9911796707
TMI Blog2004 (10) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... ration before us projected in the aforesaid grounds of appeal is as to whether the assessee is entitled to deduction under section 80-O. If so, what is the quantum of income on which the aforesaid deduction under section 80-O is to be allowed. 3. The facts of the case in assessment years 1995-96 and 1996-97 are as follows. The assessee in this case is an individual carrying on the business under the name and style of Leather Machinery Corporation. The assessee has experience of about 25 years in the field of leather machinery used in the leather garments and related industries. The assessee claimed that he was appointed consultant by the foreign companies to provide the following information and services : ( i )To collect information of the current state of the market in India for the foreign products including prices, sales and the opinions of the customers of the franchised products. ( ii )To carry out market survey of the franchised products and forward the same to them with expert observations and recommendations. ( iii )To inform about the production, market capabilities of the manufacturers engaged in similar activities in India and also the potential competition in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in regulating payments and dealing in foreign exchange. ( ii ) foreign enterprises means a person, which is a non-resident. ( iii )Services rendered or agreed to be rendered outside India shall include services rendered from India but shall not include services rendered in India." The assessee claimed that the assessee rendered services to the foreign principals outside the country for which he received the income by way of commission under convertible foreign exchange for supply of industrial/commercial technical knowledge, experience and skill outside the country to the foreign enterprises. According to the assessee, the foreign enterprise used the information supplied by the assessee and formulated and modified the specifications of the machinery based upon the information supplied after analyzing data collected by the assessee in India through knowing the market conditions, opinions of the customers of the product, carrying out the market survey and compilation of data collected as exhibitions. The assessee also claimed that he compiled information regarding market capabilities of the other manufacturers engaged in similar activities in India and also potential competi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yments to these persons for finding customers for the foreign buyers. Therefore, the assessee not only rendered the services in India himself but also got the services delivered by others in India to its foreign principals by making payments from its own. In its trading a/c., the assessee has shown purchase amounting to Rs. 11,92,826 and sales at Rs. 7,99,655. From the details filed with its letter dated 18th June, 1997, it was evident that the purchases were of clicking board, fortuna parts, band knives, needles etc. and other parts, which were imported items. The sales also represent the same items. In its letter dated 18th June, 1997, the assessee stated that the sales is only to feed the customers who are importing machinery from the foreign principals which was incidental to the commission business. Thus, the assessee helped the Indian customers who had imported from its foreign buyers in the maintenance of the machinery. Otherwise maintenance etc. for a particular period would have been responsibility of the principals. 7. As far as assessment year 1996-97 is concerned, the Assessing Officer referred to the reasons given in assessment year 1995-96 and denied claim for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. The assessee explained the modus operandi and the Assessing Officer did not express his opinion that the modus operandi adopted by the assessee amounted to rendering the services to foreign enterprises from India. It was further submitted by him that in assessment year 1997-98, he filed before the Assessing Officer the agreement between the assessee and the foreign enterprise under which the services to be rendered by the assessee to the foreign enterprise have been duly explained. According to him the information provided by the assessee to the foreign enterprise had been utilized by the foreign enterprise on deciding the sales strategy to be adopted in India for the sales of their products. It was therefore submitted that the assessee had rendered technical services to a foreign enterprise outside India from India and that the remuneration received for rendering such services in convertible foreign exchange was eligible for deduction under section 80-O of the Act. The learned Counsel placed reliance in the following decisions : CIT v. Travel Corpn. of India Ltd. [1994] 209 ITR 555 (Bom.) Dy. CIT v. Mittal Corpn. [2001] 77 ITD 270 (Delhi) Dy. CIT v. Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same reveals that the assessee was to collect information about the current state of market in India for the product of the principal. The assessee was also to provide information of the marketing potential of the principal s product. The assessee has also been furnishing the particulars about the potential clients to the various principals product in India. The assessee has also furnished the prices at which the competitors are selling their products in India. The assessee has been appraising the foreign principal about the trends in the Indian leather industry. Copies of the relevant correspondence with foreign principals are placed at 2 to 28 of assessee s paper book. From a perusal of these documents it is clear that the assessee has been giving out technical information to the foreign enterprise and that such information is capable of being utilized by the foreign enterprise for the purpose of sale of its machine in India. The CBDT in its Circular No. 700 dated 23-3-1995 has clarified that if professional and technical services which are rendered from India and received by a foreign enterprise outside India for use by such foreign enterprise to sell its products in Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directions which have been given above. 16. Ground No. 5 in ITA Nos. 701 and 702 is with regard to the action of the revenue authorities in holding that deduction under section 80-O should be computed on the net income and not of income brought or received into India in convertible foreign exchange. This issue is no longer res integra and has been decided by the Full Bench of Hon ble Delhi High Court in the case of CIT v. Chemical Metallurgical Design Co. Ltd. [2001] 247 ITR 749 wherein it has been held that deduction under section 80-O was to be allowed on the net income after deducting expenses and not on the gross receipts. 17. In view of the above ground No. 5 of grounds of appeal in both assessment years 1995-96 and 1996-97 are dismissed. 18. What remains for consideration is ground No. 6 in the assessment years 1995-96 and 1996-97. The disallowance out of telephone expenses were made by the Assessing Officer in both the assessment years on the ground of personal use of telephone. A sum of Rs. 6,582 and Rs. 659 has been disallowed for the assessment years 1995-96 and 1996-97. The orders of the revenue authorities on this issue is just and proper and cal ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
