TMI Blog1995 (4) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... f the hire charges remitted by the Indian clients to foreign ship-owners/charterers in accordance with the agreements. He also observed that the agreements were being signed by the assessee for each transaction of hiring ships on behalf of the foreign ship-owners/charterers as their brokers. 2.1 The Assessing Officer proceeded to examine as to whether the services provided by the assessee qualified for deduction under section 80-O of the Income-tax Act, 1961. He examined the guidelines for approval of agreements laid down in the Circular No. 253 dated 30-4-1979 issued by the Central Board of Direct Taxes. The Assessing Officer observed that in the said circular, with reference to information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided, it is mentioned that such information should not be merely of statistical type collected or collated from commercial or scientific journals or other commonly available sources of information, but it should be information concerning the industrial, commercial or scientific knowledge, experience or skill processed or developed by Indian Party. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operation was confined to brokerage only and that he was not responsible for anything beyond that. According to him the information passed on by the assessee to foreign enterprise/charterers was merely regarding the intending Indian clients, their cargoes and related to requirements of ships and that such services were denied concessions under section 80-O vide paragraphs (iv), (v) and (vii) of the aforesaid instructions issued by the CBDT. 2.2 The Assessing Officer further examined the provisions of section 80-O and observed that for the applicability of the said section agreements should be between the assessee and the foreign ship-owners/ charterers, and the commission should be received in convertible foreign exchange which should be brought into India from outside India. With reference to the second requirement, the Assessing Officer further observed that the assessee's brokerage was being deducted by the Indian clients from out of the total hiring charges to be paid to foreign ship-owners/charterers and was being paid to the assessee in India in Indian currency by the Indian clients. He further observed that the agreement of the assessee was not with the foreign enterprise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial or managerial services. In this view of the matter the services of managing agents rendered by the company to a foreign company are not technical services within the meaning of section 80-O ". 2.4 In view of the foregoing discussion, the Assessing Officer held that the assessee was not entitled to deduction under section 80-O and denied the said deduction to the assessee. 3. On appeal before the CIT(A), the learned counsel for the assessee submitted that the assessee is a master mariner having over 40 years of experience in the marine line. During the year under consideration, the assessee received an aggregate amount of Rs. 29,48,524 from various ship-owners for services rendered to them. He further submitted that the said amount was received in foreign exchange/convertible foreign exchange. In this connection he stated that the only requirements of section 80-O are that the assessee must be an Indian company or a person (other than a company) resident in India, the income should be by way of royalty, commission, fee, etc., or similar payment which should be received from a person who is a non-resident and the consideration must be for supply of commercial, technical or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share of brokerage from out of the total hiring charges and paying it in Indian currency. He submitted that in three cases, foreign exchange had directly been received by the assessee while in the rest of cases the assessee's banker had received foreign exchange credit advices on the basis of which the converted equivalent of Indian rupees had been credited to the assessee's account. He emphasised that such credits fell within the meaning of convertible foreign exchange in terms of Foreign Exchange Regulation Act. He further submitted that the nature of services provided by the assessee would fall in the category of technical services inasmuch as, in the case of sister-concern, namely, M/s. Eastern Bulk Services, the Tribunal had held that the deduction admissible under section 35-B was available because the services rendered were technical in nature and as the services rendered by the assessee were of similar nature, the assessee would be covered within the scope of admissibility of deduction permitted under section 80-O. He also submitted that in the assessee's own case in ITA No. 1029 (Del.) 84 it was held that the assessee was imparting information concerning industrial, commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the assessee was on a different set of facts than those involved in the cases of E.P.W. De Costa and Continental Construction Ltd., though the requirement of Board's approval was not involved because of change in law, yet the legislative intention of the scope of coverage of relief contemplated under section 80-O, as explained in the Board's circular under reference, would continue to hold good and the twin objectives underlying the tax concession in section 80-O, namely, promotion of export of Indian technical know-how and augmentation of foreign exchange resources, would continue to govern the admissibility of relief under section 80-O, that the brokerage commission to which the assessee was entitled had been credited to his account by the Indian parties out of the freight charges payable to the foreign ship owners and the credit in the account was obviously in terms of Indian rupees, that in terms of the general permission accorded by the Reserve Bank of India vide notification No. GSR 1159, the assessee had been working for and on behalf of the foreign ship owners, that the majority of the commission brokerage received by the assessee was from Indian parties, and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was made in terms of foreign currency and the same was received through the banks after converting the foreign currency into Indian rupees. He submitted that such payments, received after converting the foreign currency into Indian rupees, amounted to receipt of brokerage in convertible foreign exchange as the same had the effect of saving the remittance of foreign exchange and amounted to saving the foreign currency, or earning the same, which was the underlying purpose of the provisions in section 80-O. In this connection he also invited our attention to the clarification given by the Reserve Bank of India, Exchange Control Department, on 4-10-1986 in the case of M/s. J.B. Boda Co. Pvt. Ltd. The Reserve Bank of India had advised in that case that " the remittance of reinsurance premia after deducting the brokerage due to you would not violate the provisions of Foreign Exchange Regulation Act, 1973 ". 4.1 The learned counsel further submitted that the provisions of section 80-O stipulate the following conditions for admissibility of deduction under that section, namely :--- (a) the assessee should be an Indian company or a person (other than a company) who is resident i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eign ship owners. In support of these contentions, the learned counsel invited our attention to the order of the Tribunal in ITA No. 895 (Del.) 84 dated 31-5-1985 in the case of the assessee for the assessment year 1979-80, wherein the claim of the assessee for weighted deduction under section 35-B was considered. The Tribunal considered at length the said claim of the assessee in terms of the provisions of section 35-B(1A)(a)(ii) read with the provisions of clause (c) of the Explanation to sub-section (1A), which defined the expression " provision of technical know-how " in terms of the provisions of sub-section (2) of section 80-MM. The Tribunal also considered its Special Bench decision in the case of Eastern Bulk Services v. ITO [1983] 5 ITD 471 (Delhi) and extensively quoted from the said decision in the said order. The Tribunal further considered the case of J.K. (Bombay) Ltd. and ultimately held in paragraph 14 that " the business activities of the assessee, as such, fit in, within the definition of provision of technical know-how, inasmuch as, the assessee has been imparting information concerning commercial, experience and skill. Simon Carves India Ltd. v. CBDT [1979] 120 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banks after converting the foreign currency into Indian rupees. In this connection he again invited our attention to the clarification furnished by the Reserve Bank of India on 4-10-1986 in the case of M /s. J.B. Boda Co. Pvt. Ltd. that such remittance after deducting the brokerage would not violate the provisions of the Foreign Exchange Regulation Act, 1973 and urged that the assessee has fulfilled the said condition relating to receipt of payment in convertible foreign exchange having regard to the spirit of the provisions. In support of the foregoing contentions, the learned counsel relied on the decision of the Hon'ble Delhi High Court in the case of E.P.W.Da Costa, the decision of the Hon'ble Supreme Court in the case of Continental Construction Ltd. In the latter decision, the Apex Court has considered the meaning of the expression "technical services " and " professional services " and it has observed at page 117 that the amendment to substitute the words " technical services " by the words " technical or professional services " is only of a clarificatory nature and that the expression " technical services " has a very broad connotation and it has been used elsewhere in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties are placed, pages 130-140 where details of commission received during the year ending 31-3-1992 along with details of ports where loading and discharge of cargo has taken place and addresses of ship owners and charterers have been given, page 115 where names of vessels, types of agreements and other technical details have been given, pages 122-126 where the list of technical terminology used in the business of shipping is placed, pages 127-136, where written submissions filed before the CIT(A) are placed, page 152 where the copy of the letter dated 24-4-1991 from Minerals and Metals Trading Corpn. of India Ltd. to the Manager, State Bank of India, Overseas Branch, New Delhi is placed and wherein the bank has been requested to remit rupees equivalent to US $ 8,951.91 to M/s. Interocean Shipping Company, 75 Link Road, Lajpat Nagar-III, New Delhi (being their brokerage), page 153 where break up of freight charges in respect of Rockphosphate/Sulphur vessel in relation to the brokerage amount mentioned at page 152 has been given. In view of the said data, the learned counsel submitted that it is clearly established that the assessee has earned income from brokerage on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial, commercial or scientific knowledge, experience or skill, nor the case of the assessee was covered by the latter portion of that section which stipulated rendering of technical or professional services outside India to the Government of a foreign State or a foreign Enterprise. He further submitted that the findings of the Tribunal in its order in ITA No. 895 (Delhi) 84 dated 31-5-1985 in the case of the assessee for the assessment year 1979-80 with reference to the provisions of section 35-B read with provisions of section 80-MM were not relevant as the provisions of section 80-O have to be interpreted independently. In support of his contentions, the learned departmental representative relied on the decision of the Hon'ble Bombay High Court in the case of Davy Powergas India (P.) Ltd. v. CBDT [1994] 207 ITR 164. He further relied on the decision of the Hon'ble Delhi High Court in the case of J.K (Bombay) Ltd. and the decision of the Hon'ble Supreme Court in the case of Petron Engg. Construction (P.) Ltd. He also submitted that the words " agreed to " in section 80-O still stipulate some agreement between the parties though approval of the agreement by CBDT was no longer neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical and professional services to the foreign ship owners and the services were being rendered from India for use outside India in terms of the provisions of clause (iii) of the Explanation to section 80-O. In this connection he again invited our attention to pages 122-126 of the paper book as also clause (19) of the agreement placed at page 9 of the paper book. Clause (19) clearly provides that a commission of 1.25% is payable by ship owners to Interocean Shipping Co., Bombay. Thus, the learned counsel concluded that the assessee's case is squarely covered by the provisions of section 80-O and he is entitled to deduction under that section. 7. We have carefully considered the submissions made by both the parties and have also perused the relevant record to which our attention was invited during the course of hearing. We have also carefully considered the cases relied upon by both the parties. There is no dispute that during the asst. year 1992-93 the provisions of section 80-O covered the case of a person (other than a company) who is a resident in India. In this case the assessee is an individual and is resident in India during the said assessment year. There is also no dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -10-1986 in the case of M/s. J.B. Boda Co. Ltd. ; where the Reserve Bank of India had advised that remittance of reinsurance premia after deducting the brokerage due to the said company would not violate the provisions of the Foreign Exchange Regulation Act, 1973. Thus it is claimed by the assessee that he fulfils all the requisite conditions stipulated in section 80-6 and is entitled to the relief. As against this the claim of the revenue is that the assessee is not fulfilling any of the material conditions relating to furnishing of information concerning industrial, commercial or scientific knowledge, experience or skill or rendering technical or professional services or the receipt of income in convertible foreign exchange and thus the assessee is not entitled to the benefit of section 80-O. It has further been urged by the revenue that the assessee has not developed anything new and compiled information is being furnished by the assessee to foreign ship owners which is already easily available from various sources and any person with little effort can collect such information and furnish the same. 7.1 It is observed that the Tribunal has already examined the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the relevant charter party. In the second cited case, the Hon'ble Supreme Court at page 117, while dealing with the amendment made by the Finance (No. 2) Act, 1991 with effect from 1-4-1992 by which the words " technical services " were substituted by the words " technical or professional services ", have observed that " this amendment may be only of a clarificatory nature. The expression " technical services " has a very broad connotation and it has been used else-where in the statute also so widely as to comprehend professional services ......" There can hardly be any doubt that services involving the specialised knowledge, experience and skill in the field of constructional operation are " technical services ". The cases relied upon by the revenue have also been carefully seen and we feel that the same are distinguishable on facts and are not directly on the point at issue. In view of the foregoing we hold that the activities of the assessee constitute furnishing of information concerning commercial and scientific knowledge, experience and skill to the foreign ship owners and that such information has been used outside India. 7.2 With reference to the receipt of income by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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