1983 (12) TMI 46 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of the Bombay High Court to grant relief.
2. Delay in approaching the court.
3. Approval sought for both service and know-how agreements.
4. Consideration of application for approval of the know-how agreement.

Jurisdiction of the Bombay High Court:
The respondent raised a preliminary objection regarding the jurisdiction of the Bombay High Court to grant the relief claimed in the petition. However, the court found that the petition had been pending for over three years and concluded that transferring the case to New Delhi would only lead to unnecessary delays and multiplicity of litigation. Therefore, the court decided to retain jurisdiction and proceed with the case.

Delay in Approaching the Court:
The respondent argued that the petitioner had approached the court after a significant delay, as the approval for the service agreement was granted in 1976, and the petitioner only filed the petition in 1979 after the ITO declined to treat the receipts as capital receipts. Despite the delay, the court refused to dismiss the petition solely on that ground, emphasizing that delay alone should not be a reason to reject a petition, especially when the petitioner had a strong case on merits.

Approval Sought for Both Service and Know-How Agreements:
The petitioner had initially applied for approval under section 80-O of the Income Tax Act in 1973 but inadvertently sought approval only for the service agreement, not realizing the omission regarding the know-how agreement. The court acknowledged this oversight and noted that the petitioner had clearly indicated in the pro forma that approval was required for both agreements. The court held that this error should not deprive the petitioner of its right and directed the tax authority to consider the application for approval of the know-how agreement on its merits.

Consideration of Application for Approval of the Know-How Agreement:
The court ruled in favor of the petitioner, stating that the application made in 1973 should be considered as an application for approval of both the service and know-how agreements. As approval had already been granted for the service agreement, the tax authority was directed to review the application for the know-how agreement and make a decision based on the merits of the case. The court granted the petitioner's request and directed the tax authority to process the application accordingly, with costs to be borne by the petitioner.