TMI Blog1998 (1) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-O of the IT Act. From the balance commission it claimed deduction of expenses and finally declared the taxable income at Rs. 92,030, Rs. 12,610 and Rs. 1,37,417 for the assessment years 1994-95, 1995-96 and 1996-97 respectively. 3. The Assessing Officer passed the order in the case under section 143(3)/158BC on 27-12-1996. He disallowed the claim of deduction under section 80-O of the IT Act. He computed the total concealed income under section 158BC of the IT Act at Rs. 13,63,759, Rs. 6,76,500 and Rs. 2,07,706 for the assessment years 1994-95, 1995-96 and 1996-97 (broken period), Le., the total concealed income for the block period under section 158BC was worked out at Rs. 22,47,965. 4. While computing the concealed income the Assessing Officer allowed deductions for expenses as per the accounts. He also allowed deduction of income shown by the assessee in the regular return filed for the assessment year 1994-95 prior to the date of the search. Deduction was also allowed for the income shown as per return for the block period from the income for the assessment year 1996-97 (broken period). Deduction for the income shown in the regular return for the assessment year 1995-96 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessment order. Therefore, the impugned order is held to be proper and valid on this ground. 8. The next major ground raised in the appeal is against the disallowance of the claim of deduction under section 80-O of the IT Act. In support of the claim the assessee submitted before the Assessing Officer that it provided technical, commercial and industrial knowledge and information to the said 2 foreign companies, M/s. Stemcor U.K. Ltd., Hongkong and M/s. G. Premjee Ltd. Bangkok. It stated that one of the partners of the assessee-firm, Mr. Girish Kapila, is a Metallurgist having working experience of 14 years of the Steel Authority of India Ltd. (SAIL). He had substantial knowledge of physical and chemical properties, types and grades of steel etc. The assessee used to supply information regarding the physical and chemical properties and any other characteristics of steel to the principal foreign companies. On the basis of the information furnished the foreign companies used to decide about their purchases from M/s. TISCO Limited and M/s. Rashtriya Ispat Nigam Ltd., Vishakhapatnam. It was, therefore, contended before the Assessing Officer that the claim under section 80-O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sures and their Scientific Services Divn. issued test certificates for both physical and chemical properties of the products being despatched. Such test certificates were handed over to the customer or their accredited agent for their further end. 8.4 It appears that on similar lines reply was received from Rashtriya Ispat Nigam Limited, Vishakhapatnam. 8.5 The Assessing Officer apprised the assessee with the replies received from M/s. TISCO Limited and M/s. Rashtriya Ispat Nigam Limited and asked it to explain why its claim of imparting technical services to the foreign buyers should not be treated as factually incorrect. In this connection, he also referred to the Debit Note raised by the assessee dated 2-12-1993 against M/s. G. Premjee Co. Limited in which it was mentioned that the amounts due were against commission payable for steel shipment effected from M/s. Vizag Steel Plant and TISCO Ltd. 8.6 In reply, the assessee submitted that on receipt of the physical and chemical properties of the products from the seller companies it was the duty of the assessee firm to verify and match them with the specification and requirement received from the principal companies. Therea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial or scientific, while the services must be technical and would not, therefore, include commercial services." 8.10 He observed that the aforesaid judgment completely negates the claim of the assessee. What the assessee had done in this case? At the most, he conceded sending of commercial information and thereafter negotiating commercial terms and conditions for effecting the transaction of purchase and also helping in the shipment of the goods. It was definitely not rendering technical services and so as per the above judgment of the Delhi High Court the assessee was not entitled to deduction under section 80-O. 8.11 The Assessing Officer also observed that the assessee had rendered the services only in India and not from India and, therefore, the claim of deduction under section 80-O was not tenable as per the Explanation (iii) of section 80-O. The assessee-firm was engaged by the principal foreign companies for assisting them in the transaction of purchase of certain steel items in India. The assessee did so. The transaction of such purchases finalised fully in India only which was not a case at all that the services were rendered from India and were received by foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TTJ (Cal.) 231 and Supreme Court's order in the case of Continental Construction Ltd. He also relied on the decision reported in (SIC) 121 ITR 117. The ld. counsel further submitted that the claim of the assessee for deduction of 50 per cent of the gross commission before deduction of expenses was also proper and justified. He contended that the provisions of section 80B were not applicable to the computation of the admissible deduction under section 80-O. 8.15 The learned counsel further submitted that the Assessing Officer was wrong in applying the provisions of section 158BC in respect of the claim under section 80-O. He contended that the disallowance of the claim under section 80-O could not be covered under the provisions of section 158BC of the IT Act. He stated that the assessee had filed its return for the assessment year 1994-95 on 31-1-1995, i.e., before the date of the search and seizure operation under section 132 in which it had furnished the particular of the commission received from the foreign enterprises. He contended that the disallowance of the claim under section 80-O could not be treated as detection of concealed income. He added that the matters concerning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to the detailed discussions by the Assessing Officer in the impugned assessment order in this regard. She further submitted that the services were rendered in India and the transactions of purchase and shipment of the goods were completed by the assessee in India. These services were not rendered from India received by the foreign principals outside India. The foreign principals only received the goods shipped by the assessee from India which could not be treated as receipt of services by the foreign principals outside India. 8.20 The learned D.R. submitted that the decisions relied upon by the ld. counsel were not applicable because the facts of the present case were distinguishable from the facts of the cases relied upon. She added that, on the other hand, the decisions reported in Eastman Consultants (P.) Ltd. v. CBDT [l98l] 132 ITR 637/7 Taxman 93 (Bom.) and Searle (India) Ltd. v. CBDT [1984] 145 ITR 673/[1983] 12 Taxman 300 (Bom.) supported the revenues stand regarding the claim of deduction under section 80-O by the assessee. 8.21 The learned D.R. further submitted that the provisions of section 80AB were applicable to the computation of admissible deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the foreign enterprises. He also held that the assessee had neither provided any technical or professional services to the foreign enterprises. The detailed reasons for these findings of the Assessing Officer have been discussed above. We are of the view that these findings of the Assessing Officer are not correct. There is no doubt that the assessee-firm was providing some such services to the foreign enterprises which can be termed as information concerning industrial, commercial or scientific knowledge, experience or skill or technical or professional services. It is an admitted fact that TISCO Limited had confirmed, as mentioned above, that the assessee had been negotiating commercial or technical terms and followed up of above orders as accredited agents of M/s. G. Premjee Limited, Bangkok. Negotiating commercial and technical terms and follow up can be regarded as technical or professional services. The list of technical and professional services has been over expanding in the modern world. Gone are the days when only doctors and lawyers profession was considered as professional work. A large number of items have been added to the list of professional work since then. The se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the foreign enterprises decided about making the purchase from the Indian company. He, therefore, contended that the services were rendered from India which were utilised by the foreign enterprises outside India for making the transactions in question and, as such, the services rendered qualify for deduction under Explanation (iii) to section 80-O (which provided that the services rendered outside India shall include the services rendered from India. In this connection, the ld. counsel also referred to Board's Circular No. 691, dated 5th September, 1994, which says that "as long as the technical and professional services are rendered from India and are received by a foreign Govt. or enterprise outside India deduction under section 80-O would be available to the person rendering services even if the foreign recipient of the services untilsed the benefit of such services in India". 8.30 We have examined carefully the aforesaid contentions of the learned counsel, with regard to the provisions of Explanation (iii) to section 80-O but we do not find his contentions correct and acceptable. The assessee had failed to produce any evidence before the Assessing Officer in course of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent under section 158BC, was not proper and justified. The assessee had filed its return for the assessment year 1994-95 on 31-1-1995, i.e., before the date of the search. It had also filed return for the assessment year 1995-96 on 25-1-1996, i.e., before passing of the impugned block assessment order on 27-12-1996, though after the date of the search. For the assessment year 1995-96 also the assessee had furnished the particulars of the commission received from the foreign enterprises. Thus, it was not a case where receipt of commission from the foreign enterprises had been detected as a result of the search and seizure operation. So far as the disallowance of the claim of exemption under section 80-O is concerned, it also cannot be termed as detection as a result of the search and seizure operation. The disallowance is a matter of law in which there can be difference in the stand of the assessee and the revenue. Such disallowance cannot be brought within the purview of Chapter XIVB. 9.1 Section 158B(b) defines "undisclosed income" as under: "(b) 'undisclosed income' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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