Even promise to render services at a future date would entitle Assessee to deduction u/s 80O of the Income Tax Act, 1961
Dec 28, 2009 Income Tax Case Laws
CASE LAW DETAILS
Decided by: ITAT, D-BENCH, MUMBAI, In The case of: Voltas International Ltd. v. ACIT, Appeal No.: ITA No. 2931/Mum./2005 July 18, 2008, Decided on: July 18, 2008
RELEVANT PARAGRAPH
13 1 Section 80-O as it stood in the impugned assessment year reads as follows:-
“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 received by the assessee from the government of a foreign State or foreign enterprise in consideration for the use outside India of any patent, invention, design or registered trade mark and such income is received in convertible foreign exchange in 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 -
(i) forty per cent for an assessment year beginning on the 1st day of April, 2001
Explanation 2 to section 9(1)(vii) reads as follows.
‘Explanation [2].- for the purposes of this clause, ‘fees for technical services” means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”.”
13.2 As per Explanation 2 to section 9(1)(vii), rendering of any managerial, technical or consultancy services include the provisions for services of technical and other personnel The Hon’ble Delhi High Court in the case of Raunaq International Ltd (supra) was considering a case of an assessee which is engaged in the business of export of engineering and industrial goods. Technical know how to indigenous manufacturers was provided by the sales engineers of the petitioner as the exports comprised of sophisticated goods Such technical assistance was also provided in the development of various engineering and industrial goods for the purpose of exports. An Iraq government company known as a State Company for Rubber Industries (Baghdad)(SCRI) sought technical assistance of the petitioner pursuant whereto 16 specialists were deputed for the purpose of sharing experience for running the factory as also for improving and developing technical and managerial skills of its personnel as also to participate in the practical application of the planned technology. On the ground that providing of such technical assistance would entitled the petitioner to claim deduction under section 80-O of the Income-tax Act, an application was filed for approval of the agreement before the prescribed authority. The application was rejected. On a writ petition against the order, it was held that the petitioner was entitled to exemption in terms of section 80-O of the Act and the same had wrongly been denied to the petitioner. The impugned order could not be sustained and was liable to be set aside. Thus by applying the decision of the Hon’ble Delhi High Court to the facts of the case, we have to necessarily hold that the assessing officer as well as the CIT(A) were wrong in coming to a conclusion that the assessee is not entitled to deduction u/s 80-O on the ground that it has only deputed certain personnel for working in the foreign enterprises.
13.3 The second objection of the revenue that no evidence has been provided by the assessee that it actually rendered certain technical services. The assessee has in fact provided copies of the technical service agreement entered into by the assessee company with the foreign enterprises and it is an admitted fact that its technical service agreements have been approved by the CBDT / Chief CIT. While so it is not proper to doubt the genuineness of these agreements and hold that the assessee has received remuneration without rendering of any service whatsoever. As rightly pointed out by Shri Pardiwalla, even a promise to render services at a future date would entitle the assessee for deduction u/s 80-O in view of the specific wordings in the section. Thus we allow ground 1(b) of the assessee.
Tags: case law, consultancy services, delhi high court, foreign exchange, international ltd, ita, mumbai, patent invention, provision of services, salaries, section 9, voltas international
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