TMI Blog2003 (11) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed by the learned Commissioner of Incometax (Appeals). The nature of the services provided by the assessee was explained to the taxing authorities. Written submissions were filed before the learned Commissioner of Income-tax (Appeals). These find place at pages 391-405 of the assessee's paper book. ( APB , for short), Volume-III. The assessee is a franchisee of an international institution called Boyden World Corporation. The assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requirements of the client. The assessee formulates its own judgment about the acceptability and usefulness of candidates to the client organization. This is a critical area requiring imparting of reliable advice on how an individual will perform in a given organization. Such advice is contained in the evaluation report and the reference check report, which the assessee sends to its client. Along with the assessee's comments, opinions and analysis 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 honou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yers. The honourable High Court held that the 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. Further, the assessee did not satisfy the condition laid down in the section, viz., that the industrial, commercial or scientific knowledge experience or skill must be made available for use outside India . The fact that the selected 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts clients after assessing infor mation not obtained through advertisements from its database and conducting preliminary interviews of short-listed candidates. The assessee accomplishes this by presenting an evaluation report, enlisting the fundamental criteria influencing the selection. The reports cover a study of the industry to which the client belongs, a study of the work culture of the client, impressions about the traits of the prospective candidates, which would 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 spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he required category of personnel and then processed their applications to see whether they were technically fit for the job. Thereafter the assessee merely conveyed the names of suitable candidates to the foreign employers. Such, as evident from the underlined portion of para. 12 (page 94) above, is not the case before us. The assessee does not merely convey names it prepares comprehensive reports, which are used by its clients outside India, to enable them to formulate 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n therein, we hold it to be inapplicable hereto. In E. P. W. Da Costa [1980] 121 ITR 751 (Delhi), the question for consideration was, whether the assessee therein had received payment from the BBC in consideration for the use outside India, of information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available to the BBC. The BBC is a commercial corporation interested in knowing how the BBC broadcasts 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 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness/corporate conglomerates, corporations and multinationals cannot afford to rest content with general information for their purpose of selecting high executives and CEOs, on whom, the very existence of these institutions depend. The information has to be specific, particular and analysed according to their peculiar requirement. It is this quality information, as detailed in para. 12 (page 93) above, which the assessee has been disseminating to its clients, by way of rendering 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly advise its clients. In its function of disseminating such information, the assessee requires commercial and scientific knowledge and when it does so, it is providing, in no uncertain terms, professional services . Even otherwise it would be foolhardy in today's age, which is aptly known as the age of information, to restrict and constrict the meaning of professional services to the classical concept of professional services. With the ever expanding horizons of human endeavour, such services as rendered by the assessee definitely find place in the realm of professional services . In this regard, the Central Board of Direct Taxes Circular No. 700, dated March 23, 1995 (see [1995] 213 ITR (St.) 78), clarifies that as long as technical and professional services are rendered from India and are received by a foreign Government or enterprise outside India, deduction under section 80-O would be available to the person rendering the services even if the foreign recipient of the services utilises the benefit of such services in India. Thus, in respectful consonance and agreement with E. P. W. Da Costa [1980] 121 ITR 751 (Delhi), the professional services rendered by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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