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Issues:
Challenge to legality and validity of orders refusing approval of agreements under section 80-0 of the Income-tax Act, 1961. Interpretation of provisions of section 80-0 and section 80HHB. Jurisdiction of the Board in approving agreements under section 80-0 and impact of section 80HHB(5) on deductions. Analysis: The petitioner, a company, contested the legality of ten orders passed by the Central Board of Direct Taxes refusing to approve thirteen agreements under section 80-0 of the Income-tax Act, 1961. The Board rejected the applications on the basis that the agreements included supply of drawings and designs for construction projects falling under section 80HHB, thus out of the scope of section 80-0. However, the Board failed to assess whether the agreements met the approval conditions of section 80-0. The court held that the Board's approach was incorrect as section 80-0 mandates examination of specific criteria for approval, which was not done in this case. The orders were deemed flawed, necessitating fresh consideration by the Board in accordance with the law. A previous judgment involving the petitioner supported this stance. A question arose regarding the Board's obligation to consider section 80HHB(5), which restricts deductions for certain income under other provisions, including section 80-0. Section 80HHB was introduced to incentivize contractors undertaking foreign projects. The addition of sub-section (5) post-enactment raised concerns about dilution of the original purpose. The court highlighted the distinction in jurisdiction between the Board for approving agreements under section 80-0 and the Assessing Officer for applying section 80HHB. It emphasized that the Board should evaluate agreements solely based on section 80-0 criteria, allowing the Assessing Officer to determine if any income falls under section 80HHB to avoid prejudicing the applicant. This approach ensures the applicant's right to appeal or reference in case of adverse decisions. In conclusion, the court upheld the petitioner's challenge, directing the Board to reconsider the applications with a focus on section 80-0 requirements. It recommended the Board to clarify that the Assessing Officer can assess if any income under the agreements falls under section 80HHB(1) to prevent denial of benefits under section 80-0. By maintaining this distinction, the petitioner's rights are safeguarded, and the Board can fulfill its approval duties effectively.
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