Examination of an agreement for purpose of Sec.80-O. - Income Tax - 1887/1991

INSTRUCTION NO. 1887/1991 Dated: August 23, 1991 In paragraph 3(xix) of the Board's Instruction No. 1813 (F.No. 516/4/87-FTD) dated 27.3.1989, it was emphasised that the CCIT/DGIT has to examine the applicability of section 80HHB to a particular agreement before approving the same under section 80-O. It was further stated therein that if any part of the consideration under the agreement falls within the ambit of section 80HHB, it cannot be considered for the purpose of section 80-O. 2. The Bombay High Court, in a recent judgment delivered on 17.9.1990 in the writ petition NO. 14 of 1988 filed by M/s Stup Consultants Ltd., has pointed out that the legislature has given jurisdiction to administer and apply section 80HHB to the Assessing Officer whereas the jurisdiction to approve agreements under section 80-O vests in the Board (now CCIT/DGIT). The High Court has held that the Board should continue to consider the agreements in question purely from the point of view of section 80-O and grant or refuse approval on that basis. The Board may, if so advised, qualify the approval by making it clear that it will be open to the Assessing Officer examine whether the whole or part of the income under the agreement falls under section 80HHB(1), so as to disentitle such income from the benefit under section 80-O. 3. The above judgment of the Bombay High Court has been accepted by the Board. Accordingly, the existing instructions contained in paragraph 3(xix) of the Board's Instruction No. 1813 dated 27.3.1989 may be treated as withdrawn. The following sub-paragraph may be substituted for the existing one; "(xix) While examining an agreement for the purposes of section 80-O, the CCIT/DGIT should consider the agreement in question purely from the point of view of section 80-O and administration and application of section 80HHB vests with the Assessing Officer and not with the CCIT/DGIT. Hence, in the order passed under section 80-O, it is open to CCIT/DGIT to qualify the approval by making it clear that it will be open to the Assessing Officer to examine whether the whole or part of the income under the agreement falls under section 80HHB so as to disentitle such income from the benefit under section 80-O. 4. As a direct consequence of the above, in cases where the CCIT/DGIT feels that section 80HHB is applicable, the following paragraph may be added to the specimen order (enclosed with the Instruction No. 1813 dated 27.3.1989 to be issued by the CCIT/DGIT under section 80-O, as paragraph 3 after the existing paragraph 2, renumbering the remaining paragraphs as 4 to 7: '3. The above approval is subject to the condition that it will be open to the Assessing Officer to examine whether the whole or part of the income under the agreement falls under section 80HHB(1) so as to disentitle such income from the benefit under section 80-O'. 5. These instructions may please be brought to the notice of all officers working in your region.