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2012 (11) TMI 134 - AT - Income TaxDeduction u/s 80-O services rendered from India or Services rendered in India - services rendered outside India - held that - the finding of CIT(A) in the instant case was that assessee has rendered services to the ONGC in India. Insofar as services were rendered in India, the assessee is not entitled for deduction u/s 80-0 irrespective of the utilization of such services by the foreign enterprise either in India or outside India. Meaning thereby if the services are rendered by assessee from India, the mere fact that foreign enterprises has utilized these services in India would not disentitle it from claiming deduction u/s 80-0, but if the services are rendered in India and not from India, assessee s claim for entitlement u/s 80-0 will not be allowed. In the instant case no clear finding has been recorded by CIT(A) that services rendered by the assessee from India to the foreign enterprise and the foreign enterprise after receipt of such services outside India had utilized it in India and it is not a case of rendering of services by the assessee at ONGC platform in India so as to bring it within the ambit of Circular No. 700 dated 23.3.95.
Issues Involved:
1. Eligibility for deduction under section 80-O of the Income Tax Act, 1961. 2. Interpretation and application of Explanation (iii) to section 80-O. 3. Relevance and application of CBDT Circular No. 700 dated 23.03.1995. 4. Interpretation of the High Court decisions in the cases of Anand & Anand vs. CIT and Eicher Consultancy Services Ltd. vs. CIT. Detailed Analysis: 1. Eligibility for Deduction under Section 80-O: The primary issue revolves around whether the assessee is entitled to a deduction under section 80-O of the Income Tax Act, 1961. The assessee claimed a deduction for professional and technical services rendered to foreign parties, which was initially restricted by the Assessing Officer (AO) to a specific amount based on the net income from one project. The CIT(A) upheld the AO's decision, stating that the services were rendered in India, thus disqualifying the deduction under section 80-O. However, the ITAT remanded the case for fresh adjudication, emphasizing the need to consider the CBDT Circular No. 700. 2. Interpretation and Application of Explanation (iii) to Section 80-O: Explanation (iii) to section 80-O clarifies that "services rendered or agreed to be rendered outside India shall include services rendered from India but shall not include services rendered in India." The AO and CIT(A) concluded that since the services were rendered in India, the deduction under section 80-O was not applicable. The ITAT highlighted the need to determine whether the services were rendered from India and received by a foreign enterprise outside India, as per the CBDT Circular. 3. Relevance and Application of CBDT Circular No. 700: CBDT Circular No. 700 dated 23.03.1995 states that deduction under section 80-O would be available if the services are rendered from India and received by a foreign government or enterprise outside India, even if the benefit is utilized in India. The ITAT emphasized that the AO must consider this circular while re-evaluating the case, as it binds all income tax authorities. The circular clarifies that the location of service utilization does not affect the eligibility for deduction, provided the services are rendered from India. 4. Interpretation of High Court Decisions: The ITAT considered two relevant High Court decisions: - Anand & Anand vs. CIT: This case held that services rendered in India do not qualify for deduction under section 80-O, as the professional services were not rendered from or outside India. - Eicher Consultancy Services Ltd. vs. CIT: This case upheld the deduction under section 80-O, emphasizing that services rendered from India to a foreign entity qualify for the deduction, irrespective of where the services are utilized. The ITAT noted that the CIT(A) relied on the Eicher Consultancy Services Ltd. decision, which supports the assessee's claim if the services were rendered from India. However, the ITAT found that the CIT(A) did not clearly establish whether the services were rendered from India or in India, necessitating a remand for further examination. Conclusion: The ITAT concluded that the matter requires a fresh evaluation to determine if the services were rendered from India and received by a foreign enterprise outside India. The CIT(A) must re-examine the case, considering the CBDT Circular No. 700 and the relevant High Court decisions. The appeal was allowed for statistical purposes, and the matter was restored to the CIT(A) for a detailed and clear determination based on the directions provided.
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