Income Tax Appellate Tribunal - Delhi
Capt. K.C. Saigal vs Income-Tax Officer on 17 April, 1995
Equivalent citations: [1995]54ITD488(DELHI)
ORDER
B.S. Saluja, Judicial Member
1. The assessee is in appeal against the order of CIT(A)-XVII, New Delhi dated 6-6-1994 mainly on the ground of disallowance of the claim for deduction of Rs. 14,74,272 under Section 80-O of the Income-tax Act.
2. The assessee filed the return of income on 30-10-1992 declaring nil income. The case was processed under Section 143(1 )(d) on 19-2-1993 and it was selected for scrutiny to vouch-safe the correctness of claim of deduction under Section 80-O to the extent of Rs. 14,74,262. A notice was issued under Section 143(2) and the assessee filed information/details and documents like copies of agreements etc. The Assessing Officer observed that the assessee was carrying on brokerage activites under the name and style of M/s. Interocean Company, 75 Link Road, New Delhi and that the assessee was a ship broker of the foreign ship-owners/ship charteres and received a specified commission @ 1.25% out of the hire charges remitted by the Indian clients to foreign ship-owners/charterers in accordance with the agreements. He also observed that the agreements were being signed by the assessee for each transaction of hiring ships on behalf of the foreign ship-owners/charterers as their brokers.
2.1 The Assessing Officer proceeded to examine as to whether the services provided by the assessee qualified for deduction under Section 80-O of the Income-tax Act, 1961. He examined the guidelines for approval of agreements laid down in the Circular No. 253 dated 30-4-1979 issued by the Central Board of Direct Taxes. The Assessing Officer observed that in the said circular, with reference to information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided, it is mentioned that such information should not be merely of statistical type collected or collated from commercial or scientific journals or other commonly available sources of information, but it should be information concerning the industrial, commercial or scientific knowledge, experience or skill processed or developed by Indian Party. The Assessing Officer further noted that the technical services rendered or agreed to be rendered to the foreign party should relate to productive fields such as (a) mining, or (b) generation or distribution of electricity or any other form of power, or (c) engineering services, and services such as those relating to management, organisation, sales, finance and accounts will not qualify for the said purpose. The said circular also mentioned that technical services which were rendered in India would not qualify for the said purpose. The said circular further provided that the agreements providing for participation in business and management operations abroad simpliciter in return for a specified percentage of commission or profits will not be eligible for approval. The Assessing Officer further observed that although the said circular covered the period when the approval was to be granted by the CBDT, which had been discontinued with effect from assessment year 1992-93, but the instructions mutatis mutandis apply as the same had not been superseded by any subsequent instructions on the subject. The Assessing Officer further observed that the assessee was signing the agreements for the limited purpose of liaisoning for a specified percentage of commission as a broker of the foreign ship-owners /charterers who supplied him ready-made information of all kinds regarding ships, their loading capacity etc. and the Indian clients pass on all the information regarding their cargo and their destinations etc. He went on to observe that gathering of information regarding ports, the handling capacity and weather conditions etc. is available to the assessee easily from the commonly available sources and that the assessee's liaisoning is over, the moment the agreement was signed and the specified percentage of brokerage was quantified and incorporated in the agreements. He further observed that the role of broker by and large ended and the role of agents began, who are also appointed by the foreign ship-owners/charterers. He held that the assessee had developed nothing of his own and that he possessed mere information received from both the foreign charterers and Indian clients, which information was passed on between the parties and brokerage was earned. He further observed that the assessee was offering liaisoning to Indian clients from India and within India and his area of operation was confined to brokerage only and that he was not responsible for anything beyond that. According to him the information passed on by the assessee to foreign enterprise/charterers was merely regarding the intending Indian clients, their cargoes and related to requirements of ships and that such services were denied concessions under Section 80-O vide paragraphs (iv), (v) and (vii) of the aforesaid instructions issued by the CBDT.
2.2 The Assessing Officer further examined the provisions of Section 80-O and observed that for the applicability of the said section agreements should be between the assessee and the foreign ship-owners/ charterers, and the commission should be received in convertible foreign exchange which should be brought into India from outside India. With reference to the second requirement, the Assessing Officer further observed that the assessee's brokerage was being deducted by the Indian clients from out of the total hiring charges to be paid to foreign ship-owners/charterers and was being paid to the assessee in India in Indian currency by the Indian clients. He further observed that the agreement of the assessee was not with the foreign enterprise/ship owners but he was merely signing on behalf of the foreign ship-owners/ charterers as their broker only for the limited purpose of earning brokerage. He further observed that the provisions of Section 80-O had been extended to cases of individuals and the approval of CBDT/Chief Commissioner for the agreements had been done away with and that the simplification of procedure has always been the endeavour of legislation, but the original intention of the legislation while granting concession could not be overlooked and the concessions were to be allowed in cases which really deserve the same after careful examination of the facts and circumstances of each case. He further observed that in the present case the assessee's services to Indian clients as a broker did not qualify for deduction under Section 80-O. Therefore, even if certain payments, as indicated by the assessee in his letter dated 30-12-1993, had been received by him from abroad, the said payments will not be eligible for deduction under Section 80-O. 2.3 The Assessing Officer further referred to the directions issued by the DCIT, Range-12, New Delhi under Section 144-A vide his order dated 22-12-1993. In the said directions the DCIT had referred to the decision of the Hon'ble Supreme Court in the case of Patron Engg. Construction (P.) Ltd. v. CBDT [1989] 175 ITR 523, wherein the Apex Court had held that the CBDT was justified in refusing to approve the agreement on the ground that according to the said agreement the contract price was received by the appellant company for an Indian company, in other words, income by way of royalty, commission or fees had not been received by the appellant company from the Government of a foreign State or enterprise and that the agreement had been entered into by the appellant company with an Indian company and they were not with the foreign State or enterprise. In the light of the said decision, the Assessing Officer observed that in the assessee's case, the agreements were signed by the assessee on behalf of foreign enterprise and the money had been received by the assessee from the Indian party in Indian rupees in India and not from foreign party. He also made a reference to the decision of the Hon'ble Delhi High Court in the case of J.K. (Bombay) Ltd. v. CBDT[ 1979] 118ITR 312, wherein it was held that "technical services in Section 80-O cannot include commercial or managerial services. In this view of the matter the services of managing agents rendered by the Indian company to a foreign company are not technical services within the meaning of Section 80-O".
2.4 In view of the foregoing discussion, the Assessing Officer held that the assessee was not entitled to deduction under Section 80-O and denied the said deduction to the assessee.
3. On appeal before the CIT(A), the learned counsel for the assessee submitted that the assessee is a master mariner having over 40 years of experience in the marine line. During the year under consideration, the assessee received an aggregate amount of Rs. 29,48,524 from various ship-owners for services rendered to them. He further submitted that the said amount was received in foreign exchange/convertible foreign exchange. In this connection he stated that the only requirements of Section 80-O are that the assessee must be an Indian company or a person (other than a company) resident in India, the income should be by way of royalty, commission, fee, etc., or similar payment which should be received from a person who is a non-resident and the consideration must be for supply of commercial, technical or scientific knowledge or similar services rendered abroad or rendered in India for use outside India. He submitted that the assessee duly satisfied all the said conditions. The learned counsel mentioned that the job of the assessee commenced with collection of up to date daily information regarding possible cargo, worldwide and also the availability of various types of ships, worldwide. He mentioned that the said work was carried out by the assessee while keeping in touch with various agencies likely to charter vessels for freight movement, type of cargo and the possible rate offered. He mentioned that the second aspect regarding vessels was the collection of information about the ship-owners, shipping conventions, types of vessels, their capacity and see-worthiness. The assessee also had to gather information about the past background of the ship-owners/charterers and their capacity to perform. The assessee was also engaged in the drafting of agreements which again was a professional job involving in depth knowledge of sea faring activities. He further submitted that the assessee was paid commission/fees both for developing such contracts, which were of special nature, and also for providing information of all commercial, technical, legal and mechanical aspects on which all negotiations and conclusions of contracts of employment were based. He submitted that for these purposes, the assessee had built up an international network of communications in the field of shipping and chartering. He further submitted that the Assessing Officer had relied on the Board's circular which was no more in force after the statutory requirements of seeking Board's approval to the agreements had been dispensed with and, therefore, the very basis on which the Assessing Officer had proceeded to deny the deduction to the assessee was erroneous. The learned counsel relied on the decisions of the Hon'ble Delhi High Court in the case of E.P.W.Da Costa v. Union of India [1980] 121 ITR 751 and the Hon'ble Supreme Court in the case of Continental Construction Ltd. v. CIT[1992] 195 ITR 81. The learned counsel also submitted that the assessee had been advising his clients to suitably alter their vessels or provide additional equipments to suit port conditions. He also submitted that the Assessing Officer had committed factual error in observing that the clients Were deducting assessee's share of brokerage from out of the total hiring charges and paying it in Indian currency. He submitted that in three cases, foreign exchange had directly been received by the assessee while in the rest of cases the assessee's bankers had received foreign exchange credit advices on the basis of which the converted equivalent of Indian rupees had been credited to the assessee's account. He emphasised that such credits fell within the meaning of convertible foreign exchange in terms of Foreign Exchange Regulation Act. He further submitted that the nature of services provided by the assessee would fall in the category of technical services inasmuch as, in the case of sister-concern, namely, M/s. Eastern Bulk Services, the Tribunal had held that the deduction admissible under Section 35-B was available because the services rendered were technical in nature and as the services rendered by the assessee were of similar nature, the assessee would be covered within the scope of admissibility of deduction permitted under Section 80-O. He also submitted that in the assessee's own case in ITA No. 1029 (Del.) 84 it was held that the assessee was imparting information concerning industrial, commercial or scientific knowledge, experience or skill. In support of the claim, the learned counsel also filed written submissions along with a paper book containing several documents.
3.1 The CIT(A) after considering the submissions made by the learned counsel, held that
(a) there was no dispute about the fact that the only set of agreements from which the assessee had received commission brokerage were those entered into between the foreign ship owners and the clients, the majority of which happened to be Indian parties and that in all the said agreements the assessee had been a party for and on behalf of the foreign ship owners and thus the identity of the assessee, in all those contracts, had not been separate from the foreign ship owners and the view taken by the DCIT that the role of the assessee had been that of an agent seemed more plausible;
(b) there was no evidence to suggest the relationship between the assessee and the foreign ship owners to be that of principal to principal because after execution of the contracts the assessee had been rendering all the ancillary services connected with the shipment ;
(c) the commission brokerage received by the assessee had been a fixed percentage of the freight which crystallised with the shipment of the cargo and there were no further conditions attached thereto. As such the CIT(A) upheld the view of the Assessing Officer that the role of the assessee had been that of an agent and it was only logical to conclude that the assessee had been engaged in the business on commission basis ;
(d) all the services like location of the clients and foreign ship owners, negotiations and conclusions of fixture on behalf of the foreign parties, advising and delivering the contracts to the concerned parties, following-up ship movement and cargo position, facilitating coast and port declaration and berthing of vessels, rendering advice on market conditions and also playing the role of a broker in undertaking the obligation to be a party in the event of requirement of an arbitration or litigation were part of contractual services that a normal agent was required to render and those services clearly fell in the nature of managerial services and not in the nature of technical or professional services ;
(e) relying on the observations made by the DCIT in his order made under Section 144-A of the Income-tax Act, 1961, that the case of the assessee was on a different set of facts than those involved in the cases of E.P.W. De Costa (supra) and Continental Construction Ltd. (supra), though the requirement of Board's approval was not involved because of change in law, yet the legislative intention of the scope of coverage of relief contemplated under Section 80-O, as explained in the Board's circular under reference, would continue to hold good and the twin objectives underlying the tax concession in Section 80-O, namely, promotion of export of Indian technical know-how and augmentation of foreign exchange resources, would continue to govern the admissibility of relief under Section 80-O, that the brokerage commission to which the assessee was entitled had been credited to his account by the Indian parties out of the freight charges payable to the foreign ship owners and the credit in the account was obviously in terms of Indian rupees, that in terms of the general permission accorded by the Reserve Bank of India vide notification No. GSR 1159, the assessee had been working for and on behalf of the foreign ship owners, that the majority of the commission brokerage received by the assessee was from Indian parties, and it had come directly from them into the account of the assessee through credit advice and that the requirements of law that the receipt should be from Government of a foreign State/Foreign Enterprise could not be conclusively held to be satisfied, that it was doubtful whether such receipt could either be held to be in terms of convertible foreign exchange, and that the services rendered by the assessee could not be construed to be falling in the category of technical or professional services and, therefore, the requirement of law could not be held to be satisfied, the CIT(A) held that the case of the assessee was materially different from the cases of E.P. W. Da Costa (supra) and Continental Construction Ltd. (supra) and that the decision of the Hon'ble Delhi High Court in the case of J.K. (Bombay) Ltd. (supra) would have a better application rendering the analogy of Section 35-B equally inapplicable.
In view of the foregoing, the CIT(A) finally held that the assessee did not fulfil the conditions laid down for the tax concession under Section 80-O and declined to interfere with the denial of relief by the Assessing Officer.
4. The learned counsel for the assessee Shri S.E. Dastur submitted that the assessee is a ship broker and on the basis of information received by him from the parties intending to send cargo, he used to contact ship owners of such ships which could meet the needs of carrying particular cargoes. The assessee had also to ensure that the ship owners who pick up the cargoes would transport it within time and at the agreed rates. Thus the assessee used to bring the ship owners and the parties interested in sending their cargoes together and in the process he exchanged various types of specialised information with the ship owners and the concerned parties. The assessee also used to counsel the ship owners and the other parties on various issues before conclusion of the agreements between them. The learned counsel further submitted that in lieu of the said services the assessee received a brokerage of 1.25% of the freight charges payable to the foreign ship owners and that such brokerage was expressed in terms of foreign currency. He further submitted that the payment of brokerage was received either directly from the foreign ship owners or the same was deducted by the Indian parties out of the total freight charges payable to the foreign ship owners and that such deduction was made in terms of foreign currency and the same was received through the banks after converting the foreign currency into Indian rupees. He submitted that such payments, received after converting the foreign currency into Indian rupees, amounted to receipt of brokerage in convertible foreign exchange as the same had the effect of saving the remittance of foreign exchange and amounted to saving the foreign currency, or earning the same, which was the underlying purpose of the provisions in Section 80-O. In this connection he also invited our attention to the clarification given by the Reserve Bank of India, Exchange Control Department, on 4-10-1986 in the case of M/s. J.B. Boda & Co. Pvt. Ltd. The Reserve Bank of India had advised in that case that "the remittance of reinsurance premia after deducting the brokerage due to you would not violate the provisions of Foreign Exchange Regulation Act, 1973".
4.1 The learned counsel further submitted that the provisions of Section 80-O stipulate the following conditions for admissibility of deduction under that section, namely:
(a) the assessee should be an Indian company or a person (other than a company) who is resident in India ;
(b) the gross total income of the said assessee should include income by way of royalty, commission fees or any similar payment received by the assessee from the Government of a Foreign State or a Foreign Enterprise ;
(c) the said payment should be in consideration for the use outside India of any patent, invention, model, design, secret formula or process or similar property right or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to the aforesaid Government or Enterprise by the assessee; or
(d) the said payment should be in consideration of technical or professional services rendered or agreed to be rendered outside India to the said Government or Enterprise by the assessee ; and
(e) the payment referred to in items (c) & (d) is received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange.
The learned counsel submitted that in so far as the first two conditions relating to the assessee being resident in India and the recipient of payment from foreign Enterprise (in this case the foreign ship owners) are concerned, there is no dispute that the assessee fulfils the said two conditions. The dispute by the department is with reference to the third condition, namely, that the receipt of brokerage by the assessee is in consideration for the use outside India of information concerning industrial, commercial, or scientific knowledge, experience or skill made available by the assessee to the foreign ship owners. He emphasised that the claim of the assessee is based mainly on the furnishing of information concerning industrial, commercial and scientific knowledge, experience and skill made available to the foreign ship owners. In the alternative, if it is held that the case of the assessee does not fall within the ambit of the aforesaid information, the case of the assessee would be that the brokerage from foreign ship owners is in any case received in consideration of technical and professional services rendered by the assessee to the foreign ship owners. In support of these contentions, the learned counsel invited our attention to the order of the Tribunal in ITA No. 895 (Del.) 84 dated 31-5-1985 in the case of the assessee for the assessment year 1979-80, wherein the claim of the assessee for weighted deduction under Section 35-B was considered. The Tribunal considered at length the said claim of the assessee in terms of the provisions of Section 35-B( 1 A)(a)( it) read with the provisions of Clause (c) of the Explanation to Sub -section (1A), which defined the expression "provision of technical know-how" in terms of the provisions of Sub -section (2) of Section 80-MM. The Tribunal also considered its Special Bench decision in the case of Eastern Bulk Services v. ITO [1983] 5 ITD 471 (Delhi) and extensively quoted from the said decision in the said order. The Tribunal further considered the case of J.K. (Bombay) Ltd. (supra) and ultimately held in paragraph 14 that "the business activities of the assessee, as such, fit in, within the definition of provision of technical know-how, inasmuch as, the assessee has been imparting information concerning commercial, experience and skill. Simon Carves India Ltd. v. CBDT[1979] 120ITR 172 (Delhi) at page 179, Lurgi India Co. (P.) Ltd. v. CBDT[198O] 121 ITR 141 (Delhi) and again Holtec Engineers (P.) Ltd. v. CBDT[1979] 120 ITR 696 (Delhi) at page 704 favour the assessee. The assessee, as such, on the facts and in the circumstances of the case, is held to be entitled to weighted deduction in lieu of export market development allowance under Section 35-B of the Act in relation to activities in which he was engaged in the accounting period relevant to the assessment year under appeal". The learned counsel submitted that the provisions of Section 35-B read with the provisions of Section 80-MM(2)(iv) are in pari materia to the provisions of Section 80-O inasmuch as the same words have been used in Section 80-MM(2)(iv) and Section 80-O and as such the same meaning ought to be ascribed to the words used in both the provisions and that the order of the Tribunal in ITA No. 895 (Delhi) 1984 would be equally applicable in the present case. He, therefore, emphasised that the assessee fulfilled all the conditions relating to furnishing of information concerning industrial, commercial and scientific knowledge, experience and skill to the foreign ship owners and qualified for deduction under Section 80-O. He also mentioned that the Hon'ble Bombay High Court have rejected the reference application of the Deptt. under Section 256(2) in the case of CIT v. Travel Corpn. of India Ltd [1994] 209 ITR 555 which was a case on interpretation of provisions of Section 35-B read with Section 80-MM. With reference to the receipt of payment of brokerage in convertible foreign exchange, the learned counsel submitted that the provision should be construed in the light of the spirit and history of the provisions of Section 80-O and that the real thrust of the said condition is that either the payment is received in convertible foreign exchange in India or the remittance of the payment in foreign currency is restricted so that the foreign currency is saved and accumulated in India. He said that if seen from this angle, the assessee is receiving payment of brokerage either directly from foreign ship owners in convertible foreign currency or the said payment due to the assessee is deducted by the Indian parties while remitting the freight charges in foreign currency and that the said deduction is made in foreign currency and the same is remitted to the assessee through banks after converting the foreign currency into Indian rupees. In this connection he again invited our attention to the clarification furnished by the Reserve Bank of India on 4-10-1986 in the case of M/s. J.B. Boda & Co. Pvt. Ltd. that such remittance after deducting the brokerage would not violate the provisions of the Foreign Exchange Regulation Act, 1973 and urged that the assessee has fulfilled the said condition relating to receipt of payment in convertible foreign exchange having regard to the spirit of the provisions. In support of the foregoing contentions, the learned counsel relied on the decision of the Hon'ble Delhi High Court in the case of E.P. W. Da Costa (supra), the decision of the Hon'ble Supreme Court in the case of Continental Construction Ltd. (supra). In the latter decision, the Apex Court has considered the meaning of the expression "technical services" and "professional services" and it has observed at page 117 that the amendment to substitute the words "technical services" by the words "technical or professional services" is only of a clarificatory nature and that the expression "technical services" has a very broad connotation and it has been used elsewhere in the statute also so widely as to comprehend professionmal services, e.g., Section 9(1)(vii)of the Income-tax Act. In this connection the learned counsel also relied on the decision of the Hon'ble Allahabad High Court in the case of P. Stan will & Co. v. CIT[1952] 22ITR 316, wherein it was held that the profits of the assessee depended mainly on the personal qualifications of the partners as contemplated by Section 2(5) of the Excess Profits Tax Act, 1940. The learned counsel further relied on the decision of the Tribunal, Bombay Bench "E" in the case of Cent International v. Z4C[1985] 12 ITD 381, wherein the Tribunal considered the meaning of the expression "fees for technical services". It was held that the assessee had a worldwide net work of offices which he used for the purposes of the goods of the Indian company. Information from abroad regarding markets could not be considered just ordinary information, getting it required through experience and a well-established organisation.
4.2 The learned counsel further recapitulated in brief the history of the provisions of earlier Section 85-C and Section 80-O. In this connection he referred to paras 34 and 60 from Taxman's circulars Vol. 3. In para 34 it has been observed that the object of the provisions of Section 85-C was to encourage Indian companies to export their "technical know-how" and skill abroad to developing countries in order to expand their business activities and augment foreign exchange resources of. the country. Similarly in para 60, it has been observed that the object of the provisions of Section 80-O is to encourage Indian companies to develop technical know-how and make it available to foreign companies so as to augment our foreign exchange earnings and establish a reputation for Indian technical know-how in foreign countries.
4.3 In support of his contentions relating to information being furnished by the assessee to the foreign ship owners for the purpose of earning brokerage, the learned counsel also took us through various pages of the paper book filed before us. He submitted that pages 1 to 112 of the paper book cover cases of 4 different charter parties. He invited our attention in particular to pages 23 to 32 wherein various suggestions made by the assessee had been incorporated in the charter parties, pages 40 to 50 where various types of telex messages exchanged between the parties are placed, pages 130-140 where details of commission received during the year ending 31-3-1992 along with details of ports where loading and discharge of cargo has taken place and addresses of ship owners and charterers have been given, page 115 where names of vessels, types of agreements and other technical details have been given, pages 122-126 where the list of technical terminology used in the business of shipping is placed, pages 127-136, where written submissions filed before the CIT(A) are placed, page 152 where the copy of the letter dated 24-4-1991 from Minerals and Metals Trading Corpn. of India Ltd. to the Manager, State Bank of India, Overseas Branch, New Delhi is placed and wherein the bank has been requested to remit rupees equivalent to US $ 8,951.91 to M/s. Interocean Shipping Company, 75 Link Road, Lajpat Nagar-III, New Delhi (being their brokerage), page 153 where break up of freight charges in respect of Rockphosphate/ Sulphur vessel in relation to the brokerage amount mentioned at page 152 has been given. In view of the said data, the learned counsel submitted that it is clearly established that the assessee has earned income from brokerage on the basis of furnishing information concerning industrial, commercial and scientific knowledge, experience and skill to the foreign ship owners and the assessee has received the payment in convertible foreign exchange having regard to the spirit of the provisions of Section 80-O. He further submitted that merely because the assessee has signed the agreements on behalf of foreign ship owners will not disentitle the assessee from the benefits of deduction under Section 80-O. He explained that the agreements have to be signed before sending the cargo and due to the time constraint the said agreements have been signed by the assessee, and they of course have been signed as a broker only. In this connection he invited our attention to page 59 of the paper book, where the agreement has been signed by a representative of Interocean Shipping Company (as brokers only).
5. The learned departmental representative Shri Abrar Ahmed heavily relied on the orders of tax authorities, more particularly on the directions issued by the learned DC, under Section 144-A of the Income-tax Act on an application made by the assessee. He further submitted that the assessee was on the panel of ship brokers of the Government of India, in the Ministry of Shipping & Surface Transport and that he only arranges ships for carrying particular cargoes and is entitled to fixed amount of commission. He further submitted that the said amount of commission is deducted in India before making payment of freight charges to foreign ship owners and that the said commission is not received by the assessee from foreign Enterprises as stipulated under Section 80-O. He further submitted that the assessee is not rendering services outside India as contemplated by Section 80-O. He also submitted that the assessee has no specialised knowledge or qualifications and that the type of information which is being furnished by the assessee is commonly available and any person can collect such information and that such work does not involve any innovation on the part of the assessee. The learned departmental representative, therefore, emphasised that the assessee had not fulfilled all the conditions stipulated by Section 80-O and that he was not eligible for any deduction under that section, as neither his case is covered under the first portion of Section 80-O, which required furnishing of information concerning industrial, commercial or scientific knowledge, experience or skill, nor the case of the assessee was covered by the latter portion of that section which stipulated rendering of technical or professional services outside India to the Government of a foreign State or a foreign Enterprise. He further submitted that the findings of the Tribunal in its order in ITA No. 895(Delhi) 84 dated 31 -5-1985 in the case of the assessee for the assessment year 1979-80 with reference to the provisions of Section 35-B read with provisions of Section 80-MM were not relevant as the provisions of Section 80-O have to be interpreted independently. In support of his contentions, the learned departmental representative relied on the decision of the Hon'ble Bombay High Court in the case of Davy Power gas India (P.) Ltd. v. CBDT[ 1994] 207ITR 164. He further relied on the decision of the Hon'ble Delhi High Court in the case of J.K. (Bombay) Ltd. (supra) and the decision of the Hon'ble Supreme Court in the case of Petron Engg. Construction (P.) Ltd (supra). He also submitted that the words "agreed to" in Section 80-O still stipulate some agreement between the parties though approval of the agreement by CBDT was no longer necessary after the amendment by the Finance (No.2) Act, 1991 with effect from 1 -4-1992. He also referred to ground No.5 taken by the assessee, where it is mentioned that information furnished by the assessee related to giving technical and commercial details of the vessels and cargoes to various foreign parties etc. and submitted that the assessee had developed nothing new and was only furnishing the information which would easily be collected by any person. He also invited our attention to the observations at page 2696 of vol. 2 of the commentary by S/Shri Chaturvedi & Pithisaria with reference to the decision of the Hon'ble Bombay High Court in the case of Eastman Consultants (P.) Ltd v. CBDT [1981] 132 ITR 637. In view of the foregoing the learned departmental representative concluded that the assessee was not eligible for any relief under Section 80-O.
6. In reply, the learned counsel for the assessee submitted that the arguments advanced by the learned departmental representative are misconceived and that the assessee fulfils all the conditions stipulated by Section 80-O and is entitled to the deduction under that section. He again reiterated that where the language used in various provisions is identical and the purpose underlying the said provisions is similar, the expressions used must be given the same meaning. In this connection he again referred to the decision of the Tribunal in the case of the assessee, wherein the provisions of Section 35-B read with provisions of Section 80MM have been interpreted. He further submitted that the cases relied upon by the revenue were distinguishable. He submitted that the case of J.K. (Bombay) Ltd. (supra) related to a branch of Indian ship owners. Similarly, the case of Eastman Consultants (P.) Ltd (supra)is a case before Clause (in) was inserted in the Explanation to Section 80-O. Similarly, the case of Davy Power gas India (P.) Ltd. (supra) is a case where the Department had denied benefit of Section 80-O on the ground that Section 80HHB was available. He further submitted that the Circular of CBDT is also no longer applicable since approval of the agreement is not required with effect from 1 -4-1992. He further submitted that in case it is held that the assessee was not furnishing information concerning industrial, commercial and scientific knowledge, experience or skill, then, in the alternative the assessee was rendering technical and professional services to the foreign ship owners and the services were being rendered from India for use outside India in terms of the provisions of Clause (iii) of the Explanation to Section 80-O. In this connection he again invited our attention to pages 122-126 of the paper book as also Clause (19) of the agreement placed at page 9 of the paper book. Clause (19) clearly provides that a commission of 1.25% is payable by ship owners to Interocean Shipping Co., Bombay. Thus, the learned counsel concluded that the assessee's case is squarely covered by the provisions of Section 80-O and he is entitled to deduction under that section.
7. We have carefully considered the submissions made by both the parties and have also perused the relevant record to which our attention was invited during the course of hearing. We have also carefully considered the cases relied upon by both the parties. There is no dispute that during the asst. year 1992-93 the provisions of Section 80-O covered the case of a person (other than a company) who is a resident in India. In this case the assessee is an individual and is resident in India during the said assessment year. There is also no dispute that the gross total income of the assessee includes income by way of commission and fees. The next condition which the assessee is required to fulfil for claiming deduction under Section 80-O is that the income by way of commission, fees or any similar payment is received by the assessee from a foreign Enterprise in consideration for the use outside India of any information concerning industrial, commercial, or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to such Enterprise, or in consideration of technical or professional services rendered or agreed to be rendered outside India to such foreign enterprise. The claim of the assessee is that he had received the brokerage from the foreign ship owners in consideration for the use outside India of the information furnished by him and that such information is concerning industrial, commercial or scientific knowledge, experience or skill. In the alternative the claim of the assessee is that he has rendered technical and professional services to foreign ship owners and is entitled to the deduction under Section 80-O. The next important condition stipulated by Section 80-O is that the said income is received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange. With reference to the last condition of receiving income in convertible foreign exchange, the claim of the assessee is that the brokerage is either directly received from the foreign ship owners in convertible foreign exchange or in the alternative the Indian parties making payment of freight charges in foreign currency deduct the amount of brokerage in terms of foreign currency and the same is received by the assessee through the Bankers after converting the said deduction in foreign currency into Indian rupees, which according to the assessee is as good as receiving the payment in convertible foreign exchange as the outflow of foreign currency from India is restricted to that extent. In this connection the learned counsel has also relied on a clarification given by the Reserve Bank of India on 4-10-1986 in the case of M/s. J.B. Boda & Co. Ltd; where the Reserve Bank of India had advised that remittance of reinsurance premia after deducting the brokerage due to the said company would not violate the provisions of the Foreign Exchange Regulation Act, 1973. Thus it is claimed by the assessee that he fulfils all the requisite conditions stipulated in Section 80-O and is entitled to the relief. As against this the claim of the revenue is that the assessee is not fulfilling any of the material conditions relating to furnishing of information concerning industrial, commercial or scientific knowledge, experience or skill or rendering technical or professional services or the receipt of income in convertible foreign exchange and thus the assessee is not entitled to the benefit of Section 80-O. It has further been urged by the revenue that the assessee has not developed anything new and compiled information is being furnished by the assessee to foreign ship owners which is already easily available from various sources and any person with little effort can collect such information and furnish the same.
7.1 It is observed that the Tribunal has already examined the provisions of sections 35B and 80MM(2)(iv) in detail in its order dated 31-5-1985 in ITA No. 895 (Delhi) 1984 in the case of the assessee for the assessment year 1979-80 and it held that the business activities of the assessee fit in within the definition of "provision of technical know-how" as given in Section 80MM(2)(iv). It clearly held that the assessee has been imparting information concerning commercial knowledge, experience and skill. It, therefore, held that the assessee was entitled to weighted deduction in lieu of export market development allowance under Section 35B of the IT Act. It is further observed that the terminology used in Section 80-O with reference to furnishing of information is the same as in Section 80MM(2)(iv), as it then existed. We feel that there is force in the argument of the learned counsel that the underlying purpose in both Sections 35B read with Section 80MM(2)(iv) and Section 80-O is the same and the same meaning should be given to the words used in Section 80-MM(2)(iv) and Section 80-O, as already interpreted by the Tribunal. We feel that the case of the assessee gets further support from the decision of the Hon'ble Delhi High Court in the case of E.P. W. Da Costa {supra) and the decision of the Hon'ble Supreme Court in the case of Continental Construction Ltd. (supra). In the first case it has been held that the word "used" is a very general word and it is not necessary that the use to which the information is to be put must be practical, ie., to say, it must result in the manufacturing or making of some concrete thing. The foreign Enterprise (in the said case the BBC, a broadcasting Corpn.) can be said to use the information when it formulates or modifies its broadcasting programme to India according to the guidance given to the BBC by the said information. It has further been held in the said case that the word "science" is also a very general word and statistical tables compiled after analysing masses of numerical data can be said to be commercial or scientific knowledge. In the present case, it has been clearly demonstrated by the assessee that he is furnishing information concerning commercial and scientific knowledge, experience and skill and the said information is being used outside India by the foreign ship owners before entering into a charter party. It is further observed that various suggestions made by the assessee are incorporated in the relevant charter party. In the second cited case, the Hon'ble Supreme Court at page 117, while dealing with the amendment made by the Finance (No. 2) Act, 1991 with effect from 1 -4-1992 by which the words "technical services" were substituted by the words "technical or professional services", have observed that "this amendment may be only of a clarificatory nature. The expression 'technical services' has a very broad connotation and it has been used else-where in the statute also so widely as to comprehend professional services...". There can hardly be any doubt that services involving the specialised knowledge, experience and skill in the field of constructional operation are 'technical services'. The cases relied upon by the revenue have also been carefully seen and we feel that the same are distinguishable on facts and are not directly on the point at issue. In view of the foregoing we hold that the activities of the assessee constitute furnishing of information concerning commercial and scientific knowledge, experience and skill to the foreign ship owners and that such information has been used outside India.
7.2 With reference to the receipt of income by the assessee on account of brokerage in convertible foreign exchange, we have carefully considered the matter in the light of the provisions of Section 80-O, the clarification furnished by the Reserve Bank of India on 4-10-1986 in the case of M/s. J.S. Boda & Co. Pvt. Ltd. the relevant documents placed at pages 152-153 of the Paper Book and the other relevant submissions made by the parties, and we feel that having regard to the spirit of the provisions for receipt of income in convertible foreign exchange in India, the assessee has met with the requirements of law as he is receiving the payment either directly from the foreign ship owners or through the banks after the deduction made by the Indian party in foreign currency is converted into Indian rupees. We, therefore, hold that the assessee has essentially met with the requirements stipulated in Section 80-O for receipt of income in convertible foreign exchange.
7.3 In view of the aforesaid discussion in this paragraph we hold that the assessee has fulfilled all the relevant conditions stipulated in Section 80-O and is entitled to deduction specified in Section 80-O.
8. In the result, the appeal is allowed.