TaxTMI 
TaxTMI 
2012 (7) TMI 119
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.... of foreign exchange earnings. The assessee also claimed deduction under Section 80-IA of the Act. The assessee also claimed deduction both under Section 80-IA and 80-O of the Act in respect of few agreements. He also claimed deduction under Section 80-HHB of the Act. The Assessing Authority declined to grant the benefit sought for. Aggrieved by the said order, the assessee preferred an appeal to the Appellate Commissioner who granted partial relief. In the appeal filed by the assessee before the Tribunal the deduction under Sections 80-IA, 80-O and 80-HHB as well as deduction both under Sections 80-IA and 80-O was partly allowed. The Tribunal also held in so far as Section 80-O is concerned, the assessee is entitled to benefit only on the net income. Thus, rejected the claim of the assessee for deduction on the gross receipts. Therefore, the assessee is before this Court by way of cross-objection whereas the revenue has challenged the granting of those deductions under the aforesaid provisions of law. 3. The substantial questions of law framed for consideration are as under:- "1) Whether the Tribunal was right in proceeding to grant relief in favour ....
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....nt equal to the percentage specified in sub-section (5) and for such number of assessment years as is specified in sub-section (6)." 5. This Section was inserted by Finance Act No.2/1991, which came into effect from 01.4.1991. Though in the subsequent years several amendments were carried out, those amendments are of no relevance in deciding these appeals. A perusal of the aforesaid provisions makes it clear that the assessee is entitled to the benefit of deduction from the profits and gains if it is included in the total gross income of the assessee in the manner provided in the said Section. This Section was made applicable to industrial undertakings, which fulfills the conditions which are mentioned in the sub-section(2). More importantly the assessee should be in the business of manufacturing or production or any article or thing and he must have employed ten or more workers in the said manufacturing process, it is carried on with the aid of power and twenty or more workers in the manufacturing process carried on without the aid of power. The benefit under Section was declined by the Appellate Commissioner to the assessee on the ground that the activities carried on by the a....
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....sp; 10. Preparation of technical specification. 11. Structural designs of jackers, piles, pipes, top sides, etc., 12. Preparation of Materials balance. 13. Preparation/review of equipment specification for electrical work. 14. Prepare electric system testing procedure. 15. Prepare instrumentation index design, location & installation drawings and hook up drawings. 16. Prepare vendor list and technical recommendations base don vendor clarifications provided by MDL. 17. Review of vendor's project. 18. Review of inspection procedures. 19. Review of vendors documentation. 20. Issue of inspection release notes. 9. The Appellate Commissioner after taking note of all these activities has categorically held that most of these activities fall in the category of preparing engineering drawings, designs and other technical know how as claimed by the assessee. In addition to this, the assessee has offered....
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....ADESH reported in (1986) 157 ITR 86 Explains the meaning of the word plant. If the aforesaid test is applied to the drawings, charts, plans, processing date and other literature comprised in the 'documentation service' as specified in clause 3 of the agreement, it will be difficult to resist the conclusion that these documents as constituting a book would fall within the definition of "Plant". It cannot be disputed that these documents regarded collectively will have to be treated as a "book" for the dictionary meaning of that word is nothing but a "a number of sheets of paper, parchment, etc., with writing or printing on them, fastened together along one edge, usually between protective covers, literary or scientific work, anthology, etc, distinguished by length and form from a magazine, tract, etc." (Vide Webster's New World Dictionary). But apart from its physical form, the question is whether these documents satisfy the functional test indicated above. Obviously, the purpose of rendering such documentation service by supplying these documents to the assessee was to enable it to undertake its trading activity of manufacturing theodolites and microscopes and there can be no doubt....
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....opinion, could fairly fall within the concept of processing of goods, if not manufacture of goods." This view has been found favour by the Apex Court in the decision of COMMISSIONER OF INCOME TAX Vs. PEERLESS CONSULTANCY AND SERVICES P LTD., reported in (2001) 248 ITR 178. 12. The Apex Court in the decision of COMMISSIONER OF INCOME TAX Vs. B SURESH reported in (2009) 313 ITR 149 (SC) dealing with 'Articles of Trade and commerce' held at paragraph 9 that. "Today the difference between the two is getting blurred with globalisation and cross border transaction. Today with technological advancement one has to change our thinking regarding concepts like goods, merchandise and articles. In the case of B Suresh, the assessee had bought rights of various decoders and had recorded movies on beta-cam tapes which were transferred as telecasting rights to Star T.V. for five years (it has a limited life). Hence such "rights" would certainly fall in the category of articles of trade and commerce, hence, merchandise." 13. In the instant case, as it is clear from the copy of the agreement, the activities of the assessee involves various activities as per the r....
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....s carrying on its activities with the requisite number of draftsman, supervisors and even persons who are technically qualified. Therefore, the Tribunal was justified in extending the benefit of Section 80-IA to the assessee, thus the first substantial questions of law is answered in favour of the assessee and against the revenue. Re Substantial Question of law No.2 14. Answer to this question revolves round the interpretation of Section 80-O which was in force at the relevant point of time which reads as under:- "80-O Deduction in respect of royalties, etc., from certain foreign enterprises. Where the gross total income of an assessee, being an India 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....
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....made use of by the foreign enterprise outside the country. Therefore, it is not a case of service being rendered inside India. Even after the foreign enterprise making use of the service rendered by the assessee after manufacturing the equipments though brought it again into the country and erect the same, the material on record discloses that the assessee has not rendered any service in India in connection with the entire project. The reliance by the Tribunal on the circular of the Board is also apt. The service is rendered from India to a foreign enterprise and therefore, Section 80-O is attracted and the Tribunal rightly extended the said benefit. Thus the second substantial question of law is also answered in favour of the assessee and against the revenue. Re Substantial question of law No.3: 16. A similar question arose for consideration before this court in the case of COMMISSIONER OF INCOME TAX AND ANTOTHER Vs. M/S MILLIPORE INDIA PVT LIMITED, wherein the question was as to whether the assessee is entitled to the benefit of Section 80-HHC and 80-I of the Act. In that case this court held as under:- "From the aforesaid statutory provisions and the law declared by the....
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....ion. However, the overall claim under both Sections has to be restricted to the total profits and gains of such eligible business from gross total income." 17. Section 80-IA and Section 80-O both fall under the heading deductions in respect of certain incomes both are independent of each other. In view of what is held above the assessee is entitled to claim deduction under both the Sections. However the overall claim under both Sections has to be restricted to the total profits and gains of eligible accounts from the total profits and gains. In fact this provision 9A to Section 80-IA was inserted by Finance Act No.2, 1988, which came into effect from 1.4.1998 that limitation was not there for the earlier assessment years. This question is answered in favour of the assesses and against the revenue. Re Substantial question of law No.4: 18. The Tribunal has held that in the facts and circumstances of the case, the additional allocation of general overheads and business costs is not called for. The Tribunal has relied on the principles of the decision of the Tribunal in the case of M.N. DASTUR & CO. ITA Nos.452/ Bang /97 and others, which it has followed under Section 80-O. Th....