INCOME TAX OFFICER v. K.L. BHAKRI
[Citation -2005-LL-0613-2]

Citation 2005-LL-0613-2
Appellant Name INCOME TAX OFFICER
Respondent Name K.L. BHAKRI
Court ITAT
Relevant Act Income-tax
Date of Order 13/06/2005
Assessment Year 1992-93
Judgment View Judgment
Keyword Tags convertible foreign exchange • fresh evidence
Bot Summary: During the course of appeal before the learned CIT(A), the assessee submitted that it rendered a number of services to the foreign principal in the form of collecting market information, identifying clients in India and their capabilities and potential to import products of the foreign principal. The learned CIT(A) held that because of such services, deduction under s. 80-O was available to the assessee on the amount of commission earned by the assessee in convertible foreign exchange. During the hearing before me, the learned Departmental Representative argued that the assessee had not furnished any evidence of having rendered any technical/professional services outside India. From the facts on record, it w a s borne out that the assessee procured certain import orders from some Government organizations in India for the foreign suppliers and for such services, the assessee received commission calculated on the basis of the value of supply orders procured by the assessee. On these facts, the assessee was not entitled to deduction under s. 80-O. Other services, as claimed by the assessee before the learned CIT(A), were not evidenced by the assessee. At any rate, the principal service performed by the assessee was procurement of orders in India and other services, if performed, were only incidental to the services rendered by the assessee in India. On the facts of the case, it is now clear that the assessee mainly rendered services in India though some part of it also related to the services rendered from India to its clients abroad. I direct that only 20 per cent of the assessee s receipt in convertible foreign exchange may be treated as eligible to deduction under s. 80-O as against 100 per cent accepted by the learned CIT(A).


This appeal has been filed by Revenue on 3rd Dec., 1998 against order of learned CIT(A)-XIII, New Delhi dt. 11th Sept., 1998 in case of assessee in relation to assessment order under s. 143(3) for asst. yr. 1992-93. In this appeal, Revenue has disputed deduction of Rs. 60,077 allowed to assessee by learned CIT(A) under provisions of s. 80-O of Act. Facts of case leading to this appeal briefly are that during course of assessment proceedings, assessee claimed deduction under s. 80-O as per its letter dt. 26th Dec., 1994. learned AO found that assessee received commission income from certain foreign enterprises in relation to import orders placed by Government organizations. On these facts, learned AO held that assessee did not render any technical or professional services outside India. During course of appeal before learned CIT(A), assessee submitted that it rendered number of services to foreign principal in form of collecting market information, identifying clients in India and their capabilities and potential to import products of foreign principal. In this manner, foreign principal did not have to waste their time and they could rely on information/advice supplied by assessee for Indian clients. learned CIT(A) held that because of such services, deduction under s. 80-O was available to assessee on amount of commission earned by assessee in convertible foreign exchange. During hearing before me, learned Departmental Representative argued that assessee had not furnished any evidence of having rendered any technical/professional services outside India. From facts on record, it w s borne out that assessee procured certain import orders from some Government organizations in India for foreign suppliers and for such services, assessee received commission calculated on basis of value of supply orders procured by assessee. On these facts, assessee was not entitled to deduction under s. 80-O. Other services, as claimed by assessee before learned CIT(A), were not evidenced by assessee. Such contentions were not made before AO during course of assessment proceedings. At any rate, principal service performed by assessee was procurement of orders in India and other services, if performed, were only incidental to services rendered by assessee in India. learned CIT(A) is, therefore, erred in allowing deduction under s. 80-O to assessee. During course of hearing before me, learned Authorized Representative of assessee referred to certificate dt. 15th Feb., 2005 from Foster and Freeman Limited of England. He requested that same may be admitted as fresh evidence by Tribunal. certificate reads as under: "This is to confirm that M/s K.L.B. International, New Delhi was our business associate. firm through its proprietor Late K.L. Bhakri was collecting information regarding advancement of technology in field of Forensic Science. They were advising us and providing information about research centres. technical study enabled us to develop our product having requisite capabilities for processing order. We were paying commission to them for orders procured on basis of study and backup information." On perusal of certificate, I find that same has been given on general basis. In any case, certificate says that commission was paid to assessee for orders procured. This lends weight to argument of learned Departmental Representative that services, if at all, were rendered as incidental to main task of assessee to procure orders in India for foreign suppliers. At same time, I am of view that it would not be just and fair to ignore contentions of assessee altogether. Before learned CIT(A), assessee has enumerated at length nature of services rendered outside India. In way, certificate now sought to be furnished supports arguments of assessee that has been accepted by learned CIT(A). Taking overall view, I am of view that it would not be worthwhile to restore matter to IT authorities once again. Assessment year involved is 1992-93. On facts of case, it is now clear that assessee mainly rendered services in India though some part of it also related to services rendered from India to its clients abroad. I, therefore, direct that only 20 per cent of assessee s receipt in convertible foreign exchange may be treated as eligible to deduction under s. 80-O as against 100 per cent accepted by learned CIT(A). Deduction under s. 80-O may be worked out accordingly. In result, this appeal filed by Revenue is partly allowed. *** INCOME TAX OFFICER v. K.L. BHAKRI
Report Error