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2003 (11) TMI 555

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..... ives is a sine qua non for the proper functioning and success of any organization, corporations and multinational organisations are increasingly relying on the knowledge, skill, research and experience of consultants like the assessee, to conduct executive searches in a professional and scientific manner. The assessee has built up a database of more than 40,000 executives. These details are not compiled by just writing or consolidating applications obtained through advertisements. They are compiled in a professional manner by study of annual reports, by contacting people who matter, by reference to various journals, market information and knowledge of the various industries and therein requirements and the availability of human resources. The database is built up in a highly professional and confidential manner by finding out the credentials, qualifications, skills and potentials of key personnel constituting the human resource data bank. It contains confidential prima facie SWOT analysis of the concerned individuals. The SWOT analysis is compiled on the basis of reference reports, published interviews, journal reports, etc. The assessee advises and guides its clients after assessi .....

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..... rocedure is no different from the job of any other ordinary recruitment agency, not inviting entitlement to deduction under section 80-O, as held in Eastman [ 1981 (2) TMI 55 - BOMBAY HIGH COURT] . The assessee seeks to address the issue of human resource promotion and strength. It irrefragably provides information concerning industrial and commercial knowledge and makes available experience and skill to its clients and provides technical and professional services from India. The search for quality management professionals is a task calling for extreme sensitivity, caution, professionalism and confidentiality. It is specialized job that only the best executive search consultants can be entrusted with. And the assessee undoubtedly qualifies to be that, as is obvious from the payment of Rs. 7.75 lakhs for one single assignment in the year 1994-95, which the assessee allegedly earned, more so, when such payment is incontingent on whether the client appoints any of the candidates recommended by the assessee, or not. That big corporations and multinationals have retained the assessee as their executive research consultant speaks volumes of the fact that the assessee has carved out a nic .....

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..... sessee is engaged in the activity of providing consultancy services for the conduct of executive research. This activity requires application of knowledge, experience and skill of high value to bear upon the assignment. As per the franchise agreement of the assessee with Boyden, know-how means the special knowledge relating to the executive search business developed by the licensor including the related knowledge within the Boyden group. Executive search business means the assisting of corporations and other entities in the determination and placement of suitable candidates for management or specialist positions available with such corporations or other entities. The assessee is approached by companies on the lookout for executives to be highly placed, including the chief executive officer. Since selection of such executives is of utmost importance to an organization, requiring the specialized knowledge, skill, research and experience of consultants, like the assessee in the field of executive search, corporations and multinational organizations are increasingly seeking, utilizing and relying on such like services. These services are essentially vastly different from those provided .....

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..... ysis are also enclosed. This involves communication of advice in a specific objective manner, though the ultimate advice is based on study of subjective perceptions and considerations. The client of the assessee relies upon and uses the advice, opinion and analysis of the assessee in making the final selection. The report and advice of the assessee operate as important tools for the client. However, the final selection is exclusively the prerogative and responsibility of the client and the assessee does not, at any stage, act as an agent to carry out the client's bidding. The final interview is conducted by the client. The assessee's task gets over before the final interviews and selection. The Revenue relies on the decision of the honourable Jurisdictional High Court in the case of Eastman Consultants (P.) Ltd. v. CBDT [1981] 132 ITR 637, wherein it was, inter alia, held that mere supply of particulars or biodata of various Indians willing to work abroad and their selection or recruitment in India is a situation falling far too short of the requisites necessary for attracting the benefits of the section. The assessee, on the contrary, has placed reliance on the decision of the hon .....

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..... ted candidates went abroad and worked outside India was held not relevant because that work had nothing to do with the assessee s work within India. The assessee was hence held not entitled to deduction under section 80-O of the Act. In the present case, the assessee is a franchisee of Boyden World Corporation, New York, one of the oldest international consultancy firms in the field of executive search. Executive search business, as per the franchise agreement between the assessee and Boyden, means the assisting of corporations and other entities in the determination and placement of suitable candidates for management or specialist positions available with such corporations or other entities. Executive search practice in India was pioneered in April, 1979 by Boyden. It was founded by Gulab Mirchandani, the control individual of Boyden in India, an engineer and an MBA with over 30 years experience in marketing, manufacturing and general management. Boyden is the only multinational in the field of executive search in India. It boasts of being the best in the quality of service. It is the only Indian search firm with a large databank comprising the best amongst senior professionals in .....

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..... ould provide a good match to the organization, etc. After discussing the response of the client to the initial report, the assessee short-lists two or three candidates who, in the opinion of the assessee, would meet the requirements of the client. The assessee formulates its own judgment about the acceptability and usefulness of candidates to the client organization. This involves imparting of reliable advice of judgment on how an individual will perform in a given organisation. Such advice is contained in the evaluation report and the reference check report, which the assessee sends to its client with the assessee's comments, opinion and analysis. Thus, this advice is communicated by the assessee to its client in a specific objective manner, though the ultimate advice is based on a study of subjective perceptions and considerations. Assessment of technical competence, leadership and management skills and strengths of personality and stature is to be made during face to face interviews. The client of the assessee relies on and uses the advice and opinion of the assessee in making the final selection. The reports and advice of the assessee operate as important tools for the client. .....

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..... e their policies and decisions for the final selection. In addition, the assessee renders services by designing and structuring compensation packages. The assessee undertakes compensation studies for its clients and helps them in restructuring the executive compensation at various levels and bringing it to the market level. The assessee is being retained by big corporations in India and abroad only because they have the knowledge, expertise and skill, coupled with professional integrity, to carry out executive search. Without industrial knowledge, the assessee cannot make valuable recommendations, for which, it has to study the challenges of the particular industry concerned. Short of commercial knowledge, the assessee, for instance would not know that the challenges before the CEO of a sick unit are different from those before the CEO of a prosperous unit. With the aid of commercial knowledge, the assessee bases its advice on the study of all such commercial factors. The advice is finally based on the exclusive high quality database maintained by the assessee on reliable statistical theories of psychological analysis tests and ratios, which have contributed to formulating judgment .....

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..... casts are received by the listeners in India. For that purpose, they engaged the assessee to conduct a public opinion survey. As per the assessee, the information supplied by him was used by the BBC in its audience research organization and, inter alia, helped the said organization in planning its programme. The BBC would make modifications in its programmes after knowing, from the information supplied by the assessee, as to how its broadcasts are received in India. The assessee issued a questionnaire to the listeners and the information gathered from the answers was compiled in the form of various statistical tables. The assessee termed these statistical tables, compiled after analysing masses of numerical data, as commercial or scientific knowledge made available to the BBC. The Central Board of Direct Taxes, on the other hand, contended that this information was only data and not scientific or commercial knowledge. The honourable Delhi High Court held in favour of the assessee. It was observed that if information is understood as something communicated and if the contents of the information concern scientific knowledge, the knowledge gathered and analysed by the assessee from th .....

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..... its specialized professional executive search consultancy services. The meaning of professional services is illustrated by some examples of typical liberal professions and this enumeration of professions has an explanatory character. The Law Lexicon, edited by justice Y. V. Chandrachud (1997 edition) defines profession , inter alia, as involving the idea of an occupation requiring either purely intellectual skill or any manual skill, as in painting and sculpture or surgery, skill controlled by the intellectual skill of the operator, as distinguished from an occupation, which is substantially the production or sale or arrangements for the production or sale of commodities . This definition, barring the words as distinguished from an occupation which is substantially the production or sale of arrangements for the production or sale of commodities is, incidentally, the same as that assigned by Scrutton, LJ in IRC v. Maxse [1919] 1 KB 647; referred to in L. B. Curzon's Law Dictionary. Referring to the honourable Bombay High Court's judgment in the case of Sakharam Narayan Kherdekar v. City of Nagpur Corporation, AIR 1964 Bom 200, at page 210, the Law Lexicon further states that an act .....

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