9911796707
TMI Blog1992 (8) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... Board of Direct Taxes, by their order of 6th/10th of March, 1986, declined to approve the agreement under section 80-O. The Board also did not grant approval in a review petition which was filed by the petitioners. Hence, the present writ petition has been filed. The agreement of September 23, 1982, which is annexed as exhibit recites that the petitioner company has developed and acquired technical expertise in the areas of design and developing heating, ventilating and air-conditioning systems and in selection of appropriate heating, ventilating and air-conditioning equipment from various international markets and sources. It also recites that the petitioner-company has offered to make available its technical know-how and services and exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to certain deductions provided in that section. An application for approval of the agreement is made to the Central Board of Direct Taxes in the prescribed form and verified in the prescribed manner prior to October 1 of the assessment year in relation to which the approval is first sought. As from April 1, 1983, section 80HHB has been added to the Incometax Act, 1961. Where the gross total income of the assessee includes any profits and gains derived from the business of execution of a foreign project undertaken by the assessee in pursuance of a contract entered into by him or the execution of any work undertaken by him and forming part of a foreign project undertaken by any other person in pursuance of contract entered into by s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Suitable disallowance for the non-qualifying services, after taking into consideration the totality of the agreement, so that the balance of the royalty/fees, etc., which is for the services covered by section 80-O, can be exempted". This circular has been approved by the Supreme Court in the case of Continental Construction Ltd. v. CIT [1992] 195 ITR 81 (at page 132), and the Supreme Court has said that, "the Board has chalked out for itself, we think quite legitimately and properly, a very detailed and dominant role as to the availability of exemptions under section 80-O.... while granting the approval under section 80-O, the Board has not only the jurisdiction but also the responsibility of examining the agreement submitted for appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard has to see whether the consideration or a part of it is covered by section 80-O or not. Even if it is a composite agreement, if any part of the consideration can be held to be income falling under section 80-O, the Board is required to approve the agreement in the light of the circular which we have referred to above and the ratio of the Supreme Court's decision referred to above. The order of the Board suffers from non-application of mind to the relevant provision of section 80-O and the circular. The second order of March 20, 1986, also sets out that "the main activity under the agreement is squarely covered by the provisions of section 80HHB. In view of the specific prohibition of sub-section (5) of section 80HHB", therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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