2001-VIL-149-ITAT-

Equivalent Citation: ITD 080, 176, TTJ 091, 762,

Income Tax Appellate Tribunal CALCUTTA

Date: 08.03.2001

OVERSEAS MERCHANDISE INSPECTION CO. (INDIA) (P.) LTD.

Vs

DEPUTY COMMISSIONER OF INCOME TAX.

BENCH

Member(s)  : G. CHOWDHURY., PRAMOD KUMAR.

JUDGMENT

1. The assessee has filed this appeal against the order passed by the CIT (Appeals) for the assessment year 1992-93 on the following ground :

"That the CIT (Appeals) erred in confirming the disallowance made by the Assessing Officer of the claim of deduction under section 80-O of the Income-tax Act, 1961 in respect of certain earnings in Convertible Foreign Exchange for services rendered from India.'

2. The assessee, the Overseas Marchandise Inspection Company (India) Pvt. Ltd. (in short, OMIC India) claimed deduction under section 80-O of the Act of Rs. 4,81,787. According to the assessee OMIC International, Tokyo is the parent body which have different branches in different countries in the world. The OMIC International entered into a contract for cotecna inspection in respect of various Asian countries including Kenya and Benin. For the purpose of rendering services in India the assessee was appointed by OMIC International. The job of the assessee was to make inspection and survey of cargo either exported from India or imported to India. According to the contract the assessee had to inspect the cargo exported from India to Kenya, Benin and Peru. The assessee had to inspect and certify in relation to quality, quantity and price of the exported item. Further, the relevant tariff code of the commodity was to be certified for the purpose of ascertaining the correct import duty by the concerned authority of the importing countries. According to the assessee the price verification was required by the Banks of importing countries to ensure that there was no excess Foreign Exchange payments being made at the time of import. The assessee was doing the job on behalf of OMIC International, Tokyo and has been receiving payment in converting the Foreign Exchange. This fact was brought to the notice of the Assessing Officer (in short, AO) by the assessee for the purpose of claiming deduction under section 80-O of the Act. However, the Assessing Officer was of the view that according to the Explanation III appended to section 80-O of the Act, the assessee was inspecting and was issuing certificate in India. There was no element of services rendered outside India or from India. Since the services were rendered in India, deduction under section 80-0 was not available to the assessee. On appeal, the CIT(A) upheld the finding of the Assessing Officer and further held that there was no evidence that the certificates regarding quality, quantity and the price of cargoes were utilised outside India. Against the said finding the assessee has filed the present appeal before the Tribunal.

3. The only effective ground is whether the assessee was entitled to relief under section 80-0 or not. Sri G.P. Agrawal, the learned counsel on behalf of the assessee firstly brought our notice to the provision of section 80-0 of the Act particularly the Explanation according to which the services rendered or agreed to be rendered outside India shall include services rendered from India but shall not include services rendered in India. According to the learned counsel in the present case the services were rendered from India. The learned counsel has also placed reliance on the circular of the CBDT being Circular No. 700 dated 23-3-1995 in this regard wherein it has been clarified by the Board that technical and professional services are rendered from India and are received by a foreign Government or enterprise outside India deduction under section 80-0 would be available to the person rendering services even if the foreign recipient utilises the benefit of such services in India. The learned counsel has submitted that by virtue of agreement between OMIC International and the foreign company situated in Kenya, Benin, Nizeria and other places the assessee was appointed to render services in respect of the commodities exported from India to the aforesaid countries. The learned counsel has brought our notice to copies of the certificates issued by the assessee after inspection wherein it has been mentioned that the certificates were issued according to the Import Regulations of the Republic of Kenya. The goods were inspected in accordance with the mandate of the assessee and found acceptable to quality, quantity and price. Copy of the reply submitted to the Assessing Officer dated 30-12-1994, has been filed along with the paper book at page 2 where the assessee has mentioned in detail the services rendered by it which required scientific and commercial knowledge and expenence and skill. According to the assessee the certificates issued by the assessee in respect of the exported goods were being used by the importing countries to ensure the correct' price, quality and Customs Duty to be paid by the countries. The details of statement of income received by the assessee from certification job has been filed at page s 4 to 6 of the paper book. The computation of deduction is available at pages 7 and 8 of the paper book. The assessee has also brought on record copy of the Board's circular No. 700 dated 23-3-1995 and the copy of the written submission filed before the CIT(A). Apart from that, the assessee has brought on record the copies of the following documents :

(1) Circular letter No. NA-07/510 dated 1-2-i991 from OMIC International Ltd., Tokyo, advising appointment for CISS Kenya.

(2) FAX dated 1-2-1991 from Cotecna Inspection S.A. Geneva to OMIC International Ltd., Tokyo.

(3) Circular fax dated 1-2-1991 from Cotecna Inspection on CISS Kenya about enlarged CISS contract.

(4) Letter NA-08/097 dated 12-4-1991 from OMIC International Ltd., Tokyo to OMIC (India) Pvt. Ltd. advising fee schedule for Kenya and Benin.

(5) Letter dated 10-.2-1992 from OMIC International Ltd. to OMIC (India) Pvt. Ltd. advising revised CISS fees structure.

(6) Circular fax dated 20-7-1990 from OMIC International Ltd. to all OMIC Network Offices enclosing Nigerian Embassy letter appreciating the export promotion reports submitted.

(7) Invoice No. CDKN/07-15-01/04 dated 24-7-1991 on OMIC International Ltd. for US $ 7759.17 being fees for certificates issued during June, 1991 for Kenya CISS.

(8) Invoice No. CDKN/07-15-01/10 dated 15-1-1992 on OMIC International Ltd. for US $ 855.89 being fees for certificates issued during December, 1991 for Kenya CISS.

(9) Invoice No. CDBN/07-15-01/03 dated 24-7-1991 on OMIC International Ltd. for US $ 1156.04 being fees for certificates issued during June, 1991 for Benin CISS.

(10) Invoice No. CDBN/07-15-01/09 dated 15-1-1992 on OMIC International Ltd. for US $ 994.48 being fees for Certificates issued during December, 1991 for Benin CISS.

(11) Invoice No. CD/07-15-08/01 dated 8-5-1991 on OMIC International Ltd. for US $ 288.88 being fees for Certificates issued during April, 1991.

(12) Invoice No. CD/07-15-08,/04 dated 22-8-1991 on OMIC International Ltd. for US $ 286.20 being fees for Certificates issued during July, 1991 for Nigeria CISS.

(13) Debit Note No. 15/1 GEN dated 30-4-1991 on OMIC International Ltd. for US $ 320.00 equivalent to Rs. 6320 being fees for inspection of single jute yarn for Tesac Corpn., Osaka.

(14) Debit Note No. 15/17-GEN dated 31-8-1991 on OMIC International Ltd. for US $ 160 equivalent to Rs. 4,1,15 being fees for inspection of Single Jute Yarn for Tessac Corporation Osaka.

(15) Debit Note No. 15/19 (ORE-J) dated 30-9-1991 on OMIC International Ltd. for Yen 7,50,000 per quarter for July 91 to Sept. 91 equivalent to US $ 5555.56 equivalent to Indian Rs. 143223.34 towards Iron Ore Information Services for Japan.

(16) Debit Note No. 15/20 (ORE-K) dated 30-9-1991 on OMIC International Ltd. for Yen 250000 per quarter for the quarter July, 1991 to September, 1991 equivalent to US $ 1851.85 equivalent to Indian Rs. 47,740.69 being the fees for Iron Ore Information Services for South Korea.

(17) Debit Note No. 15/32-GEN dated 31-1-1992 on OMIC International for US $ 500 equivalent to Rs. 12,895 being fees for inspection of Sandle Wood Powder shipped to Toshoku Ltd., Tokyo.

(18) Debit Note No. 15/41 (ORE-J) dated 30-3-1992 on OMIC International Ltd. for Yen 750000 per quarter for the period January to March, 1992 equivalent to US $ 5474.45 equivalent to Rs. 104780.97 being fees for Iron Ore Information Services for Japan.

(19) Debit Note No. 15/42 (ORE-K) dated 30-3-1992 on OMIC International Ltd. for Yen 250000 per quarter for the quarter ended January to March, 1992 equivalent to US $ 1824.82 equiva lent to Rs. 34927.05 being fees for Iron Ore Informational Service for South Korea. The learned counsel has brought our attention to the letter dated 1-2-1991 issued by OMIC International, Tokyo to different places of the world including the assessee wherein it has been mentioned inter alia that the Kenyan Government appointed cotecn a inspection as per Telex message for other Asian countries for CISS operation excluding Japan, Taiwan and Singapore. The Fax message issued by cotecna Inspection, Geneva is at page 14 of the paper book by which cotecna inspection has awarded different territories of Asian Zone to OMIC International Ltd. for the purpose of inspection and certification. At pages 16 and 17 of the paper book letters issued by OMIC International Ltd. as prescribed fees for the job to be rendered by the assessee are available. Copy of the letter issued by the Embassy of Federal Republic of Nigeria addressed to OMIC International Ltd. is available at page 19 of the paper book At pages 20 to 32 of the paper book copies of Invoice and Debit Note raised by the assessee on OMIC International Ltd. for the job rendered by it in respect of different parties are available. Having relied upon the aforesaid documents the learned counsel has submitted that it is quite clear that the services were to be rendered by the assessee from India which were being utilised by the foreign parties and those parties were Government companies. The job of inspection and certification which were being done by the assessee as per requirement of the Import Regulation of the Republic of Kenya which is clear from the aforesaid materials particularly on the certificate it has been clearly mentioned. Therefore, there was no iota of evidence that although the assessee was rendering services sitting in India but those services were being utilised by the foreign parties in their respective countries. In such circumstances, the Assessing Officer should have held that the services were rendered by the assessee from India and not in India. In this connection the learned counsel has placed reliance on the decision of the Tribunal reported in the case of Blue Dart Express Ltd. v. Joint CIT [2000] 75 ITD 414 (Mum.). It was submitted by the learned counsel that if the services rendered by the assessee is utilised by the foreign party in their countries in that event it has to be held that the services were rendered from India. On the other hand, if the services were rendered and utilised both in India in that event it has to be held that the services were rendered in India. The Assessing Officer did not dispute the genuineness of the services rendered by the assessee. It is also admitted that by rendering services the income was received by the assessee in convertible Foreign Exchange in India. When the aforesaid criteria are satisfied in that event deduction under section 80-O was to be allowed to the assessee. The learned counsel has also submitted that the provision of section 80-0 being a special provision for encouraging an assessee to bring more foreign currency in India at the same time rendering services outside India, such beneficial provision should be interpreted liberally. The learned counsel has placed reliance on the following decisions

(1) EP. W. DaCosta v. Union of India [1980] 121 ITR 751 (Delhi). (services rendered from India)

(2) JB. Boda & Co. (P.) Ltd v. CBDT [1997] 223 ITR 271 (SC) at 281 (services rendered from India)

(3) A. S. Mani v. CIT[ 1 997] 227 ITR 380 (AAR) at 387. (services rendered from India)

(4) Blue Dart Express Ltd's case. (services rendered from India)

(5) CBDT v. Oberoi Hotels (India) (P.) Ltd. [1998] 231 ITR 148 (SC).

(6) Continental Construction Ltd. v. CIT [1992] 195 ITR 81 (SC) at 116 and 117.

(7) Gannon Dunkerley, & Co. Ltd. v. CBDT [1986] 159 ITR 162 (Bom.) at 165 and 166.

(8) Simon Carves India Ltd. v. ITO [1986] 159 ITR 167 (Cal.) at 174.

4. On the other hand, Sri D.K. Ghosh, the learned departmental representative, supported the orders passed by the authorities below and further submitted that in the present case the assessee has rendered its services in India hence, deduction under section 80-0 of the Act cannot be allowed to it.

5. We have beard both the sides and have perused the material on record. For the purpose of allowing deduction under section 80-0 of the Act the conditions are that an Indian company or a resident in India has to render its expertise service for the use outside India in consideration of which convertible Foreign Exchange is received in India. By Explanation III to section 80-0 it has been explained that the services rendered or agreed to be rendered outside India shall include services rendered from India but shall not include services rendered in India. In the present case the Assessing Officer did not allow relief to the assessee holding that there was no element of service rendered outside India or from India. The CIT(A) held that the services were rendered by the assessee in India. Both the authorities below did not dispute the fact that the assessee had rendered its service on behalf of OMIC International Ltd. Further, it is not in dispute that the assessee had received its income in convertible Foreign Exchange. Therefore, now the only issue that has to be investigated is regarding the nature of service rendered by the assessee. The assessee has brought on record the letter dated 30-12-1994 addressed to the Dy. CIT wherein it has been written that the assessee conducted inspection/ survey as to the quality, quantity and also the price of cargoes exported from India to Kenya, Benin and Peru. The nature of service rendered by the assessee has not been disputed by the Revenue. By letter dated 19-10-1992 at page 13 of the paper book OMIC International Ltd., informed all the Asian centres including the present assessee regarding appointment of cotecna inspection by Kenyan Government. The Fax message issued by cotecna inspection, Geneva has been annexed at page 14 of the paper book from which it appears that OMIC International Ltd., Tokyo was appointed w.e.f. 1-2-1991 for cotecna inspection in respect of most of the Asian countries. At pages 16 and 17 of the paper book the letters issued by OMIC International Ltd. provide the rate of fee to be paid to the assessee for the purpose of inspection service fee on report of findings. From the letter dated 12-4-1991, at page 16 of the paper book we find that OMIC International Ltd., had written the assessee about the fees to be paid for inspection and report of findings and also suggested to improve the quality of services as part of their group effort in the Asian region aiming to secure best satisfaction of the respective Government clients. We have already noticed the nature of service which was being rendered by the assessee regarding inspection of cargo in relation to quality and price of the goods. After inspection the assessee issues certificate of inspection which is called report of findings. Some of the sample copies of the report was placed on record which goes to show that the report was issued according to the Import Regulation of the Republic of Kenya. From the aforesaid facts it is clear that the Government clients of different countries required the aforesaid reports pursuant to the inspections made by the assessee on behalf of OMIC International Ltd. The contract work was obtained by OMIC International Ltd. and the inspection was being made in India by the assessee in relation to the export goods sent to the destinations like Kenya, Benin and Peru. The assessee has brought on record the details of the certification job done by it for the purposes of deduction under section 80-0 of the Act which is placed at page 4 of the paper book. From the said details we find that the assessee had rendered its specialised job for the destination countries like Kenya, Benin, Nigeria and Pakistan. We have already noticed that the service was rendered by the assessee as per the Import Regulations of the Republic of Kenya and other countries. The object of such service which was being rendered by the assessee is that the quality, quantity and the price are checked and secured from the point of export. There is no material on record that this job was being done by the assessee at the instance of the Indian parties ie., the exporters. On the other hand, sufficient evidences were brought on record by the assessee to hold that the services were being rendered by the assessee from India to be used in foreign countries in respect of the exports from India. The Explanation appended to section 80-0 of the Act was inserted with the object that even if the assessee renders its service sitting in India but to be used in a foreign country, in that event also the assessee is entitled to relief under section 80-0 of the Act. In this connection the circular issued by the CBDT being Circular No. 700 supports the case of the assessee which is as follows :

"A question has been raised as to whether the benefit of section 80-0 would be available if the technical and professional services, though rendered outside India, are used by the foreign Government or enterprise in India. The matter has been considered by the Board. It is clarified that as long as the technical and professional services are rendered from India and are received by a foreign Government or enterprise outside India, deduction under section 80-0 would be available to the person rendering the services even if the foreign recipient of the services utilises the benefit of such services in India."

The Apex Court in the case of Oberoi Hotels (P.) Ltd.'s case has held as follows :

'The basic purpose of section 80-0 is the spread by an Indian assessee of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial 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.' Considering the facts involved in the present case and the provision of law, we are satisfied that there was material available on record to hold that the services were being rendered by the assessee from India which were being used in foreign countries by the respective importers and Government Companies. Regarding the genuineness of the service and the fact that the assessee was receiving income in convertible Foreign Exchange, no doubt has been raised by the Revenue. Considering the above, we are of the view that the provision of section 80-0 of the Act has to be applied for the nature of services rendered by the assessee.

6. In the result, the appeal is allowed.

 

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