TaxTMI 
TaxTMI 
2024 (5) TMI 503
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.... 2004, this Appeal was admitted on the following substantial questions of law: "1. Whether on the facts and in the circumstances of the case and in law the Tribunal ought to have deleted the levy of interest under Section 234B of the Act ? 2. Whether on the facts and in the circumstances of the case and in law the Tribunal ought to have allowed the deduction under section 80-O of the Act?" In view of the decision of the Supreme Court in the case of Manasarovar Commercial (P) Ltd. v. CIT (453) ITR 661, the first question is answered in favour of the Revenue and is not pressed by Appellant. Hence, the determination is limited to the second question only. 3. Appellant is a private limited company. An agreement was executed on 2nd February 1987 (the said agreement) by and between Appellant and M/s. Arianespace France ("Arianespace"), the shareholders of which, it is stated, are all Government controlled companies belonging to European Space Agencies and totally unconnected with Appellant. The main business of Arianespace was to launch satellites and place them in orbit above the earth. In a bid to gain entry into the global satellite launch market, Arianespace w....
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....t the rejection of Appellant's claim under Section 80-O of the Act is perverse and completely contrary to the facts of case. According to Mr. Mistri, Appellant has received fees in consideration for furnishing of information concerning commercial knowledge and for rendering technical services and the Tribunal ought to have appreciated the absence of written reports on account of confidentiality of information. Relying on the provision of Section 80-O of the Act existing at the relevant time, Mr. Mistri submitted that the Section only required approval of the Chief Commissioner of Income Tax ('CCIT') to the agreement executed and that the CCIT had granted approval to the agreement for the Assessment Year ("AY") 1991-92 upon specific consideration of the issue regarding furnishing of newspaper cuttings and verbal discussions of reports. 6. During the course of hearing, Mr. Mistry expanded his arguments as follows: (i) In response to a specific request by the CCIT, prior to granting of approval, Appellant had furnished reports sent by it to Arianespace and had clarified that the conclusions/interpretations were done at quarterly personal meetings. Furthermore, ....
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....IT v. Container Corporation of India Limited (404) ITR 397 (e) Fibre Boards P. Ltd. v. CIT (376) ITR 596 (f) Radhasoami Satsang v. CIT (193) ITR 321 (g) Cummins India Ltd. v. ACIT (153) taxmann.com 223 7. Mr. Chhotaray, learned counsel appears for the Revenue and contests the Appeal on the ground that mere sharing of newspaper cuttings does not amount to information concerning industrial, commercial or scientific knowledge, experience or skill which is a pre-condition to seek deduction under Section 80-O of the Act. Appellant has been unable to provide any analysis, report or assessments purportedly furnished to Arianespace and hence, Appellant is not eligible for deduction under Section 80-O of the Act. Mr. Chhotaray draws our attention to a clarification issued by the Central Board of Direct Tax ('Board') by letter dated 14th September 1985 superseding its earlier letter dated 31st July 1985 which stated that letter F No. 473/644-FTD dated 31st July 1985 was only a recognition of the position that approval under Section 80-O is for the agreement as such and mention of any time limit is redundant except for the star....
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....ial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to such Government or 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, "under an agreement approved in this behalf by the Chief Commissioner or the Director General" and such income is received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction of an amount equal to fifty percent of the income so received in, or brought into, India, in computing the total income of the assessee. Provided that such income is received in India within a period of six months from the end of the previous year, or where the Chief Commis....
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....-O of the Act. It is quite significant to note that the CCIT did harbor some misgivings and observed that it was not clear as to what further role the Appellant had to play in interpreting newspaper articles appearing in various newspapers but appears to have been satisfied with the explanations of Appellant that analysis of articles were being provided in quarterly meetings of the parties. Thus, according to Appellant, upon being satisfied with its explanation, the CCIT was pleased to grant his approval to the agreement. 11. We have perused the application dated 30th September 1991 of Appellant seeking approval of the CCIT. Clause 4 (a) (ii) of the Application specifically refers to the question as to whether the income received in consideration for the use outside India of information concerning industrial, commercial, or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided. The specific response of Appellant to this query was that Income is received in consideration of provision of commercial knowledge. Further on the query in clause 6(a) of the application form, Appellant has specified the arrangements available with....
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....ated that while newspaper articles are regularly sent, the evaluation and assessment projects are orally discussed over the phone and when they meet officials of Arianespace in India or France. It informed the AO that no reports were prepared by it and neither Appellant nor Arianespace maintained any record of any telephonic conversations nor any meetings convened as per its claim. It was in these circumstances that Appellant's claim of deductions under Section 80-O was rejected by the AO. 14. As represented by Appellant to the CCIT, for grant of approval, information was to be collected and collated from various user departments. Admittedly, information shared with Arianespace comprised only of newspaper cuttings appearing in various Indian newspapers. Undoubtedly, newspapers are not information from User Departments. Moreover, mere cut outs of newspapers do not constitute information collected from User Departments. Further, even if Appellant is to be believed regarding sharing of assessments and analysis in private quarterly meetings, Appellant was bound to furnish to the AO some record of the meetings being convened, at the least in the form of minutes or correspondence of s....
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....e question of law arising in the matter since we are satisfied that the AO is neither revisiting the approval granted by the CCIT nor is he reviewing the same. All he is doing is examining the veracity of the claims of Appellant of having acted in aid of the agreement so executed and which has got the approval on the basis of information provided to the CCIT by Appellant in the application form as well as in the responses to his queries. Mr. Mistry thus, cannot wish away the full import of the approval in its entirety. The letter dated 27th March 1992 according approval reads as thus: "1. Please refer to your application dated - received with your letter No. TH/474/ASD/1424 dated 30/9/1991. The agreement entered into between you and M/s. Arianespace of France on 2/2/1987 and the amendments dated 10/12/1987 and 20/2/1990 are hereby approved for the purpose of Section 80-O of the Income Tax Act, 1961, for the assessment years 1991-92 onward till the income under the agreement accrues fully, subject to a dis-allowance of 20% of the payment as attributable to services rendered in India. The reimbursement of expenses will not qualify for the deduction u/s. 80-O of the I.T. Act,....
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....entations made by Appellant to the CCIT at the time of seeking approval clearly indicate sharing of commercial expertise, which include newspaper cuttings, data collected and collated from User Departments, etc. The contentions of Appellant that approval granted by the CCIT is unqualified and for all AY's subsequent to 1991-92 till such time that the agreement exists, and income accrues in lieu of the same, the AO has no jurisdiction to examine the veracity of its claim for deduction under Section 80-O of the Act nor has the AO any power to reject the same are wholly unacceptable and cannot be sustained. 17. The decisions of the Apex Court and other High Courts as relied upon by Mr. Mistry relate to the interpretation of the effect of an amendment on the original provisions of law. The decision of the Supreme Court in the matter of Continental Construction (supra) was in fact concerned with deduction under Section 80-O of the Act. Section 80-O of the Act, as it stood at the relevant time, mandated approval of the Board on the agreement entered into by assessee with foreign enterprise. The Board's initial approval stated it was for AY 1982-83 and included conditions similar t....
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....al Construction (supra), Appellant canvasses that once an approval is granted under Section 80-O of the Act, the Department cannot take a different view on the same set of facts especially when approval is granted till all income under the agreement fully accrues. In our view, it appears from the decision in Continental Construction (supra), a great deal turns on application of legal principles to the facts in the matter and not solely on the legal propositions expounded by Mr. Mistry drawing support from the various decisions relied upon by him. A close examination of the application of Appellant reveals its intent and purpose in seeking approval. It specifies collection of information from User departments and quarterly meetings to share analysis and assessments. The CCIT approval is accorded based on this representation by Appellant. Appellant simply failed to act in aid of its intent disclosed in the application form, based on which approval was granted. The AO cannot be accused of reviewing or revoking approval granted by the CCIT in the present matter. The AO simply seeks to verify as to whether Appellant has acted in terms of the approval granted by the CCIT. In our view, th....
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....ts, its unavailability creates a doubt and burden of proof is on the Appellant to prove that on the basis of those blue prints, the Corporation was able to start up their business in India and he was paid the amount as service charge. xxxxxx 18) ........The Appellant failed to prove that he rendered technical services to the Sumitomo Corporation and also the relevant documents to prove the basis for alleged payment by the Corporation to him. The letters exchanged between the parties cannot be claimed for getting deduction under Section 80-O of the IT Act. 19) Before parting with the appeal, it is pertinent to mention here that it is settled law that the expressions used in a taxing statute would ordinarily be understood in the sense in which it is harmonious with the object of the Statute to effectuate the legislative animation." 20. A similar view has been taken by the Supreme Court in the matter of Ramnath & Co (supra) and Khursheed Anwar (supra). The Supreme Court, in the aforesaid decisions, discussed the object of providing incentive to entrepreneurs vide provisions in the Act. Provisions like Section 80-O of the Act were originally in the former ....
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....oreign exchange for exemption granted in principle has to be translated into concrete figures for the purposes of each assessment. Neither the introduction of the words "in accordance with and subject to the provisions of these sections" nor the various "conditions" outlines in the letter of approval add anything to or detract anything from the scope of the approval." 22. In Ramnath & Co (supra) the Apex Court commented on Continental Construction (supra) as under: - "A few aspects at once emerge from the said decision in Continental Construction that even under the provisions of Section 80-O of the Act as then existing, whereunder prior approval of CBDT was required to claim deduction, this Court underscored that deduction would be available only in relation to the consideration attributable to the information and services envisaged by Section 80-O and deduction would be granted to the extent of such consideration; and all these aspects were to be examined by the Assessing officer while making the assessment." 23. Mr. Mistry made a valiant effort to distinguish the facts of the present case from that in the cases of B.L.Passi (supra), Ramnath & Co.(supra) and Khursh....