B. L. PASSI versus COMMISSIONER OF INCOME TAX, DELHI

Citation: [2018] 3 S.C.R. 496 · Decided: 24-04-2018 · Supreme Court of India · Bench: R.K. AGRAWAL · Disposal: Dismissed

Judgment (excerpt)

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SUPREME COURT REPORTS
[2018]  3 S.C.R.
B. L. PASSI
v.
COMMISSIONER OF INCOME TAX, DELHI
(Civil Appeal No. 3892 of 2007)
APRIL 24, 2018
[R. K. AGRAWAL AND ABHAY MANOHAR SAPRE, JJ.]
Income Tax Act, 1961: s.80-O – Deduction under, claimed by
assessee on the ground that it supplied to a foreign company the
industrial and commercial knowledge about the Indian Automobile
Industry, information about market conditions and also technical
assistance as required by such foreign company and such foreign
company used such services and accordingly supplied  dies to
Indian automobile manufacturer for manufacturing body parts –
Maintainability of claim for deduction – Held:  The provisions of
s.80-O mandate the production of document in respect of which
relief has been sought – Assessee claimed that the major information
sent to the foreign company was in the form of blue prints for
manufacture of dies for stamping of doors, however, said blue prints
were not produced before the lower authorities – Also there was
nothing on record to prove that any product was developed by the
foreign company by using the information supplied by assessee –
Thus, there was no material to prove the sales effected by foreign
company to its customers in India in respect of any product
developed with the assistance of assessee’s information and also
on as to how the service charges payable to assessee were computed
– The letters exchanged between the parties cannot be basis for
getting deduction under s.80-O – High Court rightly denied the
claim for deduction under s.80-O.
Words and phrases: Technical assistance – Meaning of.
Dismissing the appeal, the Court
HELD: 1.1 Provisions similar to Section 80-O of the Act
were originally in the former Section 85-C of the Income Tax
Act, 1961 which was substituted by Finance (No. 2) Act, 1971.
Section 80-O was inserted in place of Section 85C which was
deleted by the Finance (No. 2) Act, 1967.  While moving the bill
[2018] 3 S.C.R. 496
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relevant to the Finance Act No. 2 of 1967, the then Finance
Minister highlighted the fact that fiscal encouragement needs to
be given to Indian industries to encourage them to provide
technical know-how and technical services to newly developing
countries. It is also seen that the object was to encourage Indian
companies to develop technical know-how and to make it available
to foreign companies so as to augment the foreign exchange
earnings of this country and establish a reputation of Indian
technical know-how for foreign countries. The objective was to
secure that the deduction under the section shall be allowed with
reference to the income which is received in convertible foreign
exchange in India or having been received in convertible foreign
exchange outside India, is brought to India by and on behalf of
taxpayers in accordance with the Foreign Exchange Regulations.
[Para 12] [503-H; 504-A-C]
1.2. In the instant case, it is evident from record that the
major information sent by the Appellant to the foreign company
was in the form of blue prints for the manufacture of dies for
stamping of doors.  Several letters were exchanged between the
parties but there was nothing on record as to how this blue print
was obtained and dispatched to the said company.  Also, the
Appellant has not furnished the copy of the blue print which was
sent to the foreign company before the Assessing Officer nor
was it submitted before the Appellate authority and the Tribunal.
The provisions of Section 80-O of the IT Act mandate the
production of document in respect of which relief has been sought.
The blue prints made available by the Appellant to the foreign
company can be considered as technical assistance provided by
the Appellant to the foreign company in the circumstances if the
description of the blue prints is available on record.  The said
blue prints were not even produced before the lower authorities.
In such scenario, when the claim of the Appellant is solely relying
upon the technical assistance rendered to the foreign company
in the form of blue prints, its unavailability creates a doubt and
burden of proof is on the Appellant to prove that on the basis of
those blue prints, the foreign company was able to start up their
business in India and he was paid the amount as service charge.
Further, with regard to the remuneration to be paid to the Appellant
B. L. PASSI v. COMMISSIONER OF INCOME TAX, DELHI
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SUPREME COURT REPORTS
[2018]

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