Bellsonica Auto Components India Pvt. Ltd., Gurgaon V. DCIT, Gurgaon

ITA 2210/DEL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6595 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 25-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S VASUDEVAN
• Keywords: Capital asset; Depreciation; Revenue expenditure

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH E, NEW DELHI BEFORE : SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 2210/DEL/2016 ASSESSMENT YEAR: 2011-12 BELLSONICA AUTO COMPONENTS INDIA PVT. LTD., PLOT NO. 1, PHASE-3A, SECTOR-8, IMT MENESAR, GURGAON. PAN- AACCB9442Q (APPELLANT) VS. DCIT, CIRCLE 1(1), GURGAON. (RESPONDENT) ITA NO. 2329/DEL/2016 ASSESSMENT YEAR: 2011-12 ACIT, CIRCLE 1(1), GURGAON. (APPELLANT) VS. BELLSONICA AUTO COMPONENTS INDIA PVT. LTD., PLOT NO. 1, PHASE-3A, SECTOR-8, IMT MENESAR, GURGAON. (RESPONDENT) A SSESSEE BY SH. S.VASUDEVAN, ADVOCATE RE VENUE BY SH. SUJIT KUMAR, SR. DR ORDER PER L.P. SAHU, A.M.: THESE TWO CROSS APPEALS BY THE ASSESSEE AND THE RE VENUE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A), GURGAON DATED 16.0 2.2016 FOR THE ASSESSMENT YEAR 2011-12. BOTH THE PARTIES HAVE RAISED FOLLOWIN G GROUNDS IN THEIR RESPECTIVE APPEALS : GROUNDS RAISED BY ASSESSEE : 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING T HE DISALLOWANCE OF DATE OF HEARING 05.07.2018 DATE OF PRONOUNCEMENT 27 .07.2018 ITA NOS. 2210 & 2329/DEL./2016 2 REIMBURSEMENT AMOUNTING TO RS.8,92,572/- UNDER THE PROVISIONS OF SECTION 40(A)(I) OF THE INCOME TAX. ACT, 1961. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) ERRED ON FACTS AND IN LAW IN DISMISSING T HE CONTENTION OF THE APPELLANT THAT THE APPELLANT WAS NOT LIABLE TO DEDU CT TAX UNDER SECTION 195 OF THE INCOME TAX. ACT, 1961, FROM THE PAYMENT M ADE TO M/S. BELLSONICA CORPORATION JAPAN TOWARDS REIMBURSEMENT OF EXPENSES AS THE SAME WAS NOT AN INCOME CHARGEABLE TO TAX IN INDIA. 2.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT (APPEALS) ERRED ON FACTS AND IN LAW IN OBSERVING IN COMPLETE DISREGARD OF THE SUPPORTING DETAILS AND WRITTEN SUBMISSIONS THAT THE APPELLANT HAS FAILED BOTH IN THE ASSESSMENT PROCEEDINGS AS WELL A S IN THE APPELLATE PROCEEDINGS TO DEMONSTRATE THE NATURE OF REIMBURSEM ENTS. 2.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT (APPEALS) ERRED ON FACTS AND IN LAW IN NOT APPRECIA TING THAT, SIMILAR CLAIM OF REIMBURSEMENT OF EXPENSES OF THE APPELLANT HAS BEEN ALLOWED BY THE DEPARTMENT IN THE PREVIOUS ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2010- 11. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) ERRED ON FACTS AND IN LAW IN NOT DELETING THE DISALLOWANCE OF EXPENDITURE THE APPELLANT TOWARDS EXPENDITURE ON AC COUNT OF ROYALTY. 3.1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN TREATING 25% OF THE EXPENDITURE TOWARDS ROYALTY INCURRED BY THE APPELLANT AS CAPITA L EXPENDITURE. GROUND RAISED BY THE REVENUE: 1. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN TREATING 75% OF THE EXPENSES ON ROYALTY PA YMENT FOR TECHNICAL KNOW HOW AS REVENUE EXPENDITURE WITHOUT ANY BASIS FOR SUCH PERCENTAGE, WHEREAS THE TOTAL EXPENDITURE WAS CAPIT AL IN NATURE BEING INCURRED ON TECHNICAL KNOW HOW AS DEFINED IN EXPL ANATION-4 TO SECTION 32(1) OF THE INCOME TAX ACT, 1961. 2. THE BRIEF FACTS ARE THAT THE ASSESSEE FILED RETU RN OF INCOME ON 23.09.2011 DECLARING LOSS OF RS.1,62,75,800/-. THE CASE WAS SELECTED FOR ITA NOS. 2210 & 2329/DEL./2016 3 SCRUTINY AND STATUTORY NOTICES WERE ISSUED TO THE A SSESSEE. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE HAS PAID TECHNICAL FEE OF RS.8,92,572/-, ON WHICH NO TDS WAS DEDUCTED. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF PAYMENTS MADE A ND REASON FOR NON- DEDUCTION OF TAX AT SOURCE. THE ASSESSEE SUBMITTED DETAILED WRITTEN SUBMISSIONS. THE ASSESSING OFFICER WAS NOT SATISFIE D WITH THE REPLY OF ASSESSEE AND DISALLOWED A SUM OF RS.8,92,572/- U/S. 40(A)(IA ) OF THE ACT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 3. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAS PAID ROYALTY OF RS.2,36,63,834/- TO BELLSONICA CORPN., J APAN AND IT HAS BEEN CLAIMED AS REVENUE EXPENDITURE. AS PER THE LICENSE AGREEMEN T, BELLSONICA CORPN. WILL SUPPLY TECHNICAL KNOWHOW AND KNOWLEDGE OF DIES, QUA LITY CONTROL AND TESTING AND HE WILL ALSO PROVIDE PRODUCTION METHODOLOGY OF THE ASSESSEE IN LIEU OF WHICH ROYALTY HAS BEEN PAID AS PER AGREEMENT PLACED ON RECORD. IT WAS ALSO SUBMITTED THAT BELLSONICA CORPN. JAPAN HAS GIVEN LI CENSE INFORMATION, TECHNICAL KNOWHOW OF YC-5, DESIGN INFORMATION, PROC ESS, DESIGN OF MACHINES, DIES, FIXER FOR YP-8 AND ALSO PROVIDED BLUE PRINTS OF PRODUCTS. THE ASSESSING OFFICER TREATED THE ROYALTY PAYMENT AS FEE FOR TECH NICAL KNOWHOW AND AS PER RULE-5, TECHNICAL KNOWHOW IS AN INTANGIBLE CAPITAL ASSET. THEREFORE, HE ALLOWED 25% DEPRECIATION ON PAYMENT OF RS.2,36,63,8 34/- AND AFTER DEDUCTING DEPRECIATION, THE REST AMOUNT WAS TREATED AS CAPITAL IN NATURE. THEREFORE, THE BALANCE AMOUNT OF ROYALTY PAID OF RS .1,92,26,865/- WAS CAPITALIZED BY THE ASSESSING OFFICER AND ADDED TO T HE INCOME OF THE ASSESSEE. IN APPEAL BEFORE THE LD. CIT(A), WHO AFTER CONSIDER ING THE SUBMISSIONS OF THE ASSESSEE SUSTAINED THE ADDITION MADE U/S. 40(A)(IA) AND IN RESPECT OF PAYMENT OF ROYALTY, THE LD.CIT(A) TREATED 25% OF TOTAL PAYM ENT AS CAPITAL IN NATURE AND ITA NOS. 2210 & 2329/DEL./2016 4 THE BALANCE 75% WAS TREATED AS REVENUE EXPENDITURE AFTER RELYING ON CASE LAWS. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE AS WELL AS THE REVENUE HAVE COME UP IN APPEAL BEFORE THE ITAT. 4. THE LEARNED AR REITERATED THE SUBMISSIONS MADE B EFORE THE LD. CIT(A) AND SUBMITTED THAT THESE PAYMENTS MADE BY THE ASSES SEE ARE IN NATURE OF REIMBURSEMENT, THEREFORE, THE TDS PROVISION IS NOT APPLICABLE ON IT. HE HAS ALSO REFERRED TO THE AGREEMENT CLAUSE 3.05 AND SUBM ITTED THAT ALL PAYMENTS HAVE BEEN MADE ACCORDING TO THE AGREEMENT. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESSEE HAD NOT DEMONSTRATED THE EXACT NATURE OF PAYMENTS MADE TO ITS GROUP COMPANY OR PAY MENTS MADE TO THE EMPLOYEES OF BELLSONICA CORPN. JAPAN. THEREFORE, TH E LD. CIT(A) HAS RIGHTLY DISMISSED THE APPEAL OF THE ASSESSEE ON THIS ISSUE. 6. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTIE S AND HAVE GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. TH E ASSESSEE HAD NOT PRODUCED EXACT NATURE OF PAYMENT MADE BEFORE THE AS SESSING OFFICER AS WELL AS THE LD. CIT(A) AND DURING THE COURSE OF ARGUMENT S, HE WAS AGREED TO INDICATE THE NATURE OF PAYMENTS MADE TO ITS GROUP C OMPANY. THEREFORE, THIS MATTER DESERVES TO BE REMITTED BACK TO THE FILE OF ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE WHETHER THE TDS PROVISIONS ARE APPLICABLE OR NOT WITH REFERENCE TO THE NATURE OF PAYMENTS MADE BY THE ASSESSEE TO BELLSONICA CORPORATION, JAP AN OR TO THEIR EMPLOYEES. THE ASSESSEE IS ALSO DIRECTED TO PRODUCE COGENT EVI DENCES IN SUPPORT OF ITS CLAIM. REASONABLE OPPORTUNITY SHALL BE GIVEN TO THE ASSESSEE. ITA NOS. 2210 & 2329/DEL./2016 5 7. FURTHER, IN RESPECT OF PAYMENT OF ROYALTY OF RS. 2,36,63,834/-, THE AO HAS TREATED IT AS CAPITAL IN NATURE AS PER RULE 5. THE LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND SUBMITTE D THAT THE PAYMENTS HAVE BEEN MADE AS PER AGREEMENT WITH BELLSONICA CORPN. J APAN ON 01.10.2006. IT IS SUBMITTED THAT THE PAYMENT OF ROYALTY MADE BY THE A SSESSEE DOES NOT SUGGEST ANY BENEFIT OF ENDURING NATURE TO THE ASSESSEE, AS THE PAYMENT HAS BEEN MADE FOR THE LICENSE GIVEN BY THE FOREIGN COMPANY AS PER LICENSE AGREEMENT AND AFTER TERMINATION OF LICENSE, THE ASSESSEE IS NOT A UTHORIZED EITHER TO USE THE TECHNICAL KNOWHOW GATHERED FROM THE SAID COMPANY NO R CAN TRANSFER THE SAME TO ANYONE. RELIANCE IS PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HERO HONDA MOTORS LTD., 55 T AXMANN.COM 230 (DEL). HE HAS ALSO RELIED ON THE DECISION OF CHANDIGARH BENCH OF TRIBUNAL IN DSM SINOCHEM PHARMACEUTICALS INDIA (P) LTD. DCIT, 82 TA XMANN.COM 316 AND OF DLHI TRIBUNAL IN ACIT VS. DENSO INDIA, 89 TAXMANN.C OM 139. IT IS THEREFORE, SUBMITTED THAT THE LD. CIT(A) HAS WRONGLY HELD 25% OF THE PAYMENT AS CAPITAL IN NATURE. 8. ON THE OTHER HAND, THE LD. DR RELYING ON THE ORD ER OF THE ASSESSING OFFICER SUBMITTED THAT THE ASSESSEE HAD MADE AGREEM ENT IN THE YEAR 2006 AND CONTINUOUSLY GETTING BENEFIT OF THE LICENSE TILL DA TE. THEREFORE, IT IS CAPITAL IN NATURE AS THE ASSESSEE IS GETTING ENDURING BENEFIT THERE FROM. THE LD. CIT(A) HAS ALSO WRONGLY DECIDED THE ISSUE PARTLY IN FAVOUR OF THE ASSESSEE. 9. AFTER HEARING BOTH THE SIDES AND PERUSING THE EN TIRE MATERIALS AVAILABLE ON RECORD, WE FIND THAT WHAT WE HAVE TO DECIDE HERE IS WHETHER THE PAYMENT MADE FOR TECHNICAL KNOWHOW WAS CAPITAL IN NATURE OR REVENUE. THE OWNERSHIP ITA NOS. 2210 & 2329/DEL./2016 6 OF THE TECHNICAL KNOWHOW REMAINED WITH THE FOREIGN COMPANY. THE ASSESSEE HAS MADE LICENSE AGREEMENT WITH THE FOREIGN COMPANY AS ON 01.10.2006, WHICH IS CONTINUOUSLY IN FORCE TILL DATE. THE TERMS OF AGREEMENT READ AS UNDER : ARTICLE 2 LICENSE AND BELLSONICS OWNERSHIP 2.01: SCOPE OF LICENSE (A) BELLSONICA AGREES TO PROVIDE, DURING THE TERM OF THIS AGREEMENT, TECHNICAL COLLABORATION AND LICENSE NECESSARY TO THE MANUFACT URE, TESTING AND QUALITY CONTROL OF PRODUCTS, IN ACCORDANCE WITH THE TERMS AND CONDI TIONS IN THIS AGREEMENT. (B) BELLSONICA HEREBY GRANTS TO LICENSEE DURING THE TERM OF THIS AGREEMENT, IN STRICT ACCORDANCE WITH THE TERMS AND SUBJECTS TO TH E CONDITIONS SET FORTH, THE NON- EXCLUSIVE RIGHT TO USE THE LICENSED INFORMATION FOR THE MANUFACTURE, TESTING AND QUALITY CONTROL OF PRODUCTS WITHIN THE TERRITORY. 2.02 BELLSONICAS OWNERSHIP LICENSEE RECOGNIZES AND ACKNOWLEDGES BELLSONICAS O WNERSHIP AND VALIDITY OF THE LICENSED INFORMATION AND SHALL NOT RAISE OR CAUSE T O BE RAISED AND QUESTION CONCERNING OR ANY OBJECTION TO THE OWNERSHIP OR VAL IDITY OF LICENSED INFORMATION. LICENSEE SHALL NOT APPLY OR CAUSE TO BE APPLIED FOR ANY LETTERS INDUSTRIAL PROPERTIES AS TO ANY OF THE BELLSONICAS INVENTION OR REGISTER OR CAUSE TO BE REGISTERED ANY COPYRIGHT OR DESIGN WHICH ARE IDENTICAL OR SIMILAR TO OR IMITATIONS OR DERIVATIONS OF LICENSED INFORMATION, IN ANY PART OF THE WORLD WITH OUT BELLSONICA'S WRITTEN CONSENT, EITHER DURING THE TERM OF THIS AGREEMENT OR AFTE R ITS TERMINATION. 2.03: USE OF LICENSE - DISCOVERY OF INFRINGEMENT LICENSEE SHALL NOT, AT ANY TIME, DO ANY ACT WHICH M AY IN ANY WAY IMPAIR THE RIGHT OF BELLSONICA IN THE LICENSED INFORMATION. IF ANY INFR INGEMENT OF THE LICENSED INFORMATION OR ANY INDUSTRIAL PROPERTIES AND KNOW-H OW INCLUDED IN THE LICENSED INFORMATION COMES TO LICENSEES ATTENTION, LICENSEE SHALL NOTIFY BELLSONICA THEREOF IMMEDIATELY SO AS TO ENABLE BELLSONICA TO TAKE WHAT EVER STEPS IT BELIEVES ADVISABLE OR NECESSARY TO PROTECT ITS INTEREST. 2.04 DISCLAIMER OF WARRANTY (A) BELLSONICA DECLARES THAT AS OF THE DATE OF TH IS AGREEMENT NO THIRD PARTY HAS RAISED ANY INDUSTRIAL PROPERTY AND KNOW-HOW CLAIMS AGAINST BELLSONICA WITH REGARD TO PRODUCTS, WHICH MIGHT HAVE A MATERIAL ADVERSE EF FECT ON THE MANUFACTURE, USE OR SALE OF PRODUCTS BY OR FOR LICENSEE, MANUFACTURED S TRICTLY IN CONFORMITY WITH THE LICENSED INFORMATION UNDER THIS AGREEMENT. (B) BELLSONICA FURTHER DECLARES THAT IN CASE SUC H CLAIM IS RAISED DURING THE TERM OF THIS AGREEMENT, WHICH CANNOT BE SETTLED WITH THE RE LEVANT THIRD PARTY, AND SUCH INDUSTRIAL PROPERTIES AND KNOW-HOW CLAIMS HAVE A MA TERIAL ADVERSE EFFECT ON THE MANUFACTURE, USE OR SALE OF PRODUCTS MANUFACTURED S TRICTLY IN CONFORMITY WITH THE ITA NOS. 2210 & 2329/DEL./2016 7 LICENSED INFORMATION, IT WILL MAKE EFFORTS TO A REA SONABLE EXTENT TO MAKE AVAILABLE TO LICENSEE A TECHNICAL SOLUTION WHICH WILL NOT VIOLAT E THE RELEVANT INDUSTRIAL PROPERTY AND KNOW-HOW. (C) BELLSONICA AGREES TO COOPERATE WITH LICENSEE IN THE LEGAL DEFENSE OF ANY LAW SUITS ALLEGING INFRINGEMENT BY LICENSEE OF OTHERS INDUSTRIAL PROPERTY AND KNOW-HOW IN RESPECT OF PRODUCTS MANUFACTURED BY LICENSEE IN CONFORMITY WITH THE LICENSED INFORMATION, BY FURNISHING TO LICENSEE SUCH INFORMA TION AND EVIDENCE AS ARE AVAILABLE TO BELLSONICA AND ARE MATERIAL TO THE PRO PER DEFENSE OF SUCH LAW SUITS. THE FURTHER OBLIGATIONS OR RESPONSIBILITIES, IF ANY, TO BE ASSUMED BY BELLSONICA IN ANY SUCH LAW SUITS SHALL BE DECIDED BY MUTUAL AGREEMEN T BETWEEN BELLSONICA AND LICENEE IF AND WHEN SUCH A NEED ARISES. (D) BELLSONICA GIVES NO OTHER WARRANTY EXPRESS O R IMPLIED, AS TO DESCRIPTION, QUALITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, PERFORMANCE, PRODUCTIVENESS, OR ANY OTHER MATTER, OF ANY PRODUCT S, LICENSED INFORMATION, OR ANY OTHER MATTER OF THING THAT MAY BE PROVIDED BY BELLS ONICA TO LICENSEE AT ANY TIME UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT, UNLE SS THE SAME IS IN WRITTEN AND SIGNED BY BELLSONICA. BELLSONICA WILL USE ITS BEST EFFORTS TO VERIFY THE ACCURACY OF THE LICENSED INFORMATION FURNISHED IT TO LICENSEE, BUT SHALL NOT BE LIABLE TO LICENSEE FOR DAMAGES ARISING OUT OF, OR RESULTING FROM, ANY OF T HE LICENSED INFORMATION MADE AVAILABLE HEREUNDER OR THEREOF BY LICENSEE. (E) BELLSONICA FURTHER DISCLAIMS ANY RESPONSIBI LITY WHATSOEVER WITH RESPECT TO ANY REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR I MPLIED, WHICH LICENSEE MAY MAKE WITH RESPECT TO PRODUCTS MANUFACTURED AND/OR S OLD BY LICENSEE AND, IN ANY EVENT, LICENSEE AGREES TO HOLD AND SAVE HARMLESS BE LLSONICA FROM ANY CLAIMS, DEMANDS OR ACTIONS WHICH MAY RESULT FROM ANY REPRES ENTATIONS OR WARRANTIES OF LICENSEE. NOTWITHSTANDING THE FOREGOING, ANY WARRANTY WHICH L ICENSEE PROPOSES TO GIVE WITH RESPECT TO PRODUCTS IT MANUFACTURES SELLS SHALL BE NOTIFIED TO BELLSONICA IN ADVANCE. (F) LICENSEE SHALL TAKE ALL ACTIONS NECESSARY TO INDEMNIFY AND KEEP HARMLESS BELLSONICA FROM ANY PRODUCT LIABILITY CLAIMS IN CON NECTION WITH PRODUCTS MANUFACTURED AND SOLD BY LICENSEE HEREUNDER INCLUDI NG PROCURING AND MAINTAINING, IN THE NAME AND FOR THE BENEFIT OF BELLSONICA, WITH OUT ANY LIABILITY OR COST TO BELLSONICA, POLICIES OF INSURANCE IN SUCH FORM, OF SUCH TYPE AND WITH SUCH INSURES AS ARE REASONABLY SATISFACTORY TO BELLSONICA. 2.05 INFRINGEMENT OF THIRD PARTYS RIGHTS UPON RECEIPT OF NOTICE BY BELLSONICA AND/OR LICENSE E OF ANY INTENDED CLAIM FOR INDUSTRIAL PROPERTY AND KNOW-HOW INFRINGEMENTS OR I F ANY ACTION FOR INDUSTRIAL PROPERTY AND KNOW-HOW INFRINGEMENTS IS INSTITUTED A GAINST LICENSEE AND / OR BELLSONICA BY ANY THIRD PARTY OR PARTIES, THE PARTI ES HERETO SHALL CONSULT EACH OTHER REGARDING THE RESOLUTION OF SUCH MATTER. IF ANY LAW SUIT IS BROUGHT AGAINST BELLSONICA ALLEGING INFRINGEMENT OF ANY INDUSTRIAL PROPERTY AN D KNOW-HOW OWNED BY OTHERS BY ITA NOS. 2210 & 2329/DEL./2016 8 ANY ACT OF LICENSEE OR BY THE IMPORT, MANUFACTURE, USE AND / OR SALE OF PRODUCTS IN THE TERRITORY OR ANY OTHER COUNTRY, LICENSEE SHALL COOPERATE WITH BELLSONICA TO ENABLE BELLSONICA TO MAKE PROPER DEFENSE AGAINST LA W SUIT. ARTICLE 3: PROVISIONS RELATING TO LICENSING TECHNIC AL ASSISTANCE 3.01 SUPPLY OF LICENSED INFORMATION (A) BELLSONICA AGREES TO MAKE AVAILABLE TO LICENSE D INFORMATION WHICH BELLSONICA HAS THE RIGHT AND CAPACITY, AND IS FREE, TO DISCL OSE AND/OR GRANT LICENSE TO LICENSEE AS CONTEMPLATED BY THIS AGREEMENT AND WHICH IS UTILIZED BY BELLSONICA IN ITS PLANTS WHERE PRODUCTS ARE MANUFACTURED. NOTWITHSTAN DING THE FOREGOING PROVISION IN THE ARTICLE 3.01, BELLSONICA SHALL MA KE AVAILABLE TO LICENSEE SUCH LICENSED INFORMATION AS, WHEN PROPERLY USED BY LICENSEE, WIL L BE SUFFICIENT AND COMPLETE FOR THE MANUFACTURING, TESTING AND QUALITY CONTROL OF P RODUCTS AS CONTEMPLATED BY THIS AGREEMENT. (B) BELLSONICA SHALL SUPPLY TO LICENSEE ALL DOCUM ENTATION IN JAPANESE LANGUAGE. THE LANGUAGE OF DOCUMENTATION, HOWEVER, SHALL BE IN ENG LISH WHEN LICENSEE HAS BEEN SO REQUESTED. BELLSONICA SHALL FURTHER RENDER REASONAB LE ASSISTANCE TO LICENSEE IN CONVERTING JAPANESE TECHNICAL STANDARDS IN THE DOCU MENTATION WHATEVER REQUIRED TO INDIAN STANDARDS TO ENABLE THEM TO BE USED BY LICENSEE IN INDIA. 3.2 IMPROVEMENT BY LICENSEE IF, AT ANY TIME DURING THE TERM OF THIS AGREEMENT, LICENSEE DISCOVERS OR ACQUIRES ANY IMPROVEMENT WITH RESPECT TO PRODUCTS, IT SHALL GIVE TO BELLSONICA FULL INFORMATION, INSTRUCTIONS, KNOW-HOW AND PARTICULARS AS TO THE MO DE OF WORKING AND USING THE SAME. SUCH IMPROVEMENT SHALL BE TREATED AS LICENSED INFORMATION FOR THE PURPOSE OF THIS AGREEMENT. IF SUCH INFORMATION CONTAINS IMPROV EMENTS OF SIGNIFICANT COMMERCIAL VALUE FOR BELLSONICA, BELLSONICA WILL PA Y REASONABLE COMPENSATION TO LICENSEE FOR THE USE THEREOF. THE AMOUNT OF SUCH CO MPENSATION WILL BE MUTUALLY AGREED UPON. 3.03 OBSERVANCE OF STANDARDS AND SPECIFICATIONS (A) IN ORDER TO ESTABLISH A LICENSEE PRODUCTION ST ANDARD OF QUALITY COMPARABLE TO THE STANDARDS OF BELLSONICA, LICENSEE SHALL USE ITS BEST EFFORTS TO PROVIDE AND MAINTAIN ADEQUATE MANUFACTURING AND TESTING FACILIT IES, WITH THE ASSISTANCE AND COOPERATION OF BELLSONICA IN ACCORDANCE WITH THIS A GREEMENT. BELLSONICA MAY ALSO, IN CONSULTATION WITH LICENSEE, EXAMINE AND TEST MATERI ALS USED FOR PRODUCTS FOR THE PURPOSE OF ENABLING LICENSEE TO REACH THE REQUIRED STANDARDS OF QUALITY. (B) IN ORDER TO PROTECT AND MAINTAIN THE QUALITY OF PRODUCTS MANUFACTURED BY LICENSEE PURSUANT TO THIS AGREEMENT, LICENSEE SHALL MANUFACTURE PRODUCTS IN STRICT ACCORDANCE WITH THE DRAWINGS, DESIGNS, SPECIFICATIO NS, BILLS OF MATERIALS, KNOW-HOW AND INSTRUCTIONS MADE AVAILABLE BY BELLSONICA FOR T HE PURPOSE AND IN CONFORMITY WITH SUCH METHODS AND QUALITY STANDARDS AS MAY BE D ESCRIBED BY BELLSONICA. NO CHANGE OR MODIFICATION WHICH WILL AFFECT THE SAFETY OR PERFORMANCE OF PRODUCTS NOR ANY OTHER MATERIAL CHANGE OR MODIFICATION OF THE DR AWING DESIGNS, SPECIFICATIONS, BILL ITA NOS. 2210 & 2329/DEL./2016 9 OF MATERIALS, KNOW-HOW AND MODELS OF PRODUCTS SHALL BE MADE BY LICENSEE, WITHOUT SECURING THE WRITTEN APPROVAL OF BELLSONICA THERETO . 3.04 BELLSONICA IN-PLANT TRAINING BELLSONICA AGREES, DURING THE TERM OF THIS AGREEMEN T, UPON RECEIPT OF WRITTEN REQUEST FROM LICENSEE TO MAKE AVAILABLE TO LICENSEE BELLONICAS PLANT FACILITIES, AS DESIGNATED BY BELLSONICA, FOR THE PURPOSE OF IN-PLA NT OBSERVATION AND TRAINING OF PERSONNEL OF LICENSEE. AS BETWEEN BELLSONICA AND LI CENSEE ALL COSTS AND EXPENSES RELATING TO THE IN-PLANT OBSERVATION AND TRAINING O F PERSONNEL OF LICENSEE UNDER THIS ARTICLE 3.04 (INCLUDING BUT NOT LIMITED TO ROUND-TR IP AIR FARE BETWEEN INDIAN AND JAPAN, TRAVEL AND TRANSPORTATION COST WITHIN JAPAN TO AND FROM THE PLACE WHERE THE RELEVANT BELLSONICAS PLANT IS LOCATED, ACCOMMODATI ON AND DAILY EXPENSE AND SALARIES AND DAILY ALLOWANCE PAID TO SUCH PERSONNEL OF LICEN SEE IN ACCORDANCE WITH LICENSEES COMPANY POLICY AND RULES) SHALL BE BORNE BY LICENSEE. LICENSEE SHALL NOT BE REQUIRED TO PAY ANY AMOUNT TO BELLSONICA FOR SUC H IN-PLANT OBSERVATION AND TRAINING. THE NUMBER OF PERSONS AND THE PERIOD OF T RAINING AND STAY SHALL BE DECIDED BY MUTUAL CONSULTATION AND AGREEMENT BY BELLSONICA AND LICENSEE, ON A CASE BY CASE BASIS. 3.05 DESPATCH OF BELLSONICAS PERSONNEL (A) BELLSONICA AGREES, DURING THE TERM OF THIS AGRE EMENT, UPON WRITTEN REQUEST FROM LICENSEE, TO DISPATCH ITS PERSONNEL TO THE FACTORIE S OF LICENSEE TO PROVIDE TECHNICAL ADVICE AND GUIDANCE IN THE USE OF THE LICENSED INFO RMATION FOR THE MANUFACTURE, TESTING AND QUALITY CONTROL OF PRODUCTS OR THE SAME FOR START-UP MANUFACTURING OF NEW MODEL COMPONENT. THE NUMBER OF PERSONNEL TO BE DISPATCHED, THEIR PERIOD OF STAY AT THE FACTORY AND/OR FACTORIES OF LICENSEE, T HE DATE OF DEPARTURE AND ALL OTHER TERMS AND CONDITIONS NOT SET FORTH HEREUNDER IN THI S ARTICLE 3.05 SHALL BE, MUTUALLY AGREED UPON BETWEEN BELLSONICA AND LICENSEE, ON A C ASE BY CASE BASIS AND SUBJECT TO APPROVAL BY THE GOVERNMENT OF INDIA. (B) LICENSEE SHALL BEAR, OR UPON THE RECEIPT OF BELLSONICAS STATEMENT REIMBURSE TO BELLSONICA, THE FOLLOWING EXPENSE AND FEES FOR EACH BELLSONICAS DESPATCHED PERSONNEL: (1) ROUND-TRIP AIR FARE BETWEEN JAPAN AND INDIA, IN BUSINESS CLASS FOR OFFICIAL GENERAL MANAGER AND ABOVE POSITIONS WHEREAS IN ECON OMY CLASS FOR ALL OTHERS. (2) TWENTY FIVE THOUSAND JAPANESE YEN ( 25,000.-) PER PERSON FOR THE INLAND TRANSPORTATION EXPENSE WITHIN JAPAN (3) TRAVEL AND TRANSPORTATION EXPENSES (INCLUDING B USINESS CLASS AIR FARE AND DRIVERS EXPENSES IF APPLICABLE) WITHIN INDIA, AND (4) DAILY TECHNICAL ADVISORY FEE FOR DESPATCHED PER SONNEL IN THE AMOUNT OF FORTY THOUSAND (40,000.-) FOR MANAGERS OR GREATER WHILE T WENTY THOUSAND (20,000) FOR ALL OTHER, BOTH IN JAPANESE YEN AND UNIFORMITY APPLIED WHICH RATE IS SUBJECT TO INCREASE UPON MUTUAL AGREEMENT BETWEEN THE PARTIES HERETO. ITA NOS. 2210 & 2329/DEL./2016 10 LICENSEE SHALL, IN ADDITION, PROVIDE AT ITS OWN EXP ENSE TO BELLSONICAS DESPATCHED PERSONNEL ACCOMMODATION SUITABLE TO THEIR RESPECTIV E STATUS. LICENSEE SHALL BEAR ALL TAXES AND CHARGES IMPOSED BY THE GOVERNMENT OF INDI A OR ANY AUTHORITY THEREIN OR THEREOF HAVING POWER TO TAX, UPON ANY PAYMENTS TO B E MADE BY LICENSEE PURSUANT TO OR UNDER THIS ARTICLE 3.05 (B), PROVIDED HOWEVER TH AT LICENSEE MAY MAKE PAYMENT OF DAILY TECHNICAL ADVISORY FEE TO BELLSONICA NET O F TAXES, ON AN UNDERSTANDING THAT LICENSEE SHALL FURNISH SUCH DOCUMENTS, DETAILS, AND INFORMATION IN REGARD TO THE DEDUCTION OF TAX ON DAILY TECHNICAL ADVISORY FEE WH ICH MAY BE REQUIRED BY BELLSONICA. ALL OTHER EXPENSES INCURRED IN CONNECTI ON WITH MAKING SUCH PAYMENTS INCLUDING EXPENSES OF CURRENCY CONVERSION SHALL BE BORNE BY LICENSEE AND NO DEDUCTION SHALL BE MADE BY LICENSEE FROM SUCH PAYME NT. (C) IN THE EVENT BELLSONICAS PERSONNEL ARE DESPATC HED, AS PROVIDED IN THE PRECEDING ARTICLE 3.05(A), LICENSEE SHALL TAKE, OR CAUSE TO B E TAKEN, ANY AND ALL REASONABLE STEPS TO PROTECT AND ENSURE THE SAFETY OF EACH BELLSONICA S DESPATCHED PERSONNELS LIFE AND PROPERTIES. BELLSONICA RESERVES THE RIGHT, AFTER CO NSULTING LICENSEE, TO INSTRUCT AND OR ALI OF ITS DESPATCHED PERSONNEL TO RETURN TO JAPAN OR SUCH OTHER PLACE AS IT MAY DESIGNATE, WHEN A SITUATION EXISTS WHICH MAY BE DAN GEROUS TO THE LIVES AND PROPERTIES OF SUCH DESPATCHED PERSONNEL. 3.06: CONSIDERATION (A) BASED UPON FUNDAMENTAL AGREEMENT ON ARTICLES 2. 01(A) AND (B) BETWEEN THE PARTIES, LICENSEE AGREES TO PAY BELLSONICA THE RUNN ING ROYALTY AT THE RATE OF 2 (TWO) PER CENT OF LICENSEES SALE WHICH IS THE VALUE AGAI NST NET SALE AFTER DEDUCTING ALL PAYABLE DUTIES AND TAXES, IN CONSIDERATION OF; PROV IDING AND ASSISTANCE OF LICENSED INFORMATION AS SPECIFIED IN ARTICLE 3.01(A) AND (B) AND, ASSISTANCE WITH REGARD TO ARTICLES 3 04 AND 3.08, FURTHERMORE ALL OTHER TECHN ICAL ASSISTANCE AND COOPERATION LED BY PRODUCTIVITY INCREASE OR PRODUCTION IMPROVEM ENT, AND/OR PROVIDING COMMERCIAL INFORMATION ALL OF WHICH LICENSEE IS SO DESIRED AS TO LICENSEE'S DEVELOPMENT, MANUFACTURING AND SALE OF PRODUCTS. (B) AFOREMENTIONED ROYALTY PAYMENT IS VALID AS E QUALS TO THE LIFE OF THIS AGREEMENT AND SUCH RATE OF ROYALTY IS SUBJECT TO INCREASE U PON MUTUAL AGREEMENT BETWEEN THE PARTIES HERETO. SUCH ROYALTY PAYMENT SHALL BE MA DE BY LICENSEE WITHIN 30 (THIRTY) DAYS UPON CLOSING LICENSEES ACCOUNTING BO OK AT EVERY SIX (6) MONTHS WITHIN EACH FISCAL YEAR AND BY MEANS OF WIRE TRANSFER TO B ELLSONICA LICENSEE FURTHER AGREES TO SUBMIT BELLSONICA SUCH STATEMENT OF ACCOUNT FO R ROYALTY ALONG WITH PROFIT AND LOSS STATEMENT IN EQUIVALENT PERIOD AS AN E VIDENCING DOCUMENT. (C) ALL ROYALTY PAYMENT BY LICENSEE SHALL BE DONE IN JAPANESE YEN. LICENSEE MAY MAKE PAYMENT OF ROYALTY TO BELLSONICA NET OF TAXES, ON AN UNDERSTANDING THAT LICENSEE SHALL FURNISH SUCH DOCUMENTS, DETAILS AND INFORMATION IN REGARD TO THE DEDUCTION OF TAX ON DAILY TECHNICAL ADVISORY FEE WH ICH MAY BE REQUIRED BY BELLSONICA. ALL OTHER EXPENSES INCURRED IN CONNECT ION WITH MAKING SUCH PAYMENTS INCLUDING EXPENSES OF CURRENCY CONVERSION SHALL BE BORNE BY LICENSEE AND NO DEDUCTION SHALL BE MADE BY LICENSEE FROM SUCH PA YMENT. ITA NOS. 2210 & 2329/DEL./2016 11 (D) NOTWITHSTANDING OF THE PROVISIONS IN ARTICLE 3.06 (A) AND (B) ROYALTY PAYMENT BY LICENSEE MAY FORBEAR, SUBJECT TO LICENSEES PRIOR WRITTEN NOTICE AND CONSENT TO THE SAME BY BELLSONICA, FURTHER PROVIDED THAT THE L ICENSEES GROSS PROFIT IS SO LONG AS AND SUBSTANTIALLY NEGATIVE FOR THE FIRST 3 (THREE) FISCAL YEARS FROM LICENSEES INCORPORATION. IN SUCH EVENT OF FORBEARANCE, ROYALT Y PAYMENT THEREBY SHALL ONLY BEGIN AT THE CLOSING OF LICENSEES FOURTH FISCAL YE AR AND FURTHER. 3.07: DELAYED OR NON-PAYMENT IN THE EVENT LICENSEE FAILS TO MAKE ANY PAYMENT SPE CIFIED IN THIS AGREEMENT TO BELLSONICA WHEN DUE AND PAYABLE FOR ANY REASON WHAT SOEVER, SUBJECT TO OBTAINING REQUISITE APPROVAL OF THE GOVERNMENT OF INDIA/RESER VE BANK OF INDIA, AN INTEREST OF TEN PERCENT (10%) PER ANNUM ON SUCH UNPAID AMOUNT S HALL ACCRUE AND BE DUE AND PAYABLE BY LICENSEE TO BELLSONICA UNTIL SUCH UNPAID AMOUNT IS FULLY PAID, NOTWITHSTANDING WHETHER OR NOT THIS AGREEMENT HAS B EEN TERMINATED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN THIS AGREEMENT. TH E FOREGOING PROVISION SHALL NOT BE CONSTRUED TO RELEASE LICENSEE FROM ITS OBLIGATIO N TO COMPENSATE FOR ANY DAMAGE WHICH BELLSONICA MAY SUFFER DUE TO LICENSEES FAILU RE AS REFERRED TO ABOVE. 3.08 ASSISTANCE BY BELLSONICAS REPRESENTATIVES BELLSONICA MAY, WITH THE CONSENT OF LICENSEE, WHICH CONSENT SHALL NOT UNREASONABLY WITHHELD, EXAMINE THE MANUFACTURING FACILITIES OF L ICENSEE PERTAINING TO PRODUCTS MANUFACTURED BY LICENSEE IN MANUFACTURING PRODUCTS IN CONFORMITY WITH THE DRAWINGS, SPECIFICATIONS AND DESIGNS FURNISHED BY B ELLSONICA TO LICENSEE. 3.09: CONFIDENTIALITY ALL LICENSED INFORMATION SUPPLIED TO AND ACQUIRED B Y LICENSEE HEREUNDER, SHALL BE SUPPLIED AND ACQUIRED IN CONFIDENCE FOR THE USE OF LICENSEE UNDER THIS AGREEMENT AND LICENSEE SHALL KEEP CONFIDENTIAL AND SHALL NOT DISCLOSE THE SAME TO ANY OTHER PARTY AT ANY TIME DURING THE SUBSISTENCE OF THIS AG REEMENT, OR AFTER ITS TERMINATION, EXCEPT WHERE NECESSARY TO ITS EMPLOYEES, SUPPLIERS AND SUBCONTRACTORS FOR THE PURPOSE SOLELY RELATED TO THE MANUFACTURE AND SALE OF PRODUCTS, AND LICENSEE SHALL ENTER INTO AN AGREEMENT WITH EACH OF SUCH SUPPLIERS AND SUBCONTRACTORS UNDER WHICH SUPPLIER OR SUBCONTRACTORS UNDERTAKE TO KEEP CONFIDENTIAL, AND NOT TO USE FOR ANY PURPOSE OTHER THAN THE SUPPLY TO LICENSEE OF MA TERIALS OF PRODUCTS, ANY LICENSED INFORMATION DISCLOSED TO IT BY LICENSEE PU RSUANT TO THIS ARTICLE 3.09 AND SHALL TAKE SUCH OTHER STEPS AS MAY BE REASONABLY RE QUIRED TO CAUSE ITS EMPLOYEES, SUPPLIERS AND SUBCONTRACTORS TO SAFEGUARD THE CONFI DENTIALITY OF SUCH INFORMATION. BOTH PARTIES SHALL NOT, AND SHALL REQUIRE THEIR OFF ICERS, DIRECTORS AND EMPLOYEES NOT TO, AT ANY TIME, DIRECTLY OR INDIRECTLY, DURING THE LIFE OF THIS AGREEMENT OR AFTER ITS TERMINATION, DIVULGE TO ANY PERSON, FIRM OR CORPORA TION ANY INFORMATION FURNISHED BY EITHER PARTY WHICH MAY, IN ANY WAY, BE PREJUDICI AL TO THE BEST INTEREST OF THE OTHER PARTY HERETO. 3.10: SPECIAL WORK BY BELLSONICA ITA NOS. 2210 & 2329/DEL./2016 12 IN THE EVENT LICENSEE REQUESTS BELLSONICA TO RENDER ANY ADVICE OR ASSISTANCE RELATING TO PRODUCT OR ANY MANUFACTURING AND OPERATING PREPA RATIONS INCLUDING, BUT NOT LIMITED TO, MACHINERIES, FACILITIES AND TOOLING OR ALIKE WHICH REQUIRES SPECIAL OR UNUSUAL WORK OR ANALYSIS AND IS NOT COVERED BY THIS AGREEMENT AND IN THE EVENT BELLSONICA AGREES TO RENDER SUCH ADVICE AND ASSISTA NCE, LICENSEE AGREES TO PAY BELLSONICA A REASONABLE FEE TO BE MUTUALLY AGREED U PON THEREFORE. THIS FEE SHALL BE PAID IN JAPANESE YEN. ARTICLE 4: PURCHASE OF PRODUCTION MACHINERY 4.01: PURCHASE OF PRODUCTION MACHINERY WITH REGARD TO THE PRODUCTION MACHINERY TO BE PURCH ASED BY LICENSEE FOR THE MANUFACTURE OF PRODUCTS BY LICENSEE, BELLSONICA SHA LL RENDER ADVICE AND ASSISTANCE TO LICENSEE IN THE SELECTION AND PURCHASE PRODUCTIO N MACHINERY, AT THE REQUEST OF LICENSEE. ARTICLE 5: OTHER OBLIGATION OF LICENSEE 5.01: NOT TO MANUFACTURE SIMILAR PRODUCTS DURING THE TERM OF THIS AGREEMENT OR ANY EXTENSION THEREOF, LICENSEE SHALL NOT, EXCEPT WITH THE PRIOR WRITTEN CONSENT OF BELLSONICA , EITHER DIRECTLY OR INDIRECTLY ENTER INTO ANY OTHER LICENSE AGREEMENT OR SUPPLY WI TH ANY OTHER MANUFACTURER OR SELLER OF FOUR- WHEELERS, TWO-WHEELERS OR STAMPING AND WELDING MANUFACTURER UNDER WHICH LICENSEE WOULD DIRECTLY OR INDIRECTLY MANUFAC TURE, ASSEMBLE OR SELL ANY PART WHICH IS SIMILAR TO ANY OF PRODUCTS. 5.02: BEST EFFORTS WITH RESPECT TO PRODUCTS TO BE MANUFACTURED BY LICE NSEE HEREUNDER, LICENSEE SHALL DO EVERYTHING NECESSARY IN ORDER TO ACHIEVE AND MAI NTAIN QUALITY STANDARDS COMPARABLE TO THOSE MAINTAINED BY BELLSONICA IN JAP AN IN CONNECTION WITH PRODUCTS OF THE SAME CATEGORY AS PRODUCTS PRODUCED BY BELLSO NICA SO AS TO MAINTAIN THE REPUTATION OF SUZUKI MOTOR CORPORATION (HEREINAFTER CALLED SMC) AND MARUTI IN TERRITORY AND COUNTRIES WHERE FOUR-WHEELERS OR TWO- WHEELERS IN WHICH PRODUCTS ARE INCORPORATED ARE TO BE EXPORTED. ARTICLE 6: DURATION AND TERMINATION 6.01: TERM THIS AGREEMENT, UNLESS TERMINATED EARLIER AS PROVID ED FOR IN THIS AGREEMENT, SHALL CONTINUE TO BE IN FORCE AND EFFECT FOR A PERIOD OF 10 (TEN) YEARS FROM THE EFFECTIVE DATE, AND SHALL BE AUTOMATICALLY EXTENDED FOR SUCCE SSIVE PERIOD(S) OF FIVE (5) YEARS UNLESS EITHER PARTY HERETO TERMINATES THIS AGREEMEN T BY A WRITTEN NOTICE GIVEN TO THE OTHER PARTY NOT LESS THAN 6 (SIX) MONTHS BEFORE THE EXPIRATION OF THE THEN CURRENT PERIOD. 6.02: GOVERNMENTAL APPROVALS (A) IN THE EVENT ANY VALIDATION, APPROVAL, FILI NG OR REGISTRATION WITH RESPECT TO THIS AGREEMENT OR FOR MAKING OR MAINTAINING THE OBLIGATI ONS OF THE PARTIES UNDER THIS AGREEMENT VALID, BINDING AND ENFORCEABLE (INCLUDING THOSE LICENSEE FOR THE REMITTANCE BY LICENSEE TO BELLSONICA OF ANY FEES, R OYALTIES, EXPENSE OR ANY OTHER ITA NOS. 2210 & 2329/DEL./2016 13 MONEY PROVIDED FOR IN THIS AGREEMENT AS CONTEMPLATE D HEREIN) SHALL BE REQUIRED BY THE GOVERNMENT OF INDIA OR JAPAN INITIALLY UPON EXE CUTION OF THIS AGREEMENT OR AT ANY TIME DURING THE TERM OF THIS AGREEMENT, EACH PA RTY AGREES TO TAKE IMMEDIATELY WHATEVER STEPS AS MAY BE REQUIRED IN THIS RESPECT W ITH ITS OWN GOVERNMENT, AND ANY CHARGES INCURRED OR TO BE INCURRED BY SUCH PARTY IN SUCH CONNECTION SHALL BE FOR THE ACCOUNT OF SUCH PARTY. (B) IT IS ALSO AGREED THAT UNLESS AND UNTIL ALL S UCH VALIDATIONS, APPROVALS AND/OR REGISTRATIONS WHICH MAY BE REQUIRED AND ARE CAPABLE OF BEING OBTAINED INITIALLY UPON EXECUTION OF THIS AGREEMENT, UNDER THE LAWS OF JAPAN OR INDIA, AS THE CASE MAY BE, HAVE BEEN RECEIVED FROM THE GOVERNMENT OF JAPAN AND INDIA, RESPECTIVELY, WHICH RESPONSIBILITY BELLSONICA AND LICENSEE RESPECTIVELY ASSUME, NO PARTY SHALL BE UNDER ANY OBLIGATION TO UNDERTAKE PERFORMANCE OF ANY OF I TS OBLIGATIONS CONTAINED HEREIN. (C) BELLSONICA SHALL OBTAIN OR COMPLETE, IF REQUIR ED, SUCH APPROVALS, VALIDATIONS, REGISTRATIONS AND FILINGS IN JAPAN WITH RESPECT TO THIS AGREEMENT AS SET FORTH IN PARAGRAPH (B) ABOVE BY THE END OF OCTOBER, 2006, AN D LICENSEE SHALL OBTAIN OR COMPLETE SUCH APPROVALS, VALIDATIONS, REGISTRATIONS AND FILINGS IN INDIA WITH RESPECT TO THIS AGREEMENT AS SET FORTH IN PARAGRAPH (B) ABO VE BY THE END OF OCTOBER 2006. UPON FAILURE OF EITHER PARTY TO OBTAIN OR COMPLETE SUCH APPROVALS, VALIDATION, REGISTRATIONS AND FILINGS WITHIN THE SPECIFIC PERIO D STATED HEREIN FROM OR WITH THEIR RESPECTIVE GOVERNMENTS OR REGULATORY AUTHORITIES TH EREIN, EACH PARTY SHALL HAVE THE RIGHT AND OPTION TO DECLARE THIS AGREEMENT NULL AND VOID AND OF NO EFFECT. (D) IN THE EVENT THAT EITHER PARTY HERETO FAILS OR DELAYS TO OBTAIN ANY SUCH VALIDATION, APPROVAL OR REGISTRATION REFERRED TO IN PARAGRAPH (A) ABOVE OF THIS ARTICLE 6.02 AS MAY BE REQUIRED DURING THE TERM OF THIS AGR EEMENT AND AS IS CAPABLE OF OBTAINING THE PAYMENT OF ANY FEES, EXPENSE OR ANY O THER MONEY PROVIDED FOR IN THIS AGREEMENT DUE AND PAYABLE BY LICENSEE TO BELLSONICA SHALL BE MADE IMMEDIATELY AFTER OBTAINING SUCH VALIDATION, APPROVAL OR REGIST RATION TOGETHER WITH THE INTEREST THEREON ACCRUED IN ACCORDANCE WITH ARTICLE 3.07 HER EOF. (E) EACH PARTY ALSO ASSUMES THE OBLIGATION, AT IT S OWN EXPENSE, OF COMPLYING WITH ALL LAWS, REQUIREMENTS AND REGULATIONS OF ITS GOVER NMENT AFFECTING OR RELATING TO THIS AGREEMENT. 6.03: EFFECTIVE DATE THIS AGREEMENT SHALL BECOME EFFECTIVE AS OF THE DAT E ON WHICH ALL SUCH APPROVALS, VALIDATIONS, REGISTRATIONS AND FILINGS AS SET FORTH IN PARAGRAPH (B) OF ARTICLE 6.02 ABOVE HAVE BEEN OBTAINED AND MADE WITH SUCH TERMS A ND CONDITIONS AS ARE SATISFACTORY TO BELLSONICA AND LICENSEE, AND SUCH D ATE SHALL BE THE EFFECTIVE DATE OF THIS AGREEMENT. NOTWITHSTANDING ANY PROVISION CONTA INED IN THIS AGREEMENT, SHOULD ANY LICENSED INFORMATION BE SUPPLIED BY BELLSONICA, AT ITS SOLE DISCRETION AND JUDGMENT, TO LICENSEE PRIOR TO THE EFFECTIVE DATE, LICENSEE SHALL IMMEDIATELY BECOME SUBJECT TO, AND OBLIGED TO COMPLY WITH, THE PROVISION IN ARTICLE 2.02, 2.03 AND 3.09 AS IF THIS AGREEMENT SHALL HAVE BECOME EFF ECTIVE PURSUANT TO THIS ARTICLE 6.03. ITA NOS. 2210 & 2329/DEL./2016 14 6.04: TERMINATION FOR BREACH OF THIS AGREEMENT (A) NOTWITHSTANDING ANYTHING TO THE CONTRARY SET F ORTH IN THIS AGREEMENT AND IN ADDITION TO AND WITHOUT PREJUDICE TO THE RIGHT TO T ERMINATE THIS AGREEMENT PROVIDED ELSEWHERE HEREIN, EITHER PARTY HERETO MAY, UPON ITS ELECTION AND IN ADDITION TO ANY OTHER LEGAL REMEDIES THAT IT MAY HAVE, TERMINATE TH IS AGREEMENT BY GIVING A WRITTEN NOTICE OF TERMINATION TO THE OTHER PARTY, IN ANY OF THE FOLLOWING EVENTS: (I) ANY OF THE PAYMENTS COVENANTED HEREIN TO BE P AID TO BELLSONICA SHALL BE IN ARREAR AND UNPAID FOR A PERIOD OF 90 (NINETY) DAYS AFTER THE SAME SHALL HAVE BECOME PAYABLE; OR (II) THE OTHER PARTY HERETO SHALL MAKE A DEFAULT I N THE PERFORMANCE OR OBSERVANCE OF ANY OF THE MATERIAL OBLIGATIONS OR COVENANTS CONTAI NED IN THIS AGREEMENT AND ON ITS PART TO BE PERFORMED OR OBSERVED AND (EXCEPT WHERE SUCH DEFAULT IS NOT CAPABLE OF REMEDY) SHALL NOT REMEDY SUCH DEFAULT WITHIN 90 (NI NETY) DAYS AFTER ITS RECEIPT OF ANY WRITTEN NOTICE REQUIRING SUCH REMEDY GIVEN TO I T BY THE PARTY TERMINATING THIS AGREEMENT; OR (III) THE OTHER PARTY HERETO SHALL STOP PAYMENT ( WITHIN THE MEANING OF ANY APPLICABLE BANKRUPTCY LAW) OR BECOME INSOLVENT OR U NABLE TO PAY ITS DEBT WHEN DUE; OR (IV) ANY PROCEEDING SHALL HAVE BEEN INITIATED A GAINST THE OTHER PARTY HERETO UNDER ANY APPLICABLE BANKRUPTCY REORGANIZATION OR I NSOLVENCY LAW AND SUCH PROCEEDING SHALL NOT HAVE BEEN DISCHARGED OR STAYED WITHIN A PERIOD OF 90 (NINETY) DAYS; OR (V) THE OTHER PARTY HERETO SHALL INSTITUTE OR CO NSENT TO ANY PROCEEDING IN RESPECT OF ITSELF UNDER ANY APPLICABLE BANKRUPTCY, REORGANIZAT ION OR INSOLVENCY LAW OR SHALL MAKE ASSIGNMENT FOR THE BENEFIT OF, OR INTO ANY COM POSITION WITH, IT CREDITORS. (B) NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN AND IN ADDITION TO AND WITHOUT PREJUDICE TO THE RIGHT TO TERMINATE THIS AGREEMENT PROVIDED ELSEWHERE HEREIN, EITHER PARTY HERETO MAY, UPON ITS ELECTION AND IN A DDITION TO ANY OTHER LEGAL REMEDIES THAT IT MAY HAVE, TERMINATE THIS AGREEM ENT BY GIVING A WRITTEN NOTICE OF TERMINATION TO THE OTHER PARTY, IN CASE LICENSEE SH ALL AT ANY TIME ABANDON, OR CEASE TO PURSUE, ITS PLAN TO MANUFACTURE AND SELL PRODUCT S WITHIN THE TERRITORY AS CONTEMPLATED BY THIS AGREEMENT. (C) UPON SUCH NOTICE OF TERMINATION BEING GIVEN I N ACCORDANCE WITH PARAGRAPH (A) OR (B) OF THIS ARTICLE 6.04, THIS AGREEMENT SHALL, EXCEPT AS OTHERWISE PROVIDED HEREIN, FORTHWITH CEASE AND TERMINATE AUTOMATICALLY AS OF T HE DATE OF SUCH NOTICE OF TERMINATION AND THE NON-DEFAULTING PARTY SHALL HAVE NO FURTHER OBLIGATION TO THE OTHER PARTY UNDER THIS AGREEMENT, EXCEPT AS OTHERWI SE PROVIDED HEREIN, BUT WITHOUT PREJUDICE TO THE RIGHTS AND REMEDIES OF THE NON-DEF AULTING PARTY TO RECEIVE OR SUE FOR AND RECOVER ANY PAYMENTS, FEES OR INTERESTS PAYABLE UNDER THIS AGREEMENT, OR TO ITA NOS. 2210 & 2329/DEL./2016 15 MAKE CLAIM FOR DAMAGES SUSTAINED BY THE NON-DEFAULT ING PARTY AS A RESULT OF SUCH DEFAULT OR SEEK ANY REMEDY WITH RESPECT TO ANY BREA CH OF ANY OF THE COVENANTS OR AGREEMENTS CONTAINED HEREIN. 6.05: EFFECT OF TERMINATION (A) UPON ANY EXPIRATION, TERMINATION OR CANCELLAT ION OF THIS AGREEMENT, FOR ANY REASON WHATSOEVER, LICENSEE SHALL CONTINUE TO BE OBLIGED TO COMPLY WITH THE TERMS AND PROVISIONS OF THIS AGREEMENT WITH RESPE CT TO THE SALE OR OTHER DISPOSAL OF ANY OR ALL OF PRODUCTS REMAINING IN ITS POSSESSION AND THE OBLIGATION SET FORTH IN ARTICLE 2.02, 2.03, 3.09 AND 6.05 OF THIS AGREEMEN T SHALL SURVIVE ANY SUCH EXPIRATION, TERMINATION OR CANCELLATION AND SHALL CONTINUE IN E FFECT PERPETUALLY. (B) NO COMPENSATION OR INDEMNITY SHALL BE PAYABL E OR GIVEN BY ANY PARTY TO THE OTHER PARTY TO THIS AGREEMENT DUE TO EXPIRATION, T ERMINATION OR CANCELLATION OF THIS AGREEMENT OR UPON REFUSAL BY BELLSONICA OR LIC ENSEE TO AGREE TO AN EXTENSION OF THIS AGREEMENT OR TO ENTER INTO A NEW AGREEMENT, AND NEITHER PARTY SHALL BE ENTITLED TO, AND EACH PARTY DOES NOT HEREBY WAVE, A ND RIGHT TO CLAIM FROM THE OTHER PARTY TO THIS AGREEMENT WHICH IT MAY OTHERWISE HAVE DUE TO ANY GOODWILL, OR OTHERWISE, CREATED DURING THE TERM OF THIS AGREEMEN T OR ANY EXTENSION THEREOF. ARTICLE 7. GENERAL 7.01: ARBITRATION ANY AND ALL CLAIMS, DISPUTES, CONTROVERSIES OR DIFF ERENCES BETWEEN THE PARTIES ARISING OUT OF OR IN RELATION TO OR IN CONNECTION W ITH THIS AGREEMENT, OR WITH A BREACH THEREOF, WHICH CANNOT BE SATISFACTORILY SETT LED BY CORRESPONDENCE OR MUTUAL CONFERENCE BETWEEN THE PARTIES HERETO, SHALL BE DET ERMINED BY ARBITRATION IN ACCORDANCE WITH THE THEN PREVAILING COMMERCIAL ARBI TRATION RULES OF THE JAPAN COMMERCIAL ARBITRATION ASSOCIATION UPON WRITTEN REQ UEST OF EITHER PARTY HERETO. THE ARBITRATION TRIBUNAL SHALL CONSIST OF ONE ARBIT RATOR APPOINTED IN ACCORDANCE WITH SUCH RULES. THE ARBITRATION SHALL BE HELD IN TOKYO, JAPAN IN ACCORDANCE WITH THE RULES AND ALSO IN ACCORDANCE WITH THE JAPANESE LAWS IN RESPECT OF THE PROCEDURES ON WHICH THE RULES ARE SILENT, AND MAY BE HELD, IF THE TRIBUNAL CONSIDERS IT APPROPRIATE, IN AN INFORMAL AND SUMMARY MANNER TO SHORTEN THE TO TAL TIME OF THE ARBITRATION PROCEEDINGS ON THE BASIS THAT IT SHALL NOT BE NECES SARY TO OBSERVE OR CARRY OUT THE USUAL FORMALITIES OR PROCEDURES, INCLUDING THE DELI VERY OF PLEADINGS, THE MAKING OF DISCOVERY OR THE OBSERVANCE OF THE STRICT RULES OF EVIDENCE. THE DECISION OF SUCH ARBITRATOR SHALL BE FINAL AND BINDING UPON THE PART IES HERETO AND JUDGMENT THEREON MAY BE ENTERED IN ANY COURT HAVING JURISDICTION T HEREON OR APPLICATION MAY BE MADE TO SUCH COURT FOR JUDICIAL ACCEPTANCE OF THE A WARD AND/OR ORDER OF ENFORCEMENT, AS THE CASE MAY BE. 7.02 NO WAIVER THE FAILURE WITH OR WITHOUT INTENT OF EITHER PARTY HERETO TO INSIST UPON PERFORMANCE BY THE OTHER PARTY OF ANY TERM OR PROVISION OF THIS AGREEMENT IN STRICT CONFORMITY WITH THE LITERAL REQUIREMENTS HEREOF SHALL NOT BE T REATED OR DEEMED TO CONSTRUCT A MODIFICATION OF ANY TERM OR PROVISION HEREOF, NO R SHALL SUCH FAILURE OR ELECTION BE DEEMED TO CONSTITUTE A WAIVER OF THE RIGHT OF SUCH PARTY AT ANY TIME WHATSOEVER ITA NOS. 2210 & 2329/DEL./2016 16 THEREAFTER TO INSIST UPON PERFORMANCE BY THE O THER PARTY STRICTLY IN ACCORDANCE WITH ANY TERM OR PROVISION HEREOF. 7.03: SERVICEABILITY IF ANY TERM OR PROVISION OF THIS AGREEMENT IS HEREA FTER DETERMINED TO BE ILLEGAL BY ANY COURT WITH COMPETENT JURISDICTION, THE REMAINDE R OF THIS AGREEMENT SHALL NOT BE AFFECTED THEREBY AND SHALL CONTINUE IN FORCE NOT WITHSTANDING THE ILLEGAL PROVISION OR PROVISIONS HEREIN CONTAINED. 7.04: RELATIONSHIP OF PARTIES NOTWITHSTANDING ANY OF THE PROVISION OF THIS AGREEM ENT, THE RELATIONSHIP BETWEEN THE PARTIES HERETO, DURING THE TERM OF THIS AGREEMENT, IS AND SHALL BE THAT OF INDEPENDENT CONTRACTORS. NEITHER PARTY SHALL AT ANY TIME ENTER INTO OR INCUR ON BEHALF OF THE OTHER PARTY ANY COMMITMENT, EXPEN SE OR LIABILITY WHATSOEVER, AND ALL OBLIGATIONS, EXPENSES AND LIABILITIES IN CONNECTION WITH OR RELATING TO THE MANUFACTURE, USE AND SALE OF PRODUCTS SHALL B E MADE, PAID AND UNDERTAKEN EXCLUSIVELY BY LICENSEE FOR THEIR OWN ACCOUNTS AS I NDEPENDENT CONTRACTOR AND NOT AS AGENT OR REPRESENTATIVE OF BELLSONICA. 7.05: NOT ASSIGNABLE THIS AGREEMENT, EITHER IN WHOLE OR IN PART OR ANY O F THE RIGHTS AND OBLIGATIONS HEREUNDER, SHALL NOT BE TRANSFERRED OR ASSIGNABLE, DIRECTLY OR INDIRECTLY, BY EITHER PARTY, EXCEPT BELLSONICA MAY TRANSFER OR ASSIGN THI S AGREEMENT TO ANY SUCCESSOR BY AMALGAMATION, MERGER OR CONSOLIDATION OR TO ANY PER SON, FIRM OR CORPORATION TO WHICH, AT THE SAME TIME, SUBSTANTIALLY ALL OF THE P ROPERTY, BUSINESS AND ASSETS OF BELLSONICA ARE SOLD. LICENSEE SHALL NOT SUBLICENSE OR SUBLET ANY OF ITS RIGHTS UNDER THIS AGREEMENT. THE OBLIGATIONS SET FORTH ARTICLES 2.02, 2.03, 3.09 AND 6.05 SHALL SURVIVE ANY TRANSFER, ASSIGNMENT OR OTHER DISPOSAL OF THIS AGREEMENT AND SHALL CONTINUE IN EFFECT PERPETUALLY ON THE PARTIES AS OR IGINALLY NAMED IN SUCH PROVISIONS. 7.06: GOVERNING LAW THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUCTED IN ACCORDANCE WITH THE LAWS OF INDIA. 7.07: NOTICE ANY WRITTEN NOTICE REQUIRED BY ANY PROVISION OF THI S AGREEMENT OR WHICH EITHER PARTY HERETO SHALL DEEM NECESSARY OR DESIRABLE SHAL L BE GIVEN BY DELIVERY IN PERSON OR BY REGISTERED AIRMAIL, POSTAGE PREPAID, IN EACH CASE ADDRESSED AS FOLLOWS (OR TO SUCH OTHER ADDRESS OR PERSON AS MAY HAVE BEEN DESIG NATED BY WRITTEN NOTICE AS HEREIN PROVIDED): IF TO BELLSONICA BELLSONICA CORPORATION, 630-18 YAMAGUCHI, KOSAI CITY, SHIZUOKA PREF. 431-0443, JAPAN ITA NOS. 2210 & 2329/DEL./2016 17 ATTENTION: PRESIDENT/CEO IF TO LICENSEE: BELLSONICA AUTO COMPONENT INDIA PRIVATE LIMITED, PLOT NO, 1, PHASE 3A, IMT MANESAR, DISTT. GURGAON 122 051, HARYANA INDIA ATTENTION: MANAGING DIRECTOR ANY WRITTEN NOTICE GIVEN PURSUANT TO THIS ARTICLE 7 .07 WILL BE DEEMED TO HAVE BEEN SERVED AND BE EFFECTIVE WHEN DELIVERED IN PERSON AT THE ADDRESS HEREIN SPECIFIED FOR THE ADDRESSEE OR, IN THE CASE OF AIRMAIL, WHEN 20 ( TEN) DAYS SHALL HAVE PASSED AFTER THE SAME SHALL HAVE BEEN PLACED IN MAIL. 7.08: FORCE MAIEURE NO PARTY TO THIS AGREEMENT SHALL BE LIABLE OR RESPO NSIBLE IN ANY MANNER WHATSOEVER TO THE OTHER PARTY FOR LOSSES OR DAMAGES DUE TO FAI LURE OR DELAY TO PERFORM OR FULFILL ANY PROVISIONS OF THIS AGREEMENT WHEN SUCH FAILURE OR DELAY IS DUE TO FIRES, FLOODS, EARTHQUAKES, STRIKES, ACT OF GOD, LEGAL ACTS OF PUB LIC AUTHORITIES, OR DELAYS AND DEFAULT CAUSED BY PUBLIC CARRIERS, OR FOR ANY OTHER ACTS OR CAUSES WHATSOEVER, WHETHER SIMILAR OR DISSIMILAR, WHICH CANNOT BE REASONABLY B E FORECASTED OR PROVIDED AGAINST, PROVIDED, HOWEVER, THAT THE PARTY SO AFFECTED SHALL PROMPTLY GIVE A WRITTEN NOTICE TO THE OTHER PARTY SETTING FORTH THE REASON OR CAUSE F OR SUCH DELAY OR NON-PERFORMANCE AND SHALL USE ITS BEST EFFORTS TO AVOID OR REMOVE S UCH REASON OR CAUSE AND SHALL CONTINUE PERFORMANCE HEREUNDER WITH THE UTMOST DISP ATCH WHENEVER SUCH REASON OR CAUSE IS REMOVED. HOWEVER, IN THE EVENT THE REASON OR CAUSE FOR SUCH DELAY AND NON-PERFORMANCE IS NOT ELIMINATED FOR A PERIOD OF 90 (NINETY) DAYS, TH E OTHER PARTY MAY, AT ITS OPTION, WITHOUT ANY LIABILITY WHATSOEVER, FORTHWITH TERMINA TE THIS AGREEMENT BY A WRITTEN NOTICE GIVEN TO THE PARTY SO AFFECTED. 7.09 SUSPENSION OR TERMINATION DUE TO ACT OF JA PANESE OR INDIAN GOVERNMENT NOTWITHSTANDING ANY PROVISION CONTAINED HEREIN WHIC H MAY BE CONSTRUED TO THE CONTRARY, IN THE EVENT THAT ANY ACT, REGULATIONS, D IRECTIVES, DECREES OR LAWS OF THE GOVERNMENT OF JAPAN OR OF INDIA, THEIR DEPARTMENTS, AGENCIES OR COURT SHOULD DETERMINE ANY MATERIAL TERM OR PROVISION OF TH IS AGREEMENT TO BE ILLEGAL OR MAKE IMPOSSIBLE OR PROHIBIT, RESTRAIN, MODIFY OR LIMIT A NY MATERIAL ACT OR OBLIGATION OF BELLSONICA OR LICENSEE UNDER THIS AGREEMENT, EITHER PARTY TO THIS AGREEMENT SHALL HAVE THE RIGHT, AT ITS OPTION, TO SUSPEND OR TERMIN ATE THIS AGREEMENT OR TO MAKE, AFTER CONSULTATION WITH THE OTHER PARTY, SUCH MODIF ICATIONS THERETO AS MAY BE NECESSARY. 7.10: TITLES THE TITLES OR HEADINGS USED AT THE COMMENCEMENT OF VARIOUS ARTICLES, SECTIONS OR PARAGRAPHS OF THIS AGREEMENT ARE FOR THE PURPOSE OF EASE OF REFERENCE ONLY, AND IN NO EVENT SHALL THE SUBSTANCE OF ANY PARAGRAPH OR TH E INTENT OF THE PARTIES BE INTERPRETED OR CONTROLLED BY ANY SUCH TITLES OR HEA DINGS. ITA NOS. 2210 & 2329/DEL./2016 18 7.11: COUNTERPART ORIGINALS THIS AGREEMENT IS BEING EXECUTED IN DUPLICATE AND E ACH COPY SHALL BE DEEMED AS ORIGINAL AND SHALL BE RETAINED BY EACH PARTY HERETO . THE TWO ORIGINAL COPIES, HOWEVER, SHALL CONSTITUTE ONE AND THE SAME AGREEMEN T. 7.12 ENTIRE AGREEMENT THE TERMS AND CONDITIONS HEREIN CONTAINED CONSTITUT E THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO IN CONNECTION WITH THE SUBJECT M ATTER OF THIS AGREEMENT AND SHALL SUPERSEDE ALL PREVIOUS NEGOTIATIONS, COMMUNICATIONS , AGREEMENTS OR ARRANGEMENTS, EITHER ORAL OR WRITTEN, BETWEEN THE PARTIES HERETO PERTAINING TO THE SUBJECT MATTER OF THIS AGREEMENT, AND NO AGREEMENT OR UNDERSTANDING V ARYING OR EXTENDING THE TERMS AND CONDITIONS OF THIS AGREEMENT SHALL BE BINDING U PON ANY PARTY HERETO UNLESS IT IS MADE IN WRITING, SIGNED BY A DULY AUTHORIZED OFFICE R OR REPRESENTATIVE OF THE PARTIES HERETO AND, IF SO REQUIRED, APPROVED BY THE GOVERNM ENT OF JAPAN AND INDIAN RESPECTIVELY. 10. AFTER GOING THROUGH THE TERMS OF AGREEMENT DAT ED 01.10.2006, WE FIND THAT WHEN THE AGREEMENT IS TERMINATED, THE OWNERSHI P OF TECHNICAL KNOWHOW WILL NOT REMAIN WITH THE ASSESSEE COMPANY. IN THE D ECISION RELIED ON BY THE ASSESSEE, THE ROYALTY PAYMENT IN THE SIMILAR FACTS AND CIRCUMSTANCES, HAS BEEN DECIDED TO BE A REVENUE IN NATURE. THE OBSERVATION OF ITAT DELHI BENCH IN THE CASE OF MOSER BAER (SUPRA) READ AS UNDER : 9.4. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. 9.5. THE ISSUE BEFORE US IS REGARDING TREATMENT OF P AYMENT MADE TO VARIOUS PARTIES WITH WHOM ASSESSEE ENTERED INTO A K NOW-HOW AGREEMENT. ASSESSEE DURING YEAR MADE PAYMENTS TO VARIOUS PARTI ES WHICH WERE TREATED AS REVENUE EXPENSES. ASSESSEE CONTENDS THAT EXPENDITURE INCURRED ON ACQUISITION OF RIGHT TO KNOW-HOW/TECHNICAL INFOR MATION WOULD NOT SATISFY TEST OF ENDURING BENEFIT. ASSESSEE PLACED R ELIANCE UPON DECISION LE SUPREME COURT IN THE CASE OF CITV. CIBA INDIA LTD. [ 1968] 69 ITR 692. 9.6. WHEREAS DEPARTMENT CONTENDS THAT RIGHT ACQUIRE D BY ASSESSEE ENABLED ASSESSEE IN TRADING RESULTS IN PRACTICAL AN D COMMERCIAL SENSE AND THEREFORE SATISFIES TEST FOR ENDURING BENEFITS. ITA NOS. 2210 & 2329/DEL./2016 19 9.7. CERTAIN FACTS AS OBSERVED BY LD.CIT (A) ARE THA T KNOW-HOW ARE OWNED BY OWNERS AND ASSESSEE WAS GRANTED RIGHT TO USE FOR PERIOD OF TIME TILL AGREEMENT CONTINUES TO EXIST. AND THAT UPON TERMINA TION, ASSESSEE HAS TO DISCONTINUE MANUFACTURING ACTIVITIES AND SALE OF PR ODUCTS WHERE THE USE OF SUCH KNOW-HOW IS APPLICABLE. 9.8. FURTHER LD.AO OBSERVED THAT ASSESSEE HAS BEEN USING KNOW-HOW SINCE 2003. LD.TPO OBSERVED THAT AGREEMENTS ENTERED INTO B Y ASSESSEE WITH THESE PARTIES HAVE BEEN RENEWED FROM TIME TO TIME A UTOMATICALLY AND ASSESSEE IS ALLOWED TO SELL PRODUCTS MANUFACTURED W ITH THE HELP OF SUCH KNOW-HOW WORLDWIDE. FURTHER AGREEMENT WITH M/S HP G RANTS ASSESSEE AN EXCLUSIVE SUB-LICENSE TO REPRODUCE, USE AND DISPLAY THE HP TRADE MARKS IN THE TERRITORY ASSIGNED TO ASSESSEE AND ASSESSEE IS FREE AS PER TERMS OF AGREEMENT TO CONTRACT OUT THE MANUFACTURING OF HP B RANDED PRODUCTS TO HP APPROVED 3 RD PARTIES AND TO APPOINT DISTRIBUTORS FOR SALE OR DISTRIBUTION OF HP BRANDED PRODUCTS WITHIN THE TERR ITORY. 9.9. FROM THE CLAUSES REFERRED TO BY LD.AO IN HIS O RDER, IT APPEARS THAT, ASSESSEE ACQUIRED MERELY RIGHT TO DRAW UPON TECHNIC AL KNOWLEDGE OF FOREIGN COMPANIES FOR A LIMITED PURPOSE OF CARRYING ON ITS BUSINESS, AND THAT FOREIGN COMPANIES DID NOT PART WITH ANY OF THE IR ASSETS ABSOLUTELY FOR EVER OR FOR A LIMITED PERIOD OF TIME, THAT THEY CON TINUED TO HAVE THE RIGHT TO USE THEIR KNOWLEDGE AND, EVEN AFTER AGREEMENTS H AD RUN THEIR COURSE, THEIR RIGHTS IN THIS BEHALF WAS NOT LOST, THAT ASSE SSEE HAD NOT, THEREFORE, ACQUIRED ANY ASSET OR ADVANTAGE OF AN ENDURING NATU RE FOR BENEFIT OF ITS BUSINESS AND THAT PAYMENTS WERE, THEREFORE, REVENUE IN NATURE AND WERE DEDUCTIBLE. SIMILARLY, HONBLE DELHI HIGH COURT IN THE CASE OF HERO HONDA MOTORS(SUPRA) AFTER CONSIDERING THE TERMS OF AGREEMENT, HAS ALSO HELD AS UNDER : 16. READING THE AFORESAID TERMS AND CONDITIONS AND APPL YING THE TESTS EXPOUNDED, IT HAS TO BE HELD THAT THE PAYMENTS IN Q UESTION WERE FOR RIGHT TO USE OR RATHER FOR ACCESS TO TECHNICAL KNOWHOW AN D INFORMATION. THE OWNERSHIP AND THE INTELLECTUAL PROPERTY RIGHTS IN T HE KNOWHOW OR TECHNICAL INFORMATION WERE NEVER TRANSFERRED OR BEC AME AN ASSET OF THE RESPONDENT ASSESSEE. THE OWNERSHIP RIGHTS WERE ARDEN TLY AND VIGOROUSLY PROTECTED BY HONDA. THE PROPRIETORSHIP IN THE INTELL ECTUAL PROPERTY WAS NOT CONVEYED TO THE RESPONDENT ASSESSEE BUT ONLY A LIMITED AND RESTRICTED RIGHT TO USE ON STRICT AND STRINGENT TERMS WERE GRA NTED. THE OWNERSHIP IN ITA NOS. 2210 & 2329/DEL./2016 20 THE INTANGIBLE CONTINUED TO REMAIN THE EXCLUSIVE AN D SOLE PROPERTY OF HONDA. THE INFORMATION, ETC. WERE MADE AVAILABLE TO THE RESPONDENT ASSESSEE FOR DAY TO DAY RUNNING AND OPERATION, I.E. TO CARRY ON BUSINESS. IN FACT, THE BUSINESS WAS NOT EXACTLY NEW. MANUFACTURE AND SALES HAD ALREADY COMMENCED UNDER THE AGREEMENT DATED 24 TH JANUARY, 1984. AFTER EXPIRY OF THE FIRST AGREEMENT, THE SECOND AGREEMENT DATED 2 ND JUNE, 1995, ENSURED CONTINUITY IN MANUFACTURE, DEVELOPMENT, PRODUCTION AND SALE. THE PERIOD OF AGREEMENT, 10 YEARS IN THE PRESENT CASE, WOULD B E INCONSEQUENTIAL FOR THE AGREEMENT MERELY PERMITTED AND ALLOWED USE OF T ECHNOLOGY SUBJECT TO PAYMENT OF ROYALTY AND COMPLIANCES AND THE PROPRIET ORSHIP AND OWNERSHIP RIGHT WAS NEVER GRANTED OR TRANSFERRED. TH E FACTUM THAT AFTER 10 YEARS AND AFTER RETURNING THE TANGIBLE PROPERTIE S, THE RESPONDENT ASSESSEE COULD STILL HAVE CONTINUED TO USE TECHNICA L KNOWHOW AND INFORMATION WOULD BE A TRIVIAL AND INCONSEQUENTIAL FACTUM AS IN THE AUTOMOBILE INDUSTRY, TECHNOLOGY UPGRADATION IS CONS TANT AND RAPID. GONE ARE THE DAYS WHEN ONE OR TWO MANUFACTURERS ENJOYED MONOPOLY RIGHTS AND THERE WAS A LONG AND INDETERMINATE WAIT AND QUEUE F OR PURCHASE OF OUT- OF-DATE MODELS. TECHNICAL UPGRADATION AND STATE-OF-T HE-ART KNOW-HOW IS INJECTED EVERY YEAR IN THE AUTOMOBILE INDUSTRY. FAI LURE TO KEEP UP AND UPGRADE WOULD RESULT IN PRODUCT REJECTION AND FALL IN SALES. PERSISTENT UPGRADATION AND CUTTING EDGE TECHNOLOGY IS MANDATE AND BUSINESS REQUIREMENT IN THE COMPETITIVE MARKET OF TWO/THREE WHEELERS. 11. THE FACTS OF THE ASSESSEES CASE ARE SIMILAR TO THESE DECISIONS. THE LD. CIT(A) HAS RELIED ON SUPREME COURT DECISION IN THE CASE OF SOUTHERN SWITCHGEAR LTD. VS. CIT, 232 ITR 359 IS NOT APPLICA BLE IN THE PRESENT CASE BECAUSE IN THAT CASE AGREEMENT WAS MADE FOR A PERIO D OF FIVE YEARS AND IT WAS EXPRESSLY STIPULATED THAT AFTER EXPIRY OF AGREEMENT , THEMETHOD, PRODUCTION, PROCEDURE ETC. WOULD REMAIN WITH THE INDIAN ASSESSE E, WHEREAS NO SUCH STIPULATION IS MADE IN THE AGREEMENTS MADE IN THE C ASE BEFORE US SO AS TO OBSERVE ANY BENEFIT OF ENDURING NATURE WITH THE ASS ESSEE. IN THE PRESENT CASE, THE ASSESSEE HAS ACQUIRED ONLY RIGHT TO USE OF TECH NICAL KNOWLEDGE OF THE FOREIGN COMPANY. THUS, RESPECTFULLY FOLLOWING THE D ECISION OF HONBLE DELHI HIGH COURT AND OF THE COORDINATE BENCH OF TRIBUNAL, WE ARE OF THE CONSIDERED ITA NOS. 2210 & 2329/DEL./2016 21 OPINION THAT THE ROYALTY PAID BY THE ASSESSEE IN TH E PECULIAR FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WAS IN THE NATUR E OF REVENUE EXPENDITURE INCURRED BY THE ASSESSEE. THEREFORE, WE SET ASIDE T HE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND DECIDE IT IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NO. 3 OF ASSESSEE IS ALLOWED AND GROUND NO. 1 OF THE REVENUE IS DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JULY, 2018. SD/- SD/- (AMIT SHUKLA) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27 TH JULY, 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI