TMI Blog2002 (3) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... . After providing required treatment they are also provided qualified doctor to escort them back to their destination/country if required. The insurer's in their bid to limit their claims, seek information from the assessee coy. about the condition of the patient. This is how the assessee provides professional services to the insurers by providing them medical information about their customers. These services are provided either through overseas calls telex or fax messages. Such services, though provided fromIndiaare provided to foreign parties located outsideIndia. The billing for providing professional services is made directly to the insurers and is credited under the head 'consultation charges'. For all other services provided inIndiaseparate billing is made and credited under other heads of income. The assessee, therefore, claimed deduction under section 80-O of the Act on the amount of service charges received from foreign insurer for the services rendered to them abroad by the assessee though from India. However, the Assessing Officer did not allow deduction under section 80-O on the basis that the professional services are rendered inIndiaand not fromIndia. The foreign visi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services have been rendered inIndiaand not outsideIndia. It was argued by the learned counsel that when any foreign tourists propose to visitIndiahe gets himself insured in his country before coming toIndia. The appellant company has an agreement with such foreign insurer companies according to which the appellant will be providing medical facilities etc. to these foreign tourists inIndiawho asked for it. The payment for such professional services is received from such foreign tourists on which no deduction under section 80-O has been claimed. But the foreign tourists who visitedIndiaand made payment to the appellant claims certain reimbursements from their insurer company when they go back to their countries. The insurer company cannot settle their claims without having authentic information for the same. The assesee is, therefore, having a memorandum of understanding with the foreign enterprises by which it will provide them certain information. Such information is given fromIndiato foreign enterprises. It was claimed that the Assessing Officer/Commissioner (Appeals) were incorrect in stating that the information supplied to foreign enterprises was in the nature of general infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he effect of such insurance is that if the tourist incurs any expenditure on medical treatment etc. while visitingIndia, the insurer will make some reimbursement to the tourists when he goes back and makes a claim to that effect. But in turn the insurer company has also to safeguard its interest so that unreasonable/exhorbitant claims were not made by such tourists. The agreement was, therefore, entered into between the appellant company and some foreign enterprises by which the appellant was to render two types of services, (1) to provide medical and other facilities to the tourists if the tourist was in need, and (2) to provide necessary information to foreign enterprises where such tourists were insured about the physical condition of the tourist, the treatment needed, the medical test required, the drugs being administered and further suggestion about administering other drugs. Such information was sent to foreign enterprises by way of telex/fax messages. For providing medical aid to foreign tourists inIndiathe appellant bills the tourists directly who pays the amount. Such amount has been credited to the accounts of the appellant as professional charges. But for rendering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the law for the time being in force for regulating payments and dealings in foreign exchange; (ii) 'foreign enterprise' means a person who is a non-resident; (iii) services rendered or agreed to be rendered outsideIndiashall include services rendered fromIndiabut shall not include services rendered inIndia." 8. The provisions make it clear that in order to claim deduction under section 80-O the following requirements have to be satisfied:-- (i) The income of the assessee includes any payment received by the assessee from foreign enterprise; (ii) The payment received was in consideration for the use outsideIndia; (iii) Such payments received by the assessee should be in respect of information concerning industrial, commercial or scientific knowledge etc., or; (iv) The payment received should be in consideration of technical or professional services rendered outsideIndiato such foreign enterprises; and (v) Such amount is received in convertible foreign exchange inIndia. 9. There is no dispute that the assessee is a resident company and it has rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information which can be imparted only by a professional/technical person. Under these circumstances we feel that the information furnished by the assessee-company to foreign enterprises was in the nature of technical and professional information. By sending such information the assessee has rendered technical/professional services to its client abroad. 12. Now we come to next issue whether the information sent by the assessee-company was used by foreign enterprises abroad or the same was used inIndia. As mentioned above the foreign insurer abroad insures the health of the tourist for which the premiums are charged by the insurer. The insurer will, therefore, indemnify the expenses to be met by the tourist while touring inIndia. The foreign enterprise therefore wanted the technical information from the assessee-company which also included information about the approximate expenses for the treatment. Such informations are required by the foreign enterprises because these have to be considered at the time of reimbursing the medical expenses to the concerned tourist. Such information is essential to insure that the exhorbitant claim has not made by the insured person. Such informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Mad.) (TM), the learned counsel stated that the disallowance made by the Assessing Officer and confirmed by the Commissioner (Appeals) deserves to be deleted. On the other hand, the learned DR supported the order of the Commissioner (Appeals). 16. We have considered the rival submissions. Whether the expenditure incurred on car maintenance etc. could be disallowed in the case of the companies or not was considered by theHon'ble Courtin the case reported in CIT v. Chitram Co. (P.) Ltd [1991] 191 ITR 96. Respectfully following the same we hold that the disallowance out of car expenses in the case of companies was justified. We also find that only 1/6th disallowance has been made for non-business user. This cannot be considered to be excessive or unreasonable. Accordingly this ground of appeal is dismissed. 17. In the result, the appeal is partly allowed. Per Shri U.B.S. Bedi, Judicial Member.-- I have had the privilege of going through the proposed order of learned Accountant Member and except for ground No. 1, I fully agree and concur with his findings and conclusions drawn by him. As regards ground No. 1, I record my dissent and reasons for the same are as follows. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the assessee is altogether besides the point and it fell short of the condition precedent for grant of deduction as envisaged under section 80-O. In this case, from the facts, I find that assessee had not made available either technical or professional services to the foreign enterprises for use outside India nor it had rendered any technical services to the foreign enterprises outside India and looking into the nature of information made available to the foreign enterprises the same cannot be held to be either technical or professional services rendered. Nor such information about the patients treated inIndiacould be said or held to have been used outsideIndiaby such foreign enterprises. The main work undertaken by the assessee's company for the foreign enterprises was to give treatment and other services as enumerated in the agreement entered into by the assessee with different foreign enterprises whose clients visitedIndiafor travelling purposes and needed medical treatment as well as other services. So the work in treating the clients of the foreign enterprises while travelling in India commenced and stood completed in India itself and merely sending information about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expertise for providing emergency medical assistance to any person anywhere inIndiaon call. It has its own panel of qualified doctors, who are always on call providing necessary medical services whenever required. As per record the assessee is patronised by various insurance companies in the world as also some select embassies of foreign countries although no formal agreement exists in some of the cases. 3. It is also an undisputed fact that in some cases after providing treatment the patients are also provided qualified doctors to escort them back to their destination/country, if required. It is also an undisputed fact that most of the persons, who patronise the assessee are insured with various companies in their respective countries and from whom they claim the medical expenses incurred inIndiaand the insurance companies with a view to limit their claim's "seek information" from the assessee-company about the patient. These services admittedly are provided either on telephone or telex or through fax messages. The billing for providing these services is made directly to the insurance companies and on receipt in convertible foreign exchange these are credited under the head "co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant are rendering are being rendered inIndiaand for the same the appellant charges fee etc. Sub-section (iii) of Explanation to section 80-O states clearly that services rendered or agreed to be rendered outsideIndiashall include services rendered fromIndia, but shall not include services rendered inIndia. The appellant is rendering services only inIndia. The appellant has also not agreed to render any service outsideIndia. It is only passing data and information to insurances companies regarding persons visitingIndia. Hence, deduction under section 80-O has rightly been rejected by the Assessing Officer. The appellant's claim is rejected." 5. On the matter travelling to the Tribunal the assessee's main submissions before the Division Bench were as under:-- "(i) That whenever any foreign tourist proposes to visitIndia, he gets himself insured in the country of his origin before coming toIndia; (ii) The assessee-company had agreements with foreign insurance companies whereby it would be providing medical facilities to the foreign tourists inIndia; (iii) The payment for such professional services was received from such foreign tourists inIndiaand on which no deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed the initial order set out in para 6 of his order of the nature of the services rendered by the assessee to the foreign tourists in the form of medical aid/assistance as also referred at length and minutely the nature of services, which were to be rendered to the foreign insurance companies vis-a-vis the provisions of section 80-O of the Act which were set out in para 7 of the order. Inasmuch as the factual position is not disputed between the learned Members of the Division Bench, I proceed to extract para 6 of the order of the learned Accountant Member:-- "We have considered the rival submissions. As mentioned above when the foreign tourists visitIndiathey get themselves insured with some enterprises in their own countries. The effect of such insurance is that if the tourist incurs any expenditure on medical treatment etc. while visitingIndia, the insurer will make some reimbursement to the tourists when he goes back and makes a claim to that effect. But in turn the insurer company has also to safeguard its interest so that unreasonable/exhorbitant claims were not made by such tourists. The agreement was, therefore, entered into between the appellant company and some foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... touch-stone of the aforesaid provisions the learned Accountant Member referred to the issues which were in dispute and these being: (i) Whether the information given abroad was in the nature of technical or professional services? (ii) Whether such information was to be used outsideIndia? and (iii) Whether such services were rendered abroad? According to him there was no dispute that the assessee, was a resident company and that it had received the amount in question from foreign enterprises and that also in convertible foreign exchange. 11. Coming to the first aspect i.e., the nature of the information, the learned Accountant Member noted that the assessee-company had two Directors, who were qualified doctors and further a doctor could render medical advice to his client in writing just as an advocate could give professional advice in writing to his clients. In the instant case i.e. of the assessee the learned Accountant Member observed that the advice had been given in writing to clients abroad and in coming to such a conclusion the learned Accountant Member referred to the copies of certain fax messages placed on the paper book. It was observed that the information pertained to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaken by the assessee-company for the foreign enterprises was to give treatment and other services as enumerated in the agreement entered into by the assessee with such foreign companies, whose clients visited India for travelling etc. and needed medical treatment as also other services. According to him the work of treating the clients of foreign enterprises while travelling in India commenced and stood completed in India itself and mere sending of information about the whereabouts of the patients treatment given, diagnosis details, medicine provided etc. could under no circumstance be held to be in the nature of technical or professional services rendered by the assessee outside India to foreign enterprises to be used by them. In conclusion he proceeded to uphold the action of the tax authorities. 16. Before me the learned counsel for the appellant reiterated the arguments advanced before the tax authorities and subsequently before the Division Bench. It was highlighted that the assessee was not claiming deduction under section 80-O on the amounts earned for providing medical treatment etc. to the foreign tourists and the claim was restricted to the amounts received from forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (India) Ltd. v. CBDT [1984] 145 ITR 673 (Bom.); and (iv) CBDT v. Oberoi Hotels (India) (P.) Ltd. [1998] 231 ITR 148 (SC). 19. In a short reply the learned counsel for the assessee stated that the CBDT Circular relied upon by the learned Departmental Representative was not relevant as it pertained to approval of agreements with reference to provisions of section 80-O and which was not the issue in the present appeal. It was reiterated that only a qualified medical practitioner could furnish information to the foreign insurance company as was the type of information sent by the assessee-company through fax, through telex and by telephone. As regards the various decisions relied upon on behalf of the Department the learned counsel referred to two of these i.e., Eastman Consultants (P.) Ltd.'s case and Oberoi Hotels (India) (P.) Ltd.'s case contending that these were not applicable as they pertained to the old provisions and not the provisions of section 80-O as would be relevant to the assessment year under consideration. 20. The aforesaid submissions made in the reply by the learned counsel were commented upon by the learned Departmental Representative, who submitted that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer, or (c) constructional, industrial or manufacturing operations, or (d) engineering services. Services, such as those relating to management, organization, sales, finance and accounts, will not qualify for this purpose. Technical services which are rendered or to be rendered inIndiawill also not qualify for this purpose. (vi) Agreements for recruitment or mere supply of technical personnel fromIndiafor service outsideIndiawill not be eligible for approval. (vii) Agreements which provide for participation in business or management operations abroad simpliciter in return for a specified percentage of commission or profit will not be eligible for approval." 22. It is apparent from a reading of the aforesaid that information of a routine nature, which is collected from other printed material does not qualify and even information given consequent to trade enquiries being received from abroad does not qualify. It is also observed that agreements for recruitment or mere supply of technical personnel fromIndiafor rendering services outsideIndiawill not be eligible for approval. 23. In dealing with the various decisions relied upon by the learned Departmental Representative, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee entered into various agreements in the form of cryptic letters with foreign employers and "conveyed the names" of suitable candidates to the foreign employers. 25. On the basis of the aforesaid facts the assessee claimed exemption under section 80-O on the ground that it was providing "information" which was imparted by means of conveying the names of suitable candidates to the foreign employers. On the matter travelling to the Hon'ble High Court, Their Lordships held that "information" provided by the assessee could not be said to partake of the nature of "industrial, commercial or scientific knowledge, experience or skill" within the meaning of section 80-O. It was further held that the assessee did not satisfy the conditions laid down in the second limb that the industrial, commercial or scientific knowledge, experience or skill must be made available for "use outsideIndia". Their Lordships further observed that the fact that the selected candidates went abroad and worked outsideIndiawas not relevant because that work had nothing to do with the assessee's work inIndia. 26. In the case of Oberoi Hotels (India) (P.) Ltd. Their Lordships of the Hon'ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uite clear and that is the transmitting of general information howsoever important it may be to the foreign enterprise is not at all a relevant factor since it has been seen that even collecting information/bio data of Indian citizens and transmitting the same abroad has been held to be of a non-qualifying nature visa-vis section 80-O. It has also been held in the aforesaid judgments that something taken from local journals or printed material and forwarded to a foreign enterprise does not qualify. It is also the view of the Board that agreement which is general, vague and gives an impression that the same is not bona fide and represents a collusive arrangement is not entitled for the relevant tax concession under section 80-O. 28. In the present case the foreign companies have entered into an agreement/arrangement with the assessee-company on two scores, the first for treating the persons who are insured with such foreign companies as and when they need medical assistance in India and second once the medical services have been rendered, then the assessee-company forwards the details of the treatment so rendered to the foreign insurance companies by telex/fax or merely on telepho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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