TMI Blog1991 (3) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... The reference relates to the assessment year 1971-72. The corresponding previous year ended on September 30, 1970. (b) On July 16, 1970, the assessee entered into an agreement with the Negeri Sembilan State Development Corporation of Malaysia, a Corporation formed under an enactment dated March 22, 1969, entitled the Negeri Sembilan Corporation Enactment Act, 1969. The assessee prepared a sugar project report for the said foreign company and received a sum of Rs. 2,43,813 towards the technical fees in consideration of the services rendered by it. The assessee claimed tax concession in respect of the said amount of technical fees in its income-tax return for the assessment year 1971-72 under section 80-0 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). Section 80-O of the Act stipulates several conditions for grant of relief thereunder, one of such conditions being that the agreement must be approved by the prescribed authority. The said section would be analysed in the later part of the judgment to the extent necessary for disposal of this reference. (c) On May 13, 1971, the assessee made an application to the Secretary, Government of India, Ministry of Food ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Assistant Commissioner also rejected the claim of the assessee in view of the said agreement dated July 16, 1970, having not been approved by the Central Board of Direct Taxes, the approval of the agreement by the prescribed authority being the condition precedent to the grant of tax concession under the said section. (g) By its order dated August 29, 1975, the Income-tax Appellate Tribunal held that the assessee was entitled to relief in respect of receipt of the gross amount of Rs. 2,43,813 on account of technical fees from the said Malaysian party even though the said agreement was not approved by the Board. The Board has repeatedly declined to grant its approval to the said agreement, i.e., by its letters dated January 4, 1974, February 27, 1976, and February 23, 1977. The Tribunal interpreted the correspondence between the assessee and the Board to mean that the Board had agreed to reopen the matter of approval of the agreement and thereafter kept quiet in spite of reminders. During the course of its order, the Tribunal observed that the prescribed authority was guilty of delay and inaction in respect of consideration of the application for approval of the agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the relevant assessment year, there shall be allowed deduction of the whole of such income in computing the total income of the assessee." The said section entitles an assessee to claim tax relief in respect of income by way of royalty, commission, fees or similar payment received by the assessee from a foreign company in consideration of rendering of technical know-how and other services under an agreement approved by the Central Government in this behalf before the 1 St day of October of the relevant assessment year. The said section 80-0 of the Act as enacted by the Finance (No. 2) Act, 1967, conferred a right on the assessee to claim deduction of his entire income so derived in computing the total income of the assessee. By the Finance Act of 1968, the extent of relief granted was reduced to income of an amount equal to sixty per cent. thereof with effect from April 1, 1969. Section 80-O was introduced in the Act with the twin objective of encouraging export of technical know-how and augmentation of the foreign exchange resources of the country. Section 80-O provides for concessional tax treatment in respect of categories of income specified therein, provided all the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the approval of the Central Government as a condition to grant of relief under section 80-0 was mandatory. It was, however, held that the datum-line prescribed by the said section for obtaining of such approval, i.e., 1 st October of the relevant assessment year was directory. In other words, the assessing authorities were bound to grant relief to the assessee under section 80-0 of the Act even if the agreement was approved by the prescribed authority after lst October of the relevant assessment year. It follows that in the absence of such approval of the agreement by the prescribed authority, no relief could be granted to an assessee under section 80-0 of the Act. We are in respectful agreement with the interpretation of section 80-0 of the Act as set out in the abovereferred judgment. Even independently of the said judgment, we take the view that the requirement of approval of the agreement is mandatory and no relief can be granted by the assessing authority under section 80-0 of the Act in the absence thereof. In the above-referred case, the assessee claimed relief under section 80-0 of the Act in respect of a sum of Rs. 4,66,858 received by it during the relevant assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the theory that the Revenue was trying to take advantage of its own wrong. If the Board had refused to approve the agreement illegally or arbitrarily, the Tribunal could not set aside the decision of the Board or sit in appeal over it or ignore the same even if the action or inaction of the Board appeared to be erroneous to the Tribunal. The fact remains that the agreement in the instant case was not approved by the Board and the Board had communicated its decision of rejection to the assessee by its letter dated January 4, 1974. It is not correct to state that the Board had agreed to reopen the matter and was thereafter guilty of inaction by keeping quiet over the matter for a long time. With respect, the Tribunal misinterpreted the letter dated February 4, 1975. It appears to us that the order of the Tribunal is totally erroneous both on facts and in law. We disagree with the conclusion of the Tribunal. The Tribunal had no jurisdiction to direct the Income-tax Officer to grant relief in terms of section 80-0 of the Act unless the decision of the Board rejecting the agreement was quashed and the Board positively approved the agreement. At our request, Mr. Dilip Dwarkadas, le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant relief under the said section in the absence of approval of the agreement. The said requirement is mandatory. Accordingly, we are of the view that the judgment of the Tribunal is not correct. Mr. Dwarkadas, learned counsel for the assessee, has submitted that, in a given case, the Tribunal or other appellate authorities are entitled to presume approval of the agreement on the part of the Board if the Board does not decide the application within a reasonable time in case the Tribunal or the other authority comes to the conclusion that the other conditions for relief prescribed under section 80-0 are satisfied. There is no question of "presumed approval". Law requires specific approval of the agreement by the Board and if the Board is guilty of passing an erroneous order or of inaction, the remedy of the assessee lies elsewhere, that is by invoking the writ jurisdiction of the High Court. We need not pursue this, aspect any further. In view of the above discussion, we answer question No. 1 in the negative and in favour of the Revenue. In this view of the matter, question No. 2 does not survive and is not answered. There shall be no order as to costs. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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