TMI BlogGuidelines with respect to disposal of applications u/s 80-O.X X X X Extracts X X X X X X X X Extracts X X X X ..... er. 2. Vide Notification No. 8135/SO 1108(E) (F.No. 142/9/88-TPL) dated 28.11.1988, a new rule 11E has been inserted in the Income-tax Rules, 1962 w.e.f 1.4.1989, prescribing that the application for approval of agreement under section 80-O shall be made in Form No 10F. 3. Detailed instructions were issued vide Instruction No.797 (F.No. 473/5/72-FTD) dated 23.11.1974, highlighting the points which should be kept in view by the Assessing Officers while dealing with the claim for deduction under section 80-O. Detailed guidelines were also issued vide Circular No.187 (F.No. 473/15/73-FTD) dated 23.12.1975 as modified by Circular No. 253 (F.No. 473/15/78-FTD) dated 30.4.1979. keeping in view the amendments made to this section, it has become necessary to amplify/amend these instructions for the guidance of Chief Commissioners/Directors General of Income-tax and Assessing Officers. For the purposes of granting approval to an agreement under section 80-O, the following points should inter-alia be kept in view by the Chief Commissioners and Directors General:- i. The application for approval should be in the prescribed form No.10F. In this form the applicant is required to furnish a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use outside India of: (a) any patent, invention, model, design, secret formula or process or similar property right; or (b) information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided; and (II) technical services rendered or agreed to be rendered outside India. Deduction is available only in respect of income by way of royalty, commission, fees or any similar payment. vii. The Board have been advised that payment received in consideration for the use of trade mark rights or copy-right would be covered under the expression "similar property rights". viii. The agreements providing for furnishing of information where the job culminates into certain findings, reports, recommendation or information which would be of use to the foreign party outside India, would be covered by the provisions of section 80-O. It has been held by the Delhi High Court in the case of EPW de Costa and another Vs. Union of India (1980) (1212) ITR (751) that the statistical tables compiled by the petitioner after analysing masses of numerical data would amount to commercial or scientific knowledge ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stman Consultant P. Ltd. (132 ITR 637), wherein it was held that mere supply of bio-data of persons willing to work abroad and their selection recruitment in India is not an 'information' covered under section 80-O. xii. If under the agreement, the assessee is required to manage the day-to-day affairs of the foreign party, that would amount to a participation in the business of the foreign party and hence cannot be considered as rendering of technical services. Therefore, the portion of fees under the agreement relating to such management services which are not covered by the provisions of section 80-O should be excluded from the purview of that section. It is for the Chief Commissioner / Director General to decide the portion which is to be so excluded. Before doing so, however, an opportunity of being heard may be given to the assessee. It may be mentioned in this connection that the Delhi High Court have held that hotel management is covered under section 80-O (Oberoi Hotels India Ltd. Vs. C.B.D.T. (135 ITR 257). This judgment has not been accepted by the Board. Therefore, the cases where management services are in respect of a hotel, involving hoteliering as distinct from m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance for the non-qualifying services, after taking into account the totality of the agreement. xvii. Section 80-O requires the agreement to be approved for the purpose of that section and application has to be made for approval before the 1st day of October of the relevant Assessment Year for which the approval is first sought. It is not necessary for the assessee to file an application every year for approval of the same agreement. An approval once granted to an agreement would cover the entire period for which the agreement runs or in which the income under the agreement would be received, as the case may be. To ensure that no undue advantage is taken of the approval, the assessment years for which approval is being granted may be mentioned in the order of approval itself. A specimen copy of the order of approval to be issued by the Chief Commissioner / Director General of Income-tax is enclosed. xviii. Each agreement will have to be considered separately for the purposes of this section. Therefore, if an original agreement is extended by a subsequent agreement, such extension agreement would also have to be separately approved for the purposes of section 80-O, for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the prohibition in sub-section (5) of section 80HHB and, therefore, cannot be approved. II. In cases where the assessee has not directly undertaken any foreign project but is rendering services or furnishes information which forms part of a 'foreign project' undertaken by any other person within the meaning of section 80HHB(1)(b) then also the entire agreement would be covered by section 80HHB and not by section 80-O. It may, however, be noted that for a case to be covered by sub-section (1)(b) of section 80HHB, there has to be - a. a contract between "other person and a foreign enterprise or foreign Govt. etc." existing before the date of the agreement which is sought to be approved under section 80-O; and b. the contract should relate to a 'foreign project' as defined in sub-section (2)(b) of section 80HHB. III. The word 'work' will include even technical services or consultancy services including supervision. In the cases of agreements for preparation of feasibility reports or market survey reports, generally the contract for construction / installation is entered into at a much later date after the submission of such reports. Such cases, therefore, may not be cov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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