9911796707
TMI Blog1992 (8) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ril 18, 1978, between the petitioners and a company in Indonesia known as "P. T. Godrej, Indonesia" (which shall, hereinafter be referred to as "the foreign company"). The petitioners are well known manufacturers of steel and metal products such as safes, security equipment, indexing reference and retrievable systems, storage, shelving and locking systems including slotted angles, seating and desk systems, hospital fabrication equipment, locks and locking devices, cash boxes, cabinets and custom-oriented metal fabrication, etc. They entered into two agreements dated April 18, 1978, with the foreign company for establishing a plant in Indonesia for the manufacture of the same line of products as manufactured by the petitioners in India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end all such matters and things relating to the business and affairs of the foreign company". The petitioners were required to have control over the "general management" of the foreign company's business transactions and charge and custody of all the property, books of account, papers, documents and effects belonging to the foreign company. They were required to keep or cause to be kept proper and complete books of account of the dealings and working of the foreign company and also prepare and keep or cause to be prepared and kept, quarterly reports and accounts and such other estimates and such further or other reports and accounts as the board of directors direct them from time to time. Clause VII, particularly, vests in the petitioners, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the main thrust of the agreement under reference was the provision of managerial service which fell outside the ambit of section 80-O of the Act, and, therefore, declined to grant approval under section 80-O of the Act by the impugned order dated April 11, 1991. Mr. Dwarkadas, learned counsel for the petitioners, took us through the material provisions of the agreement and contended that the agreement was not an agreement for management simpliciter, as understood by the Department. He submits that it also includes rendering of "technical services" as the petitioners were obliged, under the terms of agreement, to depute, inter alia, fully qualified and experienced managers, engineers, technicians, production specialists and such other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Delhi High Court had to slightly modify its view in a subsequent judgment, in Oberoi Hotels (India) Pvt. Ltd v. CBDT [1982] 135 ITR 257 (Delhi). In this case, the Oberoi Hotels had agreed to take over and manage a hotel in Kathmandu, Nepal, in all its various aspects. The Division Bench of the Delhi High Court went into the details of the agreement and concluded that, though the agreement did amount to an agreement for rendering managerial services, considering the expertise required in running a five star hotel, it could not be postulated that the " managerial services" rendered under the agreement in question would not amount to "technical services" within the meaning of section 80-O of the Act. In this view of the matter, the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80-O of the Act, according to the petitioners. For the Department, Dr. Balasubramanian contended that the petitioners had themselves decided to bifurcate their contractual obligation into two categories. One was for supply of information with regard to technical matters which was signed separately and styled as "Technical Assistance Agreement" ; the Department had no objection to approving this and, rightly, this agreement has been approved under section 80-O. The other was with regard to managerial services, styled as "Management Service Agreement", which is a pure and simple agreement to render managerial services of such nature which does not amount to "technical service" within the meaning of section 80-O of the Act. When Dr. Balas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the law as laid down by the Supreme Court in Continental Construction's case [1992] 195 ITR 81. In this view of the matter, the petition is allowed. The impugned order dated April 11, 1991, (exhibit 'D'), by which approval to the management service agreement was refused is hereby quashed and set aside. The application dated September 19, 1989, made by the petitioners is sent back to the respondents for reconsideration in accordance with law. The respondents may obtain such clarification in the matter as they desire from the petitioners and, after giving a hearing to the petitioners, shall, as expeditiously as possible decide the application. Rule is, accordingly, made absolute. However, in the circumstances of the case, there s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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