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Income Tax Appellate Tribunal, DELHI BENCH “H” NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI PRASHANT MAHARISHI
ORDER
PER I.C. SUDHIR: JUDICIAL MEMBER The assessee has questioned first appellate order on the following grounds:
1. On the facts and in the circumstances of the case both on law and on fact, the appellant company is entitled to deduction under sec. 80-O of the IT Act.
2. It is contended that the appellant company did not render nor liable to render any services to any Indian concerns like ONGC etc. since the contract between the appellant company and the foreign company is an independent contract.
3. The Learned CIT(Appeals) had misdirected himself while giving effect to the order of the ITAT.
2 4. It is contended that the impugned order of the Learned CIT(Appeals) dated 15th July 2013 giving effect to the order of the ITAT is wrong, erroneous and bad in law. 5. The above grounds are independent and withour prejudice to each other.
Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon.
It is third round of the appeal before the ITAT preferred by the assessee on the issue whether the assessee is entitled to deduction under sec. 80O of the Income-tax Act, 1961.
The facts in brief are that Oil & Natural Gas Corporation (ONGC) had awarded the work of modification of BPA and BPB platform for S.H.F.T. Project to M/s. HHI Industries of Korea. The work in connection with ONGC, SHG Project had been awarded by ONGC to DAEWOO Ship Building and Heavy Machinery Ltd. of Korea. Both these foreign companies entered into an agreement with the assessee company for providing technical/engineering services. The assessee was in receipt of foreign currency of Rs.98,32,507 against professional and technical services 3 rendered by it to the foreign parties. Against this amount, the assessee claimed deduction under sec. 80-O of the Act amounting to Rs.49,16,254 being 50% of the gross receipts. Since the gross total income returned was only Rs.38,20,878, it restricted its claim under sec. 80-O to the extent of Rs.30,20,878 and accordingly declared nil income. Originally, assessment was framed under sec. 143(3) of the Act on 22.4.1997 at the income of Rs.36,89,530 after allowing deduction under sec. 80-O for the year under appeal to the extent of Rs.1,31,315 as against Rs.49,16,245 claimed by the assessee by restricting its claim of the deduction in respect of one party i.e. Triune Project only upon gross fee of Rs.3,12,700 an expense of Rs.50,000 was deducted to arrive at net income from the project and allowed 50% of such net income of Rs.2,62,700 (Rs.3,12,700 – Rs.50,000). The assessee went in first appeal with this contention that the Assessing Officer was not justified in rejecting assessee’s claim with respect to four parties from whom technical fees have also been received in foreign currency as assessee was entitled to deduction under sec. 80-O of the Act. The Learned CIT(Appeals) vide order dated 18.3.1998 dismissed the appeal with this finding that services were rendered in India for foreign enterprises, hence, the Assessing Officer was justified in rejecting the claimed deduction under sec. 80-O of the Act.
4 5. Against the said first appellate order dated 18.3.1998, the assessee went in second appeal before the ITAT and the ITAT vide its order dated 31.10.2003 set aside the matter to the file of the Assessing Officer for fresh adjudication in the light of CBDT Circular. In the set aside matter, the Assessing Officer again held that assessee is not entitled to the claimed deduction under sec. 80-O of the Act for the reason that the services were rendered in India.
The assessee again went in first appeal but could not succeed. The assessee again approach the ITAT and the ITAT vide order dated 25.5.2012 restored the matter back to the Learned CIT(Appeals) for deciding the issue afresh in terms of directions given by the ITAT. Again, the Learned CIT(Appeals) has rejected the claimed deduction to the assessee against which the assessee is in appeal before the ITAT on third occasion.
The Learned AR submitted that the Learned CIT(Appeals) has not considered the evidences filed on behalf of the assessee in support of its claim that services were rendered by the assessee from India. The mere fact that foreign enterprises has utilized these services in India would not disentitled it from claiming deduction under sec. 80-O of the Act. He 5 submitted that if the services are rendered in India and not from India then only the assessee will not entitle for claiming deduction under sec. 80-O of the Act. With these observations, the ITAT on the last occasion i.e. vide order dated 25.5.2012 had set aside the matter to the Learned CIT(Appeals) since the ITAT found that there was no clear finding recorded by the first appellate authority that services rendered by the assessee from India to the foreign enterprise and the foreign enterprise after receipt of such services outside India had utilized it in India as it was not a case of rendering of services by assessee at ONGC platform in India so as to bring it within the ambit of Circular No. 700 dated 23.3.1995. The Learned CIT(Appeals) has failed to comply with the direction of the ITAT by not entertaining the evidences furnished by the assessee in support of its claim that engineers had gone abroad on behalf of the assessee on deputation to render the services. The assessee was confined to drawing and designing and not connected to ONGC for raising the platform. In support, he referred page Nos. 34 to 36 of the paper book-II i.e. copies of invoices. He referred page No. 11 of PB-II giving the details of deputation of TPTL Engineers during the month of May 1994. The Learned AR also referred page Nos. 12 & 13 showing that engineers were sent on deputation to perform the assigned work abroad. He also referred page No. 14 of the same paper book-II i.e. deputation details of 6 EPPL Engineers to Bombay Offshore. The Learned AR also referred page Nos. 5 to 54 of the P.B-I i.e. details of income and expenditure of foreign job and copies of agreement with the foreign parties. The Learned AR thereafter referred page Nos. 140 and 141 of the P.B-I i.e. copy of ticket of Mr. Atul Mulkar for foreign visits. He also referred the CBDT Circular No. 700 dated 23.3.1995, a copy of which has been made available at Page No. 16 of the P.B-I. All these documents along with others have been filed in the shape of paper book-I and paper book-II under the certificate that these documents were furnished before the Assessing Officer as well as Learned CIT(Appeals).
The Learned Senior DR on the other hand placed reliance on the orders of the authorities below. He submitted that despite sufficient opportunities provided to the assessee, the assessee was not able to establish that the claimed services for the entitlement of deduction under sec. 80-O of the Act were rendered outside India and not in India.
Having gone through the first appellate order in question which has been passed in compliance of the order dated 25.5.2012 of the ITAT, we find that while deciding the issue against the assessee that the assessee is not 7 eligible for claiming deduction under sec. 80-O of the Act, the Learned CIT(Appeals) has not discussed the evidences filed on behalf of the assessee in support of its claim that the services were rendered by the assessee from India to the foreign enterprise. The ITAT vide order dated 25.5.2012 had set aside the matter to the file of the Learned CIT(Appeals) with this observation that so far as services were rendered in India, the assessee is not entitled for deduction under sec. 80-O irrespective of the utilization of such services by the foreign enterprise either in India or outside India, meaning thereby if the services are rendered by the assessee from India, the mere fact that the foreign enterprises as utilized these services in India would not disentitle it from claiming deduction under sec. 80-O of the Act, but if the services are rendered in India and not from India, assessee’s claim for entitlement under sec. 80-O of the Act will not be allowed. The ITAT has noted further that in the instant case no clear finding has been recorded by the Learned CIT(Appeals) that services rendered by the assessee from India to the foreign enterprise and the foreign enterprise after receipt of such services outside India had utilized it in India and it is not a case of rendering of services by the assessee at ONGC platform in India so as to bring it within the ambit of Circular No. 700 dated 23.9.1955, hence, the matter was restored back to the file of the Learned CIT(Appeals) for deciding the issue