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words model and design used in clause (i) of Explanation 2 to section 9(1)(vi) of the
Income tax Act, 1961 have to take colour from the other words surrounding them, such as,
patent, invention, secret formula or process or trade mark, which are all species of
intellectual property. These two words cannot, therefore, refer to drawings and designs
which are sold outright, without the setter retaining any proprietary rights over them. The
model or design, in order to be roped in by the provision, should be a specie of
intellectual property in the same manner as a patent or invention or secret formula or
process or a trade-mark. Therefore, the Tribunal concluded that an outright sale of the
drawings and designs cannot fall under the definition of royalty under Explanation 2 to
section 9(1)(vi).
The principle of Noscitur a Sociis has received approval from Apex Court although its
discriminate application / use has been cautioned. It must be borne in mind that the
principle of Noscitur a Sociis is merely a rule of construction and it cannot prevail in case
where it is clear that the wider words have been deliberately used in order to make the
scope of the defined word correspondingly wider. It is only where the intention of the
Legislature in associating wider words with words of narrower significance is doubtful, or
otherwise not clear that the rule of Noscitur a Sociis can be usefully applied. Ref.: State
of Bombay vs. Hospital Mazdoor Sabha [AIR 1960 SC 610] It can also be applied
where the meaning of the words of wider meaning import is doubtful; but, where the
object of the Legislature in using wider words is clear and free from ambiguity, the rule
of construction cannot be applied.