Bombay H.C : The petitioner carries on business of rendering technical and engineering services for installation of pumping plants, etc., together with preparation of designs and furnishing of technical know-how connected with it.

Counsel Appeared

K.B. Bhujale & V.H. Patil, for the Petitioners : G.J. Jetley, J.P. Deodhar & Manjula Singh, for the Respondents

MRS. SUJATHA V. MANOHAR, J. :

The petitioner carries on business of rendering technical and engineering services for installation of pumping plants, etc., together with preparation of designs and furnishing of technical know-how connected with it. The petitioner renders technical and engineering services. Several contracts of the petitioner for such technical and engineering services have, in the past, been approved by respondent No. 1, that is to say, the Central Board of Direct Taxes under s. 80-O of the IT Act, 1961. This fact is not denied by the respondents who have not filed any affidavit in reply.

2. One such contract for technical and engineering services was entered into by the petitioner with P.T. Sarang Tehnik, Indonesia. The contract is dt. 14th May, 1981. It is for installation/erection of pumping plant and other equipment in Indonesia as set out in the agreement. The agreement is at exhibit-A.

In respect of this agreement of 14th May, 1981, the petitioner applied for approval under s. 80O of the IT Act, 1961, for the asst. yr. 1982-83. Under s. 80-O, inter alia, where the gross total income of an assessee, being an Indian company, includes any income in respect of technical services rendered or agreed to be rendered outside India by the assessee under an agreement approved by the Board in this behalf, and if the assessee complies with the other condition of that section, the assessee is entitled to certain deductions as set out in that section. An application for approval under s. 80-O has to be made before the 1st October of the assessment year in relation to which the approval is first sought. Accordingly, the petitioner applied on 17th Sep., 1982, for approval of the said agreement under s. 80-O for the asst. yr. 1982-83. The respondents have declined to approve the agreement under s. 80-O on the ground that the activities covered by the agreement involved execution of a foreign project or work forming part of a foreign project as described in s. 80HHB of the IT Act, 1961. Sec. 80HHB of the IT Act, however, was introduced in the IT Act, 1961, with effect from the asst. yr. 1983-84. Sec. 80HHB was not in existence nor is it applicable to the asst. yr. 1982-83. There could, therefore, be no question of s. 80HHB being applicable to the asst. yr. 1982-83. The approval sought by the petitioners for the agreement of 14th May, 1981, is for the asst. yr. 198283. The application for approval, therefore, cannot be covered by s. 80HHB.

5. Mr. Jetley, learned counsel for the respondents, has submitted that the agreement of 14th May, 1981, cannot be considered as an agreement for technical services and hence it is not covered by s. 80-O. The respondents, however, have not denied any of the averments of the petitioner in para 2 of the petition, which clearly sets out that the contract of 14th May, 1981, was for rendering technical and engineering services. The contract is also annexed as exhibit-A to the petition and it sets out that the petitioner is required to undertake installation and erection of overhead travelling crane, six numbers pump sets and other equipment as set out in the contract. The petitioner is also required to provide all skilled workmen and supervising staff but not unskilled labour. The agreement is for rendering technical services. Such agreements have in the past been approved by the respondents under s. 80-O. There is no reason why the petitioner should be denied approval under s. 80-O of this agreement for the asst. yr. 1982-83. Orders dt. 27th Feb., 1986 and 14th Oct., 1986, being exhibits “F” and “H” to the petition, are, therefore, set aside and the respondents are directed to grant approval to the agreement of 14th May, 1981, under s. 80-O for the asst. yr. 1982-83. Rule is made absolute accordingly with costs.

[Citation : 176 ITR 317]