1992 (8) TMI 8 - HC - Income Tax

Summary

Issues:
1. Approval of agreement under section 80-O of the Income-tax Act.
2. Interpretation of the provisions of section 80-O and section 80HHB.
3. Correct application timeline for approval of the agreement.
4. Scope of relief under section 80-O for subsequent years.

Detailed Analysis:
The judgment delivered by the High Court of BOMBAY pertains to the approval of an agreement under section 80-O of the Income-tax Act. The petitioners were engaged in providing technical services and had entered into an agreement with a Swiss company for rendering engineering and design services for a project in Sumatra. The Central Board of Direct Taxes declined to approve the agreement under section 80-O, citing that it was connected with the execution of a foreign project falling under section 80HHB. However, the court held that the agreement was solely for technical services and did not fall under section 80HHB but was covered by section 80-O.

Regarding the timeline for application, the Central Board of Direct Taxes contended that the payments were received in a different assessment year than the one mentioned in the application. The court clarified that the application for approval was made in accordance with the proviso to section 80-O, which required the application to be submitted before the 1st day of October of the relevant assessment year. The court also highlighted that approval under section 80-O is independent of the provisions of section 80HHB, as observed in a previous Supreme Court judgment.

Furthermore, the court emphasized that the petitioners were entitled to seek approval for the assessment year in which the full payment was received and for subsequent years, in line with the provisions of section 80-O. The court concluded that the petitioners had correctly applied for approval within the stipulated timeline and that the nature of the agreement warranted the rule to be made absolute in favor of the petitioners. Consequently, the petition was allowed, and the respondents were directed to pay the costs of the petition to the petitioners.