2014 (12) TMI 845 - HC - Income Tax

Deduction u/s 80-O - submission of survey report to foreign agencies - Place for rendering services - Whether the services are said to have been rendered within India or outside India Held that - Explanation (iii) to section 80-O places an important role - It maintains a distinction between the service rendered from India on the one hand, and the service rendered in India on the other - Even if the services are rendered from India, the activity comes within the purview of Section 80-O of the Act - The distinction is that it must be from and not within - The first part of it i.e. service rendered from India connotes that the agency that is rendering service is within India, but the beneficiary thereof is from outside - The second part, namely service in India, takes in its fold, a situation where the agency that is rendering of service and the one who avails it are in India - It is only the former that qualifies - the words outside India become relevant - the mere fact that the submission of report was within India, does not take away the matter from the purview of Section 80-O thus, the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal under Section 260A of Income Tax Act regarding deduction under Section 80-O for activity conducted for foreign companies.

Analysis:
The case involved a challenge to an order passed by the Income Tax Appellate Tribunal regarding the deduction under Section 80-O of the Income Tax Act for an activity conducted for foreign companies. The respondent, an agency conducting services for foreign companies, claimed deduction under Section 80-O for the assessment year 1994-95. The Assessing Officer denied the deduction stating that the survey report was submitted in India, thus not meeting the requirements of Section 80-O. The Commissioner of Income Tax (Appeals) allowed the appeal, which was further challenged by the Department before the Tribunal, where it was rejected.

The appellant argued that the respondent was not eligible for the benefit under Section 80-O as the survey report was submitted within India, not meeting the criteria of the Act. On the other hand, the respondent contended that the activity covered by Section 80-O must be performed within India, and even if the report is submitted in India but used outside the country, the benefit should be extended to the assessee.

The Court analyzed Section 80-O of the Act, which provides for deductions in certain cases involving foreign enterprises. The conditions for claiming the benefit under Section 80-O include the service being for the benefit of a foreign State or enterprise, consideration in foreign exchange, and the service being for use outside India. The Court emphasized the distinction between services rendered from India and services rendered in India, highlighting that the former qualifies for the deduction. The Court noted that the mere submission of the report within India does not disqualify the assessee if the report is used outside India.

The Court referred to a judgment of the Supreme Court in a similar case but found the facts to be different in the present case. Ultimately, the Court dismissed the appeal, upholding the Tribunal's order, and ruled that there would be no order as to costs. The miscellaneous petition filed in the appeal was also disposed of accordingly.