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TMI Blog2018 (4) TMI 1373X X X X Extracts X X X X X X X X Extracts X X X X ..... nd order dated 13.12.2006 passed by the High Court of Delhi in I.T. Appeal No. 1198 of 2006 whereby the Division Bench of the High Court dismissed the appeal filed by the appellant herein against the order dated 10.10.2005 passed by the Income Tax Appellate Tribunal, Delhi Bench (in short the Tribunal ) in ITA No. 1603/D/2002. 2) Brief facts: (a) The Appellant herein filed return disclosing income of ₹ 57,40,360/- for the Assessment Year (AY) 1997-98 while claiming deduction of ₹ 58,87,045/- under Section 80-O of the Income Tax Act, 1961 (in short the IT Act ) on a gross foreign exchange receipt of ₹ 1,17,74,090/- received from Sumitomo Corporation, Japan. Sumitomo Corporation was interested in supplying dies for manufacturing of body parts to Indian automobile manufacturers and entered into a contract with the Appellant under which the services of the Appellant herein were engaged by using his specialized commercial and industrial knowledge about the Indian automobile industry. Sumitomo Corporation also agreed to pay remuneration at the rate of 5% of the contractual amount between Sumitomo Corporation and its Indian customers on sales of its products so d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that the Appellant is enjoying a very good professional reputation amongst manufacturers and traders and having a vast experience of the Indian automobile industry. The services so rendered by the Appellant were in fact rendered and the payment was received for having rendered those services. Learned counsel finally contended that the High Court committed an error in considering it a principal-agent relationship and the order passed by the High Court is liable to be set aside. 6) Learned senior counsel for the Respondent submitted that in order to claim deduction under Section 80-O of the IT Act, the information must be concerning industrial, commercial or scientific knowledge, experience or skill, which is made available to the non-resident party and it is difficult to hold from the material on record that the Appellant was having any information concerning industrial, commercial or scientific knowledge, experience or skill or he ever had in possession of any blue prints. Learned senior counsel further submitted that the manner or circumstances under which the proposed multipurpose vehicles of Telco under SAFARI project were finalized are not clear and no documents have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the income tax return declaring an income of ₹ 57,40,360/- which was selected for scrutiny by the Income Tax Department. While computing the income, a deduction of ₹ 58,87,045/- was claimed under Section 80-O of the Act on the gross receipts of ₹ 1,17,74,090/- received from Sumitomo Corporation of Japan in convertible foreign exchange in the name of M/s Pasco International wherein the Appellant was the sole proprietor. It was further explained that he had received the above amount in convertible foreign exchange as consideration for providing specialized industrial and commercial knowledge relating to the Indian automobile industry including therein the detailed information about the industry, analyzing the government policies relating to Indian automobile industry and also to identify opportunities for supply of products of M/s Sumitomo corporation to various customers in India and hence he is entitled to claim deduction under Section 80-O of the IT Act which had been claimed in the return of income filed. However, the Assessing Officer, by order dated 27.03.2000, disallowed the claim of deduction of ₹ 58,87,045/- under Section 80-O of the Act while holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e means a person who is 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. 12) Provisions similar to Section 80-O of the Act were originally in the former Section 85-C of the Income Tax Act, 1961 which was substituted by Finance (No. 2) Act, 1971. Section 80-O was inserted in place of Section 85C which was deleted by the Finance (No. 2) Act, 1967. While moving the bill relevant to the Finance Act No. 2 of 1967, the then Finance Minister highlighted the fact that fiscal encouragement needs to be given to Indian industries to encourage them to provide technical know-how and technical services to newly developing countries. It is also seen that the object was to encourage Indian companies to develop technical know-how and to make it available to foreign companies so as to augment the foreign exchange earnings of this country and establish a reputation of Indian technical know-how for foreign countries. The objective was to secure that the deduction under the section shall be allowed with reference to the income which is received in convertible foreign exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the word technical seems to be more in keeping with the object of the section. It has to be remembered that the word technology which has affinity with the word technical is concerned with the control of material environment by man. This is done by two means. Firstly, by the use of tools, and, secondly, by the application of reason to the properties of matter and secondly, by the application of reason to the properties of matter and energy. It would appear, therefore, that it would be reasonable to think that technical services should include the use of tools and machinery in addition to the use of reason. Managerial services which do not include any use of tools and machinery may not be regarded as technical services. 16) The blue prints made available by the Appellant to the Corporation can be considered as technical assistance provided by the Appellant to the Corporation in the circumstances if the description of the blue prints is available on record. The said blue prints were not even produced before the lower authorities. In such scenario, when the claim of the Appellant is solely relying upon the technical assistance rendered to the Corporation in the form of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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