TMI Blog1992 (8) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... setting up a factory in Thailand for the manufacture of Sodium Tripolyphosphates (STPP). Under the agreement of September 21, 1982, the petitioners agreed to provide certain services to Messrs. Albright and Wilson Limited, as set out in Schedule 1 of the agreement. By their application dated April 19, 1983, filed before the Central Board of Direct Taxes, the petitioners applied for the approval of this agreement under section 80-O of the Income-tax Act, 1961. The Central Board of Direct Taxes, however, after some correspondence, by its letter dated February 24, 1986, rejected the application of the petitioners and declined to approve the agreement under section 80-O of the Income-tax Act "for the reasons that the activities under the agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the income so received as set out in that section. Section 80-O at the material time contained a proviso to the effect that this deduction would be available provided an application for the approval of the agreement in the prescribed form is made before the Central Board of Direct Taxes as set out therein. Accordingly, the petitioners had applied for approval of the Central Board of Direct Taxes under section 80-O. From April 1, 1983, section 80HHB has been inserted in Chapter VI-A. The relevant part of this section is as follows : "80HHB.-(1) Where the gross total income of an assessee being an Indian company or person (other than a company) who is resident in India includes any profits and gains derived from the business of,- (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essrs. Albright and Wilson Limited the required engineering expertise for the use by them outside India for the implementation of project for construction of a sodium tripolyphosphate (STPP) plant in Thailand. Clause 2 of the agreement states as follows: "2.0 Subject and scope of the work and technical services covered by the contract 2.1. In consideration of the payment by the client to the contractor of the contract price in accordance with clauses 3 and 4 below, the contractor shall provide the following services being those defined in Schedule 1 of this agreement. 2. 1. 1. The technical services comprising but not limited to design engineering for civil, mechanical, electrical, piping and instrumentation for the plant in Thailand. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for rendering of these services. The question is whether such an agreement can be considered as falling under section 80HHB. The term "foreign project" is defined under section 80HHB as a project for the construction of any building, road, dam, bridge or other structure outside India or the assembly or installation of any machinery or plant outside India. The agreement in question does not require the petitioners either to construct any structure outside India or to assemble any plant or machinery outside India, nor are they required to execute this work as a part of a foreign project undertaken by somebody else. The nature of the work clearly does not fall within the purview of section 80HHB. The petitioners have in their application, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioners, has drawn our attention to the decision of the Supreme Court in the case of Continental Construction Ltd. v. CIT [1992] 195 ITR 81. The Supreme Court in that case considered the provisions of section 80HHB and section 80-O. It has said that section 80-O only empowers the Board to approve the contract on being satisfied that it gives rise to receipts qualifying for deduction under section 80-O and nothing more. All that the Board has to do is to grant an approval to the agreement for the purpose of section 80-O. It has nothing more to do. The Supreme Court has also clarified that after the insertion of section 80HHB, in the matter of a receipt governed by section 80HHB and section 80-O, the former and not the latter would pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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