Bombay High Court
Dharamsi Morarji Chemical Co. Ltd. vs Central Board Of Direct Taxes And ... on 2 April, 1990
Equivalent citations: [1994]206ITR608(BOM)
JUDGMENT T.D. Sugla, J.
1. This court is in respectful agreement with the observations of a Division Bench of the Delhi High Court in the case of J. K. (Bombay) Ltd. v. CBDT [1979] 118 ITR 312 that the scope of judicial review in respect of an order passed by the Board under section 80-O of the Income-tax Act, 1961 (for short, "the Act"), is not that of an appeal. The very fact that the Board has been given the power to approve or refuse to approve an agreement shows that the Legislature intends to give the Board to say in the construction of section 80-O. It is only if the understanding of section 80-O by the Board shows an error of law apparent on the face of the record that the court would interfere with the rejection of an application for approval by the Board. If the manner in which the Board understands the meaning and scope of section 80-O is reasonable and is in keeping with the object of section 80-O, the court may not interfere.
2. The Board's impugned order, thus, requires to be examined from this point of view. The Board has, admittedly, refused to approve the agreement on the ground that the activities contemplated under the agreement are of the type covered by section 80HHB and not on the ground that the agreement does not envisage activities falling under section 80-O. Therefore, unless it can be accepted as a proposition of law that services covered by section 80HHB can never fall under section 80-O, the impugned order of the Board refusing to approve the agreement will have to be taken as suffering from an apparent error of law justifying interference. At the same time, this court, in its writ jurisdiction, will not like to draw the inference from the impugned order-letter that the Board had found the services in question under the agreement to be covered by section 80-O. Nor does this court consider it appropriate to examine the nature of the services in question with a view to ascertain whether the services are or were covered by the provisions of section 80-O. The reasons are not far to seek. The agreement dated May 14, 1981, is entered into between the petitioner-company and P.T. South Pacific Viscose, an Indonesian company (for short, "S.P.V."). The services contemplated under the agreement are found enumerated in clause D of the preamble to the agreement. They are technical know-how, basic and detailed engineering and also technical assistance in the form of supervision of assembly, supervision of erection, and supervision of commissioning services for the C.C.Plant. The petitioner-company also entered into an agreement dated March 31, 1981, with Messrs. Zenith Steel Pipes and Industries Ltd. (for short, "Zenith"), for supply of complete plant and machinery, equipment and components for manufacture of sulphuric acid of 50 metric tonnes per day capacity based on Conventional Contact Sulphuric Acid Plant Process (known as "C.C.Plant") to South Pacific Viscose in the name and on behalf of Zenith. The agreement with Zenith refers to a separate agreement to be entered into between the petitioner and South Pacific Viscose. Zenith's agreement with South Pacific Viscose is not on record. In the circumstances, it is necessary but not possible to ascertain in these proceedings the exact nature of services rendered by the petitioner to South Pacific Viscose under the agreement dated May 14, 1981. Detailed examination of all the three agreements might be necessary. All this can be appropriately done by the Board.
3. For this purpose, it is necessary to bear in mind that section 80HHB was introduced as a new section in Chapter VI-A under heading C of the Act with effect from April 1, 1983. Apart from the fact that, on the face of it, this section should have no application to an agreement dated May 14, 1981, particularly, in regard to the services rendered during the previous year relevant to the assessment year 1982-83, this court, in the case of Trading Engineers (International) Pvt. Ltd. v. CBDT [1989] 176 ITR 317, took the view that section 80HHB was applicable for the assessment year 1983-84 onwards only. The agreement in the present case was entered into between the parties on May 14, 1981. Ninety per cent. of the remuneration payable under the agreement in respect of the services regarding which approval was sought was also received during the previous year relevant to the assessment year 1982-83. The impugned order/letter of the Board refusing to approve the agreement under section 80-O on the ground of section 80HHB, thus, suffers from an apparent error of law.
4. Shri Jetly, it may be stated, had made an attempt to distinguish this decision on the ground that the provisions of section 80HHB(5) were not specifically relied upon and/or considered by this court in that case. It was pointed out that that aspect of the matter was important as that sub-section was non-obstante and used the word "any" before the words "assessment year". According to Shri Jetly, the word "any" in this context meant any and every assessment year including not only assessment year 1982-83 but also earlier assessment years. In my judgment, this submission on behalf of the Revenue is not tenable in law. In order to construe a sub-section, one has to read the whole section. Reading section 80HHB as a whole, there does not appear to me to be any scope for doubt that this section was inserted in the Income-tax Act to provide relief to certain assessees who were otherwise, in the opinion of the Legislature, not till then entitled to any relief. Since relief contemplated under section 80HHB was available from the assessment year 1983-84 and onwards only, sub-section (5) was enacted to ensure that those entitled to relief under the section were not entitled to relief under any other section of Chapter VI-A under heading C. The word "any" to my mind, therefore, means any and every assessment year covered by section 80HHB for the purpose of granting relief to the assessees covered by that section.
5. Coming back to the impugned order/letter of the Board, though the approval of the agreement is refused ostensibly on the ground that the services envisaged under the agreement are of the type covered by section 80HHB, it is not safe to assume that the Board had found the petitioner's services under the agreement as covered under section 80-O in the absence of a specific finding. In the circumstances, it is considered fair and in the interest of justice that the impugned order/letter is set aside and the Board is directed to examine the petitioner's application dated August 24, 1982, in the context of the provisions of section 80-O only. Since the matter is old, the Board is further directed to dispose of the application within six months hereof. The petition is disposed of accordingly. No order as to costs.