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Issues Involved:
1. Allowability of deduction under section 80-O of the Income-tax Act, 1961. Detailed Analysis: 1. Allowability of Deduction under Section 80-O of the Income-tax Act, 1961: The core issue in this case revolves around the eligibility of the assessee for deduction under section 80-O of the Income-tax Act, 1961. The assessee, a proprietor of M/s. SNQS International, Tirupur, claimed a deduction of Rs. 44,83,074 for the assessment year 1997-98, which was 50% of the commission received in foreign currency for services rendered to foreign buyers of hosiery goods. Assessing Officer's Decision: The Assessing Officer rejected the claim for deduction under section 80-O, distinguishing it from the Supreme Court's decision in CBDT v. Oberoi Hotels India (P.) Ltd., where services were rendered abroad. The Officer noted that the assessee's services, including sourcing, negotiating, quality controlling, and shipping logistics, were rendered in India, and therefore, did not qualify for the deduction under section 80-O. CIT(A)'s Decision: The CIT(A) upheld the Assessing Officer's decision, emphasizing that the services were rendered in India, and thus, the assessee was not eligible for deduction under section 80-O. The CIT(A) also noted that the CBDT Circular No. 700 did not extend the definition of services rendered 'from India' to include services rendered 'in India'. Arguments by Assessee: The assessee argued that the interpretation of section 80-O by the Assessing Officer and CIT(A) was incorrect. The assessee relied on several court decisions and CBDT Circular No. 700, asserting that services rendered from India and utilized by non-resident parties should qualify for the deduction. The assessee also contended that the services were partly rendered abroad and partly in India, and for practical purposes, these should be considered equal. Tribunal's Analysis: The Tribunal examined the provisions of section 80-O, which stipulate that the income must be in consideration of the use outside India of any patent, invention, model, design, secret formula, or technical or professional services rendered outside India. The Tribunal noted that the assessee's services were primarily as a buying agent, which included locating manufacturers, quality control, and shipping logistics, all activities carried out in India. The Tribunal highlighted that the relationship between the assessee and the foreign enterprises was that of principal and agent, and the commission was received based on the net value of purchases. The Tribunal found no evidence that the assessee provided technical or professional services that were used by the foreign enterprises outside India. Legal Precedents: The Tribunal referred to the Delhi High Court's decision in EPWDa Costa, which interpreted the scope of 'use' under section 80-O. The Tribunal concluded that the assessee's services did not meet the criteria for 'use' outside India as required by section 80-O. The Tribunal also cited the Supreme Court's decision in Novopan India Ltd. v. Collector of Central Excise and Customs, emphasizing that exemptions must be strictly construed. Conclusion: The Tribunal concluded that the services rendered by the assessee as a buying agent did not qualify as professional and technical services under section 80-O. The Tribunal dismissed the appeal, stating that the assessee did not meet the conditions for deduction under section 80-O, and the request for a liberal interpretation could not be accepted. Final Judgment: The appeal was dismissed, and the assessee was not entitled to the deduction under section 80-O.
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