2004 (11) TMI 30 - HC - Income Tax

Delhi High Court: Income-tax Act 1961 - Section 80-O Interpretation

Commissioner of Income-Tax Versus Inchcape India P. Ltd.

The High Court of Delhi ruled in favor of the assessee in an appeal regarding the interpretation of conditions under section 80-O of the Income-tax Act, ... Deduction u/s 80-O– fulfillment of the conditions as prescribed under section 80-O - assessee was providing two types of services, namely, through its dyeing division and testing division - Tribunal after considering the facts has pointed out that the assessee through both these divisions was carrying on the activities which fell within the provisions of section 80-O - Explanation (iii) to section 80-O provide that 'Services rendered or agreed to be rendered outside India shall include services rendered from India but shall not include services rendered in India.' – further, Circular No. 700 dated March 23, 1995 states that “as long as the technical and professional services are rendered from India and are received by a foreign Government or enterprise outside India, deduction u/s 80-O would be available to the person rendering the services even if the foreign recipient of the services utilises the benefit of such services in India.' – in view of above assessee is entitled to deduction Issues:Interpretation of conditions under section 80-O of the Income-tax Act, 1961 for deduction eligibility.Analysis:The High Court of Delhi considered an appeal arising from the Income-tax Appellate Tribunal's order for the assessment year 1996-97. The court framed the question of whether the assessee fulfilled the conditions as prescribed under section 80-O of the Income-tax Act, 1961, for deduction eligibility. The Tribunal found that the assessee, operating through dyeing and testing divisions, provided services falling within the provisions of section 80-O. The dyeing division supplied information on research, local suppliers, market conditions, etc., while the testing division provided quality assurance services for textile testing and inspection of various products. The Revenue argued against the benefit based on a previous decision, but the court noted the insertion of Explanation (iii) to section 80-O, which clarified services rendered outside India. Additionally, a circular by the Central Board of Direct Taxes emphasized that services rendered from India to a foreign entity would qualify for deduction under section 80-O, even if utilized in India by the recipient. The court held in favor of the assessee, citing the provision of law and the circular, thereby disposing of the appeal.