Delhi High Court
Commissioner Of Income-Tax vs Mittal Corporation on 1 November, 2004
Equivalent citations: (2005)193CTR(DEL)1, [2005]272ITR87(DELHI)
Author: Badar Durrez Ahmed
Bench: Badar Durrez Ahmed
JUDGMENT B.C. Patel, C.J.
1. These appeals, under Section 260A of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), are placed before the court, which are for the assessment years 1992-93 to 1997-98 and the lead case is for the assessment year 1992-93 being I. T. A. No. 15 of 2001.
2. The following question of law, as framed on July 18, 2001, is required to be answered by the court :
"Whether the assessed has fulfillled the conditions as prescribed under Section 80O of the Income-tax Act, 1961, to be eligible for deduction ?"
3. The assessed received commission income of Rs. 92,59,066 as buying agents of foreign enterprises, namely, M/s. G. J. Coles (P.) Ltd., Australia, and M/s. K. Mart of U.SA. The assessed claimed deduction under Section 80O of the Act on this commission income. The assessed explained that it was entitled to deduction under Section 80O of the Act as : (i) it is a registered partnership firm and resident in India ; (ii) commission has been received in convertible foreign exchange ; and (iii) it earns income by way of commission in consideration, for the use outside India, of information concerning commercial knowledge, experience or skill made available to foreign enterprises. It is essential to refer, at this stage, to page 49 of the paperbook which is a copy of the letter dated February 12, 1993, issued by the Deputy Commissioner of Income-tax to the assessed. Reading the letter, it appears that the Assessing Officer was much concerned with the "technical services" as would be clear from the following extract there from :
"The sentence of this section is to be read in continuity as this deduction is admissible on rendering abovementioned services in connection with technical or professional services. On going through the agreements executed between you and the foreign enterprises, you are merely working on their behalf at their direction to ensure supply of samples, getting them approved, ensure issue of inspection certificate before dispatch, timely shipment, negotiate and arrange payments of any claims with the manufacturers."
4. It is in view of what is indicated hereinabove, that the assessed was called upon to show cause, why deduction under Section 80O of the Act should not be withdrawn, as the assessed was neither rendering any technical nor professional services. It thus appears that from the very inception there was misreading of Section 80O of the Act by the Assessing Officer. The Commissioner (Appeals) has correctly interpreted the provisions of Section 80O (at pages 147-148) as under :
"One plank of the Deputy Commissioner's argument is that the assessed's services cannot be termed as technical services. The assessed is not claiming it as technical services being rendered by it. The term used as 'commercial knowledge, experience or skill made available or provided to outside enterprise by the assessed.' This is the basis of the assessed's claim to deduction under Section 80O of the Act. Can the Department say that the assessed is not providing the commercial knowledge acquired and developed by it ? The sole basis of the claim of the assessed is that it is providing information concerning commercial knowledge, experience and skill to outside parties' for its use 'outside' India."
5. It is also to be noted that considering the facts and material placed on record, the Commissioner came to the conclusion that the assessed who provides industrial or commercial or scientific knowledge or experience or skill is entitled to this benefit. It is not necessary to provide technical services only. Section 80O of the Act reads as under (we have segregated the provision into parts for convenient reading ) :
"80-O. Deduction in respect of royalties, etc., from certain foreign enterprises.-Where the gross total income of an assessed, being an Indian company or a person (other than a company) who is resident in India, includes any income by way of royalty, commission, fees or any similar payment received by the assessed from the Government of a foreign State or a foreign enterprise 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 such Government or enterprise by the assessed, in consideration of technical (or professional) services rendered or agreed to be rendered outside India to such Government or enterprise by the assessed, and such 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 assessed in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction of an amount equal to fifty per cent, of the income so received in, or brought into, India, in computing the total income of the assessed".
6. The first part of section refers to the gross income of the assessed. It includes any income by way of royalties, commission, payment received by the assessed. The second part indicates the source, such as, from the Government of a foreign State or foreign enterprises. The third part has two sub-parts, one reads as--"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 such Government or enterprise by the assessed". The second sub-part reads as--"in consideration of technical (or professional) services rendered or agreed to be rendered outside India to such Government or enterprises by the assessed". The fourth part is the mode of receipt, such as, income received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, etc. The fifth and last part refers to the deduction to be allowed under the said section.
7. The section is required to be read as indicated hereinabove. The two sub-parts of the third part are alternatives as they are separated by the word "or" and cannot be read conjunctively. Thus, it cannot be said that the assessed must provide "technical services" even where it receives consideration for only providing commercial information. The section is required to be interpreted accordingly. On the facts, the Tribunal clearly held that there is no dispute that it is commercial information which the assessed provided to the foreign buyers and in consideration thereof, the assessed received commission which was in convertible foreign exchange. In view of this, the claim made by the assessed cannot be denied under Section 80-O of the Act.
8. We may point out that at the commencement of the arguments itself, learned counsel for the assessed pointed out, by drawing our attention to sub-section (4) of Section 260A of the Act, that in the instant case there is no question of law as it is dependent on facts only. It is neither a case of mixed question of fact and law nor a substantial question of law, but, one entirely on the facts which, in any event, has been concluded by the Tribunal after examining the case in detail. In our opinion, in keeping with the interpretation to be given to the provisions of Section 80O as indicated above, there is much substance in what learned counsel for the assessed has submitted that the matter is substantially on the question of facts rather than on the question of law and, therefore, we dismiss the appeal without adverting to the question.