2024 (5) TMI 503 - HC - Income Tax

Levy of interest u/s 234B - HELD THAT - In view of the decision of Manasarovar Commercial (P) Ltd. v. CIT ( 2023 (4) TMI 419 - SUPREME COURT ) the first question is answered in favour of the Revenue and is not pressed by Appellant. Deduction u/s 80-O - brandishing newspaper cuttings as proof to show 'information concerning commercial knowledge and experience '- Appellant was obliged to provide information to Arianespace regarding current regulations and market conditions in India - Deduction denied as information provided by Appellant pursuant to the said agreement comprised only of newspaper cuttings freely available and hence, cannot be treated as 'information concerning commercial knowledge and experience', there were no written reports of any analysis, Appellant had no experience in Satellite business and there was nothing to indicate that the information was utilized outside India - HELD THAT - It is clear that approval was accorded by the CCIT on the basis of specific statements made by Appellant that information to be shared pursuant to the agreement was that collected and collated from User Departments and analysis and assessments were to be done during quarterly meetings. Newspaper cuttings are not precluded from being shared as information but by themselves they do not constitute any commercial expertise. AO is well within his rights to request Appellant to furnish proof of sharing the information with Arianespace for which approval was granted by the CCIT. From the replies of Appellant to the AO, it is quite clear that Appellant has not provided material to Arianespace as represented by it before the CCIT while seeking approval as newspaper cuttings are not information collected or collated from User Departments. The application form for approval specifies providing commercial assistance to Arianespace as contemplated under Section 80-O of the Act based on which approval was procured. Thus, we have no hesitation in accepting the decision of the AO in rejecting this claim of Appellant. AO is well within his jurisdiction to verify whether the information shared is attributable to the information or service contemplated by the provision. The AO is in fact required to make such an enquiry and for that purpose the assessee is required to place on record requisite material supporting its claim for deduction and on the basis of which approval was procured from the CCIT. The present case displays an obvious attempt on the part of Appellant in creating an illusion of acting in aid of the agreement, on the basis of the approval granted by the CCIT, while at the same time refusing to produce any evidence in respect of which relief is being sought. Merely brandishing newspaper cuttings does not amount to proof of sharing commercial expertise with its French counterpart as mandated by Section 80-O of the Act. Decided against assessee.

Summary

Issues Involved:
1. Levy of interest u/s 234B of the Income Tax Act.
2. Deduction u/s 80-O of the Income Tax Act.

Summary:

Issue 1: Levy of Interest u/s 234B
The first issue regarding the levy of interest u/s 234B was resolved in favor of the Revenue based on the Supreme Court's decision in Manasarovar Commercial (P) Ltd. v. CIT (453 ITR 661). The Appellant did not press this issue further.

Issue 2: Deduction u/s 80-O
The primary issue was whether the Appellant was entitled to a deduction u/s 80-O of the Income Tax Act for the Assessment Year (AY) 1995-96. The Appellant, a private limited company, had an agreement with Arianespace France to provide information about regulations and market conditions in India. The Appellant claimed a deduction of Rs. 30,40,740/- after receiving Rs. 75,11,850/- from Arianespace.

The Assessing Officer (AO) denied the deduction on grounds that:
- The information provided was only newspaper cuttings, not 'information concerning commercial knowledge and experience.'
- There were no written reports of any analysis.
- The Appellant had no experience in the satellite business.
- There was no indication that the information was utilized outside India.

The Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT) upheld the AO's decision. The Appellant contended that the rejection was perverse and contrary to the facts. They argued that the information was confidential and discussed in personal meetings, and the Chief Commissioner of Income Tax (CCIT) had approved the agreement for AY 1991-92 onwards.

The Revenue argued that mere sharing of newspaper cuttings did not meet the requirements of Section 80-O. They emphasized that the approval by the CCIT was subject to the conditions of the Act, and the AO had the authority to verify the claims.

Court's Analysis and Conclusion:
The Court examined the provisions of Section 80-O and the amendments over time. It noted that the approval by the CCIT was based on the Appellant's representation that information would be collected from user departments and analyzed in quarterly meetings. The Court found that the Appellant had only provided newspaper cuttings, which did not constitute the required commercial expertise.

The Court held that the AO was within his rights to verify the claims and that the approval by the CCIT did not preclude the AO from examining the veracity of the Appellant's actions. The Court distinguished between the AO reviewing the approval and verifying compliance with the approved agreement.

The Court referred to various Supreme Court decisions, including Continental Construction Limited v. CIT, to underline that the AO must ensure the deductions claimed are in accordance with the approved agreement and the provisions of the Act.

Final Decision:
The Court upheld the ITAT's decision, rejecting the Appellant's claim for deduction u/s 80-O. The appeal was dismissed, with each party bearing its own costs.