Section 80MM approval cannot be refused solely because technical know-how was previously obtained from a foreign company.

Approval under Section 80MM of the Income-tax Act could not be refused merely because the Indian company had earlier obtained technical consultation and technical know-how from a foreign company. The statutory test concerned whether the agreement satisfied the requirements for rendering technical services and transfer of technical know-how; prior receipt of know-how from abroad was not a disqualifying factor under the provision. As the refusal rested on an irrelevant consideration, it was unsustainable, the refusal was quashed, and the application was directed to be reconsidered in accordance with Section 80MM.

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Issues: Whether approval under Section 80MM of the Income-tax Act, 1961 could be refused on the ground that the Indian company had earlier obtained technical consultation and technical know-how from a foreign company.

Analysis: Section 80MM governs approval of agreements between Indian companies for the rendering of technical services and transfer of technical know-how. The provision does not prohibit an Indian company from having previously obtained technical know-how or technical processes from a foreign company. The objection taken by the authority rested on a consideration that was not relevant to the statutory requirements for approval under Section 80MM.

Conclusion: The refusal of approval was unsustainable and was quashed; the application was directed to be reconsidered. The issue was decided in favour of the assessee.

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