TMI Blog1999 (12) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... on gross basis, prima facie adjustment was made in intimation under section 143(1)(a) and deduction was reduced to ₹ 3,55,30,981 under section 80-O. Return for assessment year 1995-96 was filed on 30-11-1995 declaring income at ₹ 45,22,060. The return was processed under section 143(1)(a) but no prima facie adjustment was made. Later assessment was framed on 31-12-1997 under section 143(3) of the Act allowing deduction of ₹ 4,98,06,291 under section 80-O. 3. On scrutiny of the assessment records of the assessee for the assessment years 1994-95 and 1995-96 the CIT found that the Assess- ing Officer had allowed the claim of deduction under section 80-O without examining whether the conditions of eligibility had been fulfilled, viz., whether the assessee, who was in courier business had rendered any technical or professional services to a foreign enterprise outside India in consideration of which the assessee had received income in convertible foreign exchange. As there was no application of mind by the Assessing Officer on the basic question of eligibility of the claim under section 80-O the assessment of both the years were considered to be erroneous and prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e years have been received within the stipulated period which has been substantiated by the Foreign Inward Remittance Certificate filed during assessment proceedings. It was also submitted that the explanation to the section clearly brings out the fact that the services rendered from India would also be eligible for availing deduction. It was further explained that as long as services are rendered from India i.e., services originate in India but completed outside India, such services are eligible for deduction under section 80-O. The assessee while being involved in outbound shipments renders services from India i.e., the pickup of shipments is in India but the services are completed under the contract with Fed Ex only when the assessee successfully hands over the shipment to Fed Ex at the designated gateway outside India and further when Fed Ex delivers the shipments to the consignee and obtains the POD within the service time frame. It was thus stated that the assessee s business activity is structured time bound service coupled with continuous real time transmission of commercial information. It is not synonymous with simple transport of shipments but involves a dedicated and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contract to each other. The AO has not examined this issue in all aspects. He only assumed that the assessee is entitled to the claim under section 80-O. He applied his mind only to the quantum of relief admissible under the said section. Placing reliance on the decisions in Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi), Malabar Industrial Co. Ltd. v. CIT [1992] 198 ITR 611 (Ker.) and Aspinwall Co. Ltd. v. CIT (No. 1) [1996] 220 ITR 611 (Ker.), the Commissioner held that he is justified in invoking the provisions of section 263 for both the years. Accordingly, he set aside the assessment orders on the limited issue of eligibility of the assessee for deduction under section 80-O with a direction to the Assessing Officer to examine the same in the light of relevant facts and case laws and to come to a definite and informed conclusion whether relief under section 80-O should be granted to the assessee. He further directed that the issue be redecided in accordance with the facts as emerging from his order under section 263 and further facts as the Assessing Officer may consider necessary to be gathered. Aggrieved thereby the assessee has come in appeal before the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter applying his mind on the twin aspects, viz., eligibi-lity of the assessee to deduction under section 80-O and quantum of deduction, the Assessing Officer observed that in the year of account the assessee claimed deduction under section 80-O on account of foreign exchange earnings for professional technical services given to Federal Express Incorporation, U.S. multinational company. He further observed that the assessee-company is running a line haul services and international inbound services and received total amount of ₹ 5,03,36,998 in respect of professional/technical services rendered to the above multinational company at USA out of India. He further stated that the assessee has claimed deduction under section 80-O on the gross amount of foreign exchange receipts. Rejecting the assessee s explanation giving justifications for deduction on gross basis vide letter dated 24-8-1995 the Assessing Officer on interpreting the provisions of section 80-O read with section 80AB held that indirect expenses of ₹ 87,58,385 had to be deducted from the above gross receipts and on the remainder i.e., ₹ 4,15,78,613/Rs. 5,03,36,998 minus ₹ 87,58,385 the assessee is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. In assessment year 1995-96 vide letter dated 22-7-1994 filed during assessment proceedings, a copy of agreement entered between the assessee and Fed Ex was enclosed. Shri Dinesh Vyas ld. Advocate for the assessee invited our attention to the questionnaire issued by the Assessing Officer dated 28-10-1997 (annexure B 1-4). In (iii) of that questionnaire in respect of assessee s claim of deduction under section 80-O the Assessing Officer required the assessee to furnish complete partywise details along with foreign inward remittance certificates of receipt. He also required the assessee to explain in detail the nature of services rendered along with copy of the agreements, if any, as also evidences to show that the services were rendered outside India. He also required the assessee to furnish complete details of direct and indirect expenses incurred to earn such income and to explain the basis of such apportionment. Shri Vyas pointed out that vide letter dated 19-12-1997 the assessee made submissions about the eligibility of the assessee for deduction under section 80-O. Copy thereof appears at PP C 1-3 of the paper book. He submitted that the nature of services rendered by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the nature of technical services. It was submitted that since these services rendered by the assessee to Fed Ex consisted of supply of information concerning the shipments of various customers in which assessee employees specialised professionals trained to handle the activities of providing up-to-date information to Fed Ex and also uses advanced technology, etc. it is eligible for deduction under section 80-O. Shri Vyas, ld. Advocate for the assessee submitted that it was on consideration of the aforesaid material placed before the Assessing Officer during the assessment proceedings that in para 3 of the assessment order the Assessing Officer observed that the assessee is essentially engaged in the courier service and provides integrated air and ground transport of packages to various destinations both in India and abroad. He went on to observe further that the international operations are carried out with the services of the foreign company called Federal Express Incorporation, USA. He took note of the fact that the assessee has entered into a Global Service Partnership agreement. He argued that on these facts, it is submitted that the CIT was in total error in invoking secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting Advertising Co. Ltd. v. ITO [1989] 28 ITD 231 (Delhi) (vii) Nirfabrics Ltd. v. Dy. CIT [1994] 50 ITD 336 (Bom.) (viii) Ampee Textiles (P.) Ltd. v. Asstt. CIT [IT Appeal No. 1571 (Bom.) of 1992] (ix) Jhulelal Land Development Corpn. s case (supra) (x) Indian Hotels Co. Ltd. v. Dy. CIT [IT Appeal No. 3234 (Bom.) of 1992] (xi) CIT v. Shri Govindram Seksariya Charity Trust [1987] 167 ITR 580 (MP) (xii) Eicher Motors Ltd. v. CIT [1998] 101 Taxman 267 (Indore) (Mag.) (xiii) CBDT v. Oberoi Hotels (India) (P.) Ltd. [1998] 231 ITR 148 (SC) (xiv) J.V.Boda Co. (P.) Ltd. s case (supra) (xv) Bajaj Tempo Ltd. s case (supra) 8. Shri Wasim Harshad, ld. D.R. on the other hand, supported the order of the Commissioner. He submitted that it would be seen from the impugned order that the Commissioner prima facie disagreed with the Assessing Officer and asked him to consider the issue of deduction under section 80-O afresh. Inviting our attention to para 7 of the impugned order, the ld. D.R. submitted that the prime question in the mind of the Commissioner was whether the services rendered by the assessee could at all be termed as technical/professional se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shable on facts. That was a case of no enquiry whereas the case of the assessee is fully covered by the judgment of Bombay High Court in Gabriel India Ltd. s case (supra). It was only after satisfying himself that the conditions are fulfilled for deduction under section 80-O that the Assessing Officer had proceeded to examine the issue whether deduction is admissible on gross or net basis. 10. We have given careful though to the rival submissions. Perusal of the impugned order of the Commissioner would go to reveal that he exercised his revisionary jurisdiction for the sole reason that there was non application of mind by the Assessing Officer on certain aspects viz., whether the services rendered by the assessee to Fed Ex can be termed as technical services, whether the contract is mutual etc. while allowing deduction under section 80-O of the Act. Before we proceed further let us see what section 80-O stipulates. Section 80-O provides for deduction of 50% from the income of an Indian company or a non- corporate Indian resident by way of royalty, commission, fees or any similar payment from a foreign Govt. or enterprise in consideration for the use outside India of any patent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer observed thus :- During the year under consideration, the assessee-company has claimed deduction under section 80-O at ₹ 4,55,57,524 on account of foreign exchange earnings for professional/technical services given to M/s. Federal Express Incorporation, a US multinational company. It is seen that the assessee-company is running a linehaul services and international inbound sales and received total amount of ₹ 9,11,15,048 in respect of professional/technical services rendered to the above- mentioned international company at USA. It has claimed deduction under section 80-O on gross amount of foreign exchange receipt. 12. In assessment year 1995-96 in para 3 of the assessment order the Assessing Officer (Shri A.K. Chauhan, Dy. CIT, Spl. Range 35), observed that the assessee company is essentially engaged in the courier services and provides integrated air and ground transportation of packages to various destinations both in India and abroad. The international operations are carried out with the services of the foreign company called Federal Express Incorporation, USA. The assessee had entered into a global service partnership agreement. In computat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned assessments were made without application of mind on the assessee s claim of deduction under section 80-O. The obvious answer is - it cannot. As stated earlier, upto and for the assessment year 1991-92 approval of agreement by the Board/Chief Commissioner or DG was a must. In assessment year 1992-93 while considering the assessee s claim of deduction under section 80-O the Assessing Officer in his order dated 25-11-1994 under section 143(3) of the Act observed that the assessee is rendering linehaul services and international inbound and received foreign exchange earnings of ₹ 8,96,74,832 in respect of professional technical services rendered to Federal Express Incorpn. out of India. Rejecting the assessee s claim of deduction on gross basis, the Assessing Officer allowed deduction on net basis. In assessment year 1993-94, the Assessing Officer required the assessee during assessment proceedings to file details of expenses incurred in earning the income eligible for deduction under section 80-O. This was filed vide assessee s letter dated 13-4-1994. Thereafter, the Assessing Officer required the assessee to explain the nature of its business and to file a copy of ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80-O is contrary to the facts and material borne from records. 14. It is now well settled that the question whether the assessee is rendering technical or professional services has to be considered against the background of the factual matrix of each case. The case of the assessee all along has been that it is engaged in integrated air and ground transportation of time sensitive packages to various destinations in domestic and international sectors. It has entered into global service arrangement with Fed Ex under which it renders technical services to Fed Ex outside/from India. Copy of agreement was brought on record during assessment proceedings for assessment year 1992-93. On being asked by the Assessing Officer copy of agreement was again filed during assessment proceedings for assessment year 1995-96 along with necessary evidences to show that the assessee had rendred technical/professional services to Fed Ex outside India. It was brought to the notice of the Assessing Officer that Fed Ex requires the assessee under its contract to render world class services as per the procedures and standards laid down in their operations, manuals and guides. It was on render ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or scientific knowledge, experience or skill of the assessee for use outside India and in that process to receive income to augment the foreign exchange resources of the country. The assessee can also make available to the foreign enterprise, technical and professional services, expertise of which it possesses for earning foreign exchange for the country. From the evidence on record it is apparent that the assessee did acquire speciality in integrated air and ground transportation of time sensitive packages and by contract commencing on 1-10-1993 agreed to render technical services to Fed Ex in consideration of convertible foreign exchange. As per the contract, assessee was under obligation to render technical/professional services (including furnishing of commercial information by using its skills, technology, equipments and communi-cation facilities. It is not the mandate of law as envisaged in section 80-O that there should be unilateral transfer of any sophisticated technology which the Commissioner has in mind. There is no bar either for mutual contract of service. What is provided in section 80-O is that there should be agreement between the assessee on the one hand a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpression technical services by the expression technical or professional services w.e.f. 1-4-1992 consequent to amendment of section 80-O is only clarificatory in nature . Having regard to the conditions laid down in section 80-O the claim of the assessee for relief under section 80-O appears admissible even on merits. Before the Commissioner the assessee had placed reliance on numerous decisions in support of its contention that the services provided by the assessee are technical in nature, but the Commissioner did not record any finding that the facts and/or ratio decidendi therein were inapplicable to the case of the assessee. The decisions cited before us by the ld.D.R. do not render any assistance to the revenue. The Commissioner took assistance from certain decisions mentioned earlier in support of exercise of powers by him under section 263 on the grounds of no inquiry by the Assessing Officer on the eligibility of the assessee for relief under section 80-O. As stated earlier, it is not a case of no enquiry by the Assessing Officer. It is a case where all relevant material was brought on record by the assessee to enable the Assessing Officers to consider the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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