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TMI Blog2013 (3) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. It was submitted by the Ld. A.R. that the C.O. of the assessee is not pressed and accordingly, the same is dismissed as not pressed. 3. Now, we take up the appeal filed by the assessee. In this appeal, the assessee has raised as many as 13 grounds of appeal but the only grievance of the assessee is this that the jurisdiction exercised by CIT u/s 263 is wrongly exercised by him and, therefore, the same should be quashed. 3.1 The brief fact are that it was noted by Ld. CIT in the order passed by him u/s 263 that the assessee has claimed deduction u/s 80-O in respect of the amount received by the assessee on account of sale consideration of technical know how. CIT was of the view that in the case of sale transaction, the A.O. has erroneously allowed deduction of ₹ 2,55,21,132/- u/s 80-O of the Income tax Act, 1961. There was one more objection of CIT as noted by him in the order passed by him u/s 263 of the Income tax Act, 1961 that the assessee has claimed deduction u/s 80HHC and for claiming the same, the assessee has excluded excise duty and sales tax from total turnover and, therefore, it has resulted in excess allowance of claim u/s 80HHC of the Income tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also drawn our attention to page 118 of the paper book where the A.O. discussed the issue regarding deduction u/s 80HHC and u/s 80-O and therefore, CIT had no jurisdiction u/s 263 on these two issues. He also submitted that the term 'use' is wide enough to include sales. At this juncture, a query was raised by the bench as to whether the assessee has established that the buyer of technical know how had used the know how only outside India or that he could not use the technical know how in India or the buyer can use the same only outside India. In reply, it was submitted by the Ld. A.R. that this is not the dispute raised by Ld. CIT and the only dispute raised by CIT is this that the sale is not user. He submitted that the sale also includes user and in support of this contention, reliance was placed on Circular No.187 dated 23.12.1975 as reported in 102 ITR (statute) 83. Reliance was also placed on the following judicial pronouncements: (a) 323 ITR 174 (Bom.) CIT Vs Charles m. Correa (b) 231 ITR 148 (S.C.) CBDT vs Oberoi Hotels (India) Pvt. Ltd. (c) 195 ITR 81 (S.C.) Continental Construction Ltd. Vs CIT 3.3 He also submitted that even if it is considered necessary by the Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the receipt in question is of consideration for the use outside India of any patent, design or registered trade mark etc. Although the basis of objection raised by the CIT is this that since these receipts are on account of sale of technical know how and the sale cannot be considered as received on account of user of such technical know how outside India. But the fact remains that he also objected on this aspect that the receipt in question is not on account of technical know how having been used outside India and hence, this objection of the Ld. A.R. is not correct that if it is found that sales also include user then there is no merit in the objection of CIT. In our considered opinion, even if we accept that the sale also include user then also, it has to be seen as to whether as per the terms of sale, the buyer can use the technical know how etc only outside India or whether he can use the same in India also. In reply of a specific query by the Bench, Ld. A.R. could not point out any restriction in the sale agreement as per which the buyer is debarred from using the technical know how purchased by the buyer in India and hence, it is possible that the same might have been used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es M Correa as reported in 323 ITR 174, we find that this judgement is also of no help to the assessee in the present case because in that case, a clear finding was given that it was not in dispute that the designs provided by the assessee were used outside India. In the present case, we have seen that this is not established by the assessee that technical know how transferred by the assessee could be used only outside India by the buyer and the buyer cannot use the same in India. - The 2nd judgement is of Hon'ble Apex Court rendered in the case of Continental Construction Ltd. Vs CIT as reported in 195 ITR 81. This is long judgement and it was submitted by the Ld. A.R. that the relevant pages are 122-123 of this ITR. On these pages, we find that the discussion is regarding segregating of receipt on account of contract in two parts in India to find out part which will fall u/s 80-O and which part will fall u/s 80HHB. In our considered opinion, this judgement does not throw any light as to whether even in any situation where the consideration is received on account of sale of technical know how and in the absence of any restriction that the buyer is debarred from using the same in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80HHC and we have already held that on this aspect. CIT was not having any jurisdiction u/s 263 and hence, these judgements are of no relevance with regard to the issue connected with Section 80-O of the Income tax Act, 1961. 3.9 In view of our above discussion, we do not find any reason to interfere in the order of CIT passed by him u/s 263. Regarding this contention of the Ld. A.R. that the matter may be restored back to his file for examining this aspect for user outside India, we find that CIT had simply directed the A.O. to frame de novo assessment after hearing the assessee and hence, this argument is not relevant for deciding the present appeal. 3.10 In the result, this appeal of the assessee is dismissed. 4. Now, we take up the appeal filed by the revenue. The grounds raised by the revenue are as under: "On the facts and circumstances of the case and in law. the Id. CIT(A) has erred in holding that the excise duty and sales will riot be included in the total turnover while calculating the deduction U/s.8OHHC of the Act without considering the fact that the issue in question is yet to be decided by the Highest Court of the Land. On the facts and circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould go back to the file of Ld. CIT(A) for deciding this issue afresh in order to enable the assessee to bring cogent evidence on record to establish that there were restriction on the buyer debarring him from using the technical know how in India at any point of time. If the assessee is able to do so then the assessee might have a case for allowing deduction u/s 80-O but in the absence the assessee's ability to establish this, that there was restriction on the buyer debarring him from using technical know how in India at any point of time, in our considered opinion, the assessee is not eligible for deduction u/s 80-O on account of this receipt because in that situation, it cannot be said that the receipt in question is a consideration for user of technical know how outside India. Hence, we set aside the order of CIT(A) on this issue and restore the matter back to his file for afresh decision. He should pass necessary order as per law as per above discussion after providing reasonable opportunity of being heard to both the sides. Ground No.3 stands allowed for statistical purposes. 4.3 In the result, the appeal of the revenue stands partly allowed for statistical purpose. 5. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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