TaxTMI 
TaxTMI 
2004 (12) TMI 347
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....3-10-1990 as per which it is appointed as a distributor for India for the various instruments manufactured by PE. As per this agreement, assessee can purchase the equipments on its own from PE and sell them in India. It also acts as a distributor in respect of sales made directly by PE to Indian customers for which it receives commission @21% of the sale price from PE in foreign exchange as per details given below: (a) 11% - for technical support and services (b) 7% - for installation and warranty services (c) 3% - as agency commission Though no claim under section 80-O was made by the assessee in respect of such commission in the original return filed, it made such claim in the revised returns for all the years under consideration. It was noted by the Assessing Officer that assessee was providing following services from India to its foreign principal: (a) Making efforts to locate customers for product of foreign principals; (b) Making known to the foreign principals the overall market conditions; (c) Installing the equipment ordered by the Indian customers at the customers factory or R&D center; (d) Maintaining the ....
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.... the latter use in supplying specialized instruments as per customer requirement. The appellant had not claimed the deduction in earlier years because it was unclear whether services rendered from India qualified for the deduction. The Board's clarification apparently covered the appellant's case, hence the deduction was claimed during the course of assessment proceedings. In section 80-O what is essential is that the use of the technical/professional services must be outside India, although it may be rendered from India, the objective of the section being to encourage export of Indian technical/professional expertise and augmentation of foreign exchange resources. After carefully perusing the facts and documents in the appellant's case it is held that the appellant is eligible for the deduction under section 80-O." In Para 3.10, it was held that assessee was entitled to deduction in respect of 11% commission only and not in respect of 14% commission claimed by assessee. Lastly, it was held that deduction was eligible only in respect of net income included in the gross total income of assessee and not with reference to gross receipt of foreign exchange (Para 3.14). A....
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....ourt in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 wherein it has been held that legitimate claim can be raised for the first time before the Tribunal even when no claim is made either in the return or before Assessing Officer in assessment proceedings. Further, reliance was placed on the judgment of Supreme Court in the case of Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688 and judgment of Bombay High Court in the case of Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351(FB). He also drew our attention to the decision of Tribunal in the case of Dy. CIT v. Sanmukhdas Wadhwani [2003] 85 ITD 734 (Nag.) where the Tribunal was concerned with a case under Block assessment proceedings in Chapter XIV-B. It was argued that under section 158BC, the revised return was not permissible. Despite the same, the claim of assessee was allowed. Another decision of Tribunal of Pune Bench in the case of Flotech Welding & Cutting System Ltd. [IT Appeal No. 1430 (Pune) of 1993] was brought to our notice where similar observations are made. 7. On merits, he drew our attention to the nature of services rendered by the assessee. At the direction of the bench, he ha....
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....any skill and, therefore, the judgment of Bombay High Court relied upon by him is relevant to the present issued. 8. Rival submissions of the parties have been considered carefully in the light of case law referred to and the material placed before us. The first question to be considered is whether the claim of assessee under section 80-O can be denied merely on the ground that such claim was raised by the assessee in the revised return which was filed after the prescribed time but before the completion of assessment. In our humble opinion, the answer to such question is in negative for the reasons given hereafter. It is the true and correct total income of every person which is assessable under section 4 of the Act. Consequently, the tax collector is rather duty bound to collect the legitimate tax due on such total income - neither a penny less nor a penny more. The determination/assessment of total income would depend on the relevant provisions of the Act irrespective of the nature of return filed by any person. An income which is not taxable cannot be taxed merely because the assessee forgot to claim the exemption/deduction under some mistaken belief. For example, assessee....
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....ome-tax Office for not making an order under section 84 favouring the assessee." 10. Our view is further fortified by the judgment of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 wherein it has been held that entire assessment proceedings are open before the Tribunal and, therefore, assessee is entitled to raise additional ground of appeal to claim any deduction/exemption provided no investigation into facts is required at appellate stage. It was further held that claim of assessee cannot be rejected merely on the ground that assessee himself had offered the receipts to tax in the return filed by him. If any income is not taxable under the Act, the assessee is entitled to claim the same by raising the additional ground of appeal before the appellate authorities. If the claim can be raised before the appellate authorities for the first time then, in our opinion, there is no question of rejecting such claim if made before the Assessing Officer in the course of assessment proceedings. 11. The question before us can also be considered from another angle. The provisions of section 139 are procedural provisions for making the as....
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....4. The next question to be considered is whether on merits, the assessee is entitled to deduction under section 80-O. Since, this section has been amended from time to time, it would be useful to refer to the provisions of this section relevant to the assessment years under consideration. The same is being reproduced as under: "Section 80-O: Where the gross total income of an assessee, being an Indian company or a person (other than a company) who is resident in India, includes any income by way of royalty, commission, fees or any similar payment received by the assessee from the Government of a foreign State or a foreign enterprise in consideration for the use outside India of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to such Government enterprise by the assessee or in consideration of technical or professional services rendered or agreed to be rendered outside India to such Government or enterprise by the assessee, and such income is received in convertible for....
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....the use of analytical instrument in these functions. (5) The technical people, after understanding the customer's requirements, study the process detailed by the customers, sometimes conduct tests on customer's samples in the laboratory and decide on the specific application where the analytical instrument is needed and work out a configuration of the system which is best suitable for the required analysis/study. (6) The same configuration with changes/modifications needed for the system and/or application software is then informed to PE for further processing. The need for the changes/modifications, based on the study made by the technical people, is explained to PE. The technical people sometimes suggest certain accessories which are needed to be included in the system. If this accessory is not available with or not manufactured by PE, the technical people also suggest the source for procuring accessory to PE. (7) The matter is then discussed with customers and/or their consultants either in India or abroad to finalize and/or understand their exact needs and accordingly. Labindia informs PE. (8) PE then submits the quotation on the basi....
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....onsideration of technical or professional (services rendered or agreed to be rendered outside India to such Government or enterprises by the assessee" The first part refers to various types of information which are required to be used outside India. Therefore, it is enough compliance of such condition if it is shown that information provided by the assessee is for use outside India. The concept of services rendered in India or from India or outside India is not relevant for the first part. It is only relevant for the second part. Explanation (iii) to section 80-O also speaks about the second part. Therefore, the contention that services were rendered in India can be raised only with reference to the second part and not with reference to the first part. The only condition to be fulfilled with reference to first part is that information supplied by assessee is for use outside India. In the present case, P.E. the foreign enterprises, is carrying its manufacturing activity outside India and therefore, the information provided by assessee was utilized outside India i.e., for manufacturing analytical instruments. Hence, the assessee was entitled to deduction under section 80-O. 17.....
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....r the sake of argument, that assessee's case falls in the second part, even then assessee would be entitled to deduction as such services were rendered from India in view of Explanation (iii) to section 80-O. Admittedly, the information was supplied by assessee to P.E. who is located outside India. Further, such information was also utilized by P.E. outside India in the manufacturing of analytical instruments. The Board Circular No. 700 dated 23-3-1995 on which reliance has been placed by the assessee goes one step further by clarifying that deduction would be allowed even if foreign enterprise utilizes the benefit of such services in India. The only condition, as per circular, is that services are rendered from India and are received by a foreign enterprise outside India. In the present case, the assessee gathered the industrial information and sent the same to his constituent outside India who, in turn, had utilized the same for manufacture of analytical instruments. Therefore, the only inference which can be drawn is that such services were rendered from India to P.E. 19. In view of the above discussion, it is held that assessee was entitled to deduction under section 80-....
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....section 40A(2)(b) was not attracted. (4) There was no loss of revenue as same rate of tax was paid by assessee as well as Labtek. 23. The CIT(A) accepted the appeal of the assessee on this issue by holding as under: "The arguments against the disallowance have been carefully considered. In my view the facts narrated above justify the expenditure of Rs. 8 lakhs to Labtek. For earning commission of Rs. 40,23,820 on distribution/marketing of products of companies other than P.E. the appellant has spent 20 per cent as commission paid to Labtek saving on possible establishment costs. Then against the nature of activities/services rendered to P.E. are not comparable with the nature of services rendered for products of other foreign companies. In any case it is for the businessman to decide how best to organize his work/affairs. Then again section 40A(2)(b) does not come into play considering the structure of the shareholding which does not establish the interest of any director or his relative in Labtek in terms of his section. The disallowance is not justified. The addition of Rs. 4 lakhs is deleted." For the similar reasons, the additions made in other years wer....