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5. The appellant Ramnath & Co. is a firm engaged in the business of providing services to foreign buyers of Indian marine products. The appellant filed its return of income for the assessment year 1993-1994 on 29.10.1993 declaring total taxable income at Rs. 6,21,710/- while claiming 50% deduction (amounting to Rs. 22,39,825/-) under Section 80-O of the Act in relation to the amount of Rs. 44,79,649/- received by it as service charges from foreign enterprises7.

5.1. While asserting its claim for such deduction under Section 80-O of the Act, the appellant submitted that it had rendered myriad services to the foreign enterprises like: (i) locating reliable source of quality and assured supply of frozen seafood for the purpose of import and communicating its expert opinion and advice in that regard; (ii) keeping a close liaison with agencies concerned for bacteriological analysis and communicating the result of inspection together with expert comments and advice; (iii) making available full and detailed analysis of seafood supply situation and prices;

Article 1:‘GELAZUR appoints RAMNATH” as agent to operate in priority their purchases in frozen seafood’s products in India.

Article 2 : RAMNATH’ does the following business as Agent on behalf of GELAZUR.”

1)To negotiate with the local packers for the purchase of the frozen seafood products which ‘GELAZUR’ requires:

2)To give “GELAZUR’ all the accurate information in respect of the standard, quantity, price, quality, time of shipment, etc. promptly, whenever the purchase of the products is made

firmly of the view that the appellant had worked only as an agent of the foreign enterprises in the matter of procurement of marine products from India; and all the services envisaged in the agreements were incidental to the carrying out of main function as agent. The Assessing Officer recorded his observations and findings as follows: -

“….A close study of the articles extracted above, would establish that the assessee is merely an agent of the foreign enterprises in India in the matter of procurement of marine products from India. All the services which are required to be carried out by the assessee in terms of the agreements are incidental to the carrying out of the primary function of acting as an agent. The assessee’s role is to act on behalf of the foreign principals within the limits allowed by them. In terms of the agreements, the assessee negotiates with local packers with regard to quality, quantity and price. On behalf of the principals, the assessee carries out technical guidance for processing and for quality control and also inspection of the products and also keeps close liaison with various agencies. These are definitely services rendered in India and cannot be construed as services rendered from India merely relying on the facts that the foreign principals are advised of the results and that they are stationed outside India. It is true that as per agreement, the assessee was to supply certain information of a general nature regarding markets, government policies, exchange fluctuations, banking laws, prices paid by competitors, monthly supplies of seafood data etc. However, the agreements do not envisage any payment of separate in commission or service charge for such information. The commission is payable to the assessee as a percentage of the C & F value of the imports by the foreign enterprises through the assessee. However, the payment of commission is conditional on the foreign enterprises finding the quality of goods satisfactory. This would reinforce my earlier observation that the assessee is only an agent of the foreign enterprises in the matter of procurement of marine products from India and all the services envisaged in the agreement are incidental to the carrying out of the main function as agent. It is also not as if the foreign enterprises completely stayed away from India. Though it might be a fact that none of the foreign enterprises  had any office or branch anywhere in India, available information indicates that the representatives of the foreign enterprises used to visit India in connection with the procurement of marine products from various packers in India and it fell upon the assessee to take these persons to the processing facilities of various suppliers with a view to ensure quality and hygiene standards. This is evident from the fact that a sum of Rs.23,122/- has been incurred by the assessee during the visit of buyers, representatives to various seafood packers in Calcutta, Bombay vizag, Madras Nandapam, Cochin, Calicut etc. Expenses for souvenirs, compliments and samples of the value of Rs.29,411.99 have also been incurred presumably in connection with the visit of the representatives of the foreign buyers. By any stretch of imagination, it cannot be claimed that the services rendered on the occasions of the visit of the representatives of foreign enterprises were not rendered in India. The foreign travels undertaken by the Managing Partner for meeting various buyers can been seen as only an extension of the assessee’s role as an agent of the foreign enterprises in India. An agent of a foreign enterprise in India necessarily acts on behalf of the foreign enterprise in India, and therefore, the services, namely carrying out inspections to ensure quality of the products and packaging, supervision of processing, negotiating prices in respect of marine products exported with the assistance of the assessee, could not have been rendered outside India as the parties to be contacted, products to be inspected, processing to the supervised etc. were situated in India only. In my view services that are incapable of being rendered outside India will not come under the category of services that can be rendered from India. Therefore, there is no merit in the contention of the assessee that these services were rendered from India but not within India….” (emphasis in bold supplied) 5.6. The appellant also relied upon Circular No. 700 dated 23.03.1995 issued by the Central Board of Direct Taxes 9 in support of its contentions.

9.5. As regards the services and activities of the appellant, the learned senior counsel has referred to the findings of the Appellate Authority as also of ITAT and has submitted that the said findings are to the effect that the appellant rendered services from India to its foreign customers by making over to them the information regarding seafood available in various Indian markets, their quality, price ranges etc.; and, on the basis of this information, the foreign customers took decisions on whether or not to import seafood from India, what to import and from which market and supplier. Further, the other basic requirement of Section 80-O, i.e., remittance of the amount in convertible foreign exchange to India has also been fulfilled. According to the learned counsel, the clear and unequivocal findings of the Appellate Authority and ITAT are findings of fact and they fully establish that the appellant furnished information from India to its customers abroad regarding its industrial and commercial knowledge and skill, and such information was utilized abroad by the said foreign customers and the appellant’s commission was remitted to India in convertible foreign exchange. The learned counsel would argue that nothing of perversity was shown in regard to such findings of fact so as to call for interference but the High Court has proceeded on a basis which is totally inconsistent with those findings. With reference to the decision of this Court in the case of K. Ravindranathan Nair v. Commissioner of Income Tax, Ernakulam: (2001) 247 ITR 178 (SC), the learned counsel has argued that there was no scope of interference in the findings of fact in this case. 9.6. Assailing the findings of High Court in the impugned judgment, the learned senior counsel has also argued that the approach of the High Court that unless services were rendered abroad, the amount received would not qualify for the benefit of Section 80-O is directly contrary to the plain provision contained in Explanation (iii) to Section 80-O and is also contrary to Circular No. 700 dated 23.09.1995 which had clarified that Section 80-O covered not only the services rendered outside India but also the services rendered from India to a party outside India; and it does not matter if the service is subsequently utilized by the foreign customer in India. In regard to the case of the appellant, the learned counsel would submit that in fact, the foreign enterprises related with the appellant do not have any operation or place of business in India and in such a situation, there was no question of the appellant rendering service to the customers in India. Thus, according to the learned senior counsel, the activities in question are squarely covered by Section 80-O of the Act.