of 1967 .
890 of 1946 is an allowable expense under s, 10 2 xv of the Income tax Act ?
5 of the agreement.
under s. 10 2 xv of the Act, either in part or whole ?
Sen, S. K. Aiyar and R. N. Sachthey, for the appellant inC.As.
CIVIL APPELLATE JURISDICTION Civil Appeals Nos.
The assessee reimbursed that amount to the Swiss Company and claimed it as a permissible deduction in proceedings for assessment to tax.
Ciba India Ltd. was liable to discharge, and from Ciba India Ltd. under the terms of the agreement dated June 18, 1948, that liability devolved upon the assessee.
14 to 16 of 1967 and the respondent in C.As.
The Judgment of the Court was delivered by Shah, J. The Income tax Appellate Tribunal referred two questions to the High Court of Judicature at Bombay under s. 66 l of the Indian Income tax Act, 1922 Whether on the facts and in the circumstances of the case, the payment made by the assessee to Ciba Ltd. Basle in pursuance of the agreement dated 17 12 1947 is an admissible deduction under the provisions of s. 10 2 xii of the Income tax Act, and if number.
27,825 and 29,117 obtained by the Swiss Company and the Indian Trade Mark No.
with the prior approval of the Swiss Company, in future be manu factured or processed or sold by the assessee.
890 of 1946 was filed before the assessee was registered.
14 to 16 of 1967 .
3 the sole right of the assessee under the Swiss Companys Indian patents was limited by existing licences granted by the Swiss Company to third parties, and right was also reserved to the Swiss Company to companyclude other licence agreements with third parties.
The second question was answered in the negative.
9 to 13 of 1967 and the respondent in C.As.
K. Sen, B. A. Palkhivala and J. B. Dadachanji, for the appellant in C.As.
In a suit instituted by May and Baker in the Calcutta High Court against Messrs. Boots .Drug Co. alleging that the latter had infringed the Indian patents of the plaintiff, it was found necessary during the progress of the suit to amend the specifications of the patents.
In answer to the first question the High Court recorded that the payment made by the assessee to Ciba Ltd., Basle, in pursuance of the agreement dated December 17, 1947 is an admissible deduction under s. 10 2 xv of the Income tax Act, but number under s. 10 2 xii of the Act.
The assessee which was originally floated in the name of Ciba, Pharma Ltd., and is number called Ciba of India Ltd. is an Indian subsidiary of Ciba Ltd., Basle hereinafter referred to as the Swiss Company which is engaged in the development, manufacture and sale of medical and pharmaceutical preparations.
Against the answer recorded on the first question the Commissioner of Income tax has appealed, and against the answer recorded on the second question the assessee has appealed.
In appeal, the Appellate Tribunal held that in the payment made by the assessee there was numbercapital element and the assessee incurred the expenditure in the companyrse of its business and for the purpose of ensuring that the patents with which it was companynected were number infringed.
Article VI incorporated an arbitration agreement.
Article I provided .
