LexCENTRAL BOARD OF DIRECT TAXES AND ORS. versus OBEROI HOTELS (INDIA) PVT. LTD.
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CENTRAL BOARD OF DIRECT TAXES AND ORS. A v. OBEROI HOTELS (INDIA l PVT. LTD. MARCH 30, 1998 [SUJATA V. MANOHAR AND D.P. WADHWA, JJ.] B Income-Tax Act, 1961 Section 80-0 -Technical or Professional Service-Interpretation of-Respondent, an Indian Company entered into agreement with foreign enterprise for rendering of technical services as well as for providing professional and also other services for operating hotel- C Held, CBDT erred in not granting approval to respondent's agreement even though the agreement satisfied the ingredients of Section 80-0 of the Act. Remand-CBDT erred in not approving the respondent 's agreement under Section 80-0 Holl'ever, as the matter is 28 years old, Supreme Court D declined to remand the matte" to CBDT for fi'esh appraisal. Technical or Professional Service-/11/e111retation of-Technical Services include professional services as well. Administrative Lm1~Judicial Review-Power of-Courts to see that the authority acts within the scope of its power and exercise it in reasonable manner keeping in view the object which the statute seeks to achieve. The respondent sought approval of agreement with a foreign enterprise for rendering technical, professional services etc., for operating a hotel, as E per Section 80-0. It was declined by CBDT without communicating the F grounds. The Respondent filed a Writ Petition against the order of CBDT and it was allowed by the High Court. CBDT was directed to consider the matter afresh and give decision after hearing the respondent. Again on representation by the respondent, CBDT declined to grant approval but this time communicated the decision to the respondent. However, High Court again reversed CBDT's order. G It was contended on behalf of the appellants that the agreement was basically for the respondent to manage and run the entire hotel for a foreign enterprise which was not in any way rendering technical services to foreign enterprise and would not fall within the purview of Section 80-0 of Income- Tax Act. H 501 502 SUPREME COURT REPORTS [ 1998] 2 S.C.R. A Referring to circular No. 187 dated 23.12.1975 of CBDT, the B Respondent contended that the agreement squarely satisfied the ingredients of Section 80-0. The respondent further submitted that construction which benefited the assessee should be adopted and the circular should receive liberal interpretation keeping in view the object of introduction of Section 80-0 in the statute. Dismissing the appeal, this Court HELD : I. The term "technical services" included "professional services". The agreement entered with foreign enterprise by the respondent C provides for rendering of technical services and also professional services for operating the hotel of a foreign enterprise. CBDT erred in not granting approval of the agreement to the respondent under Section 80-0 of the Act even though the agreement satisfied the ingredients of Section 80-0 of the Ac!.1526-GI D Col1fi11e11ta/ Construction ltd. v. Commissioner of Income-Tax, (1992) 1995 ITR 81 SC, relied on. I.I. The CBDT fell into error in considering particularly the clause in the agreement which provided for operation of the Hotel by the respondent. The agreement has to be seen as a whole and so examined it is quite apparent E that it provided for rendering of not only technical services for operating the Hotel of the foreign enterprise but also providing for professional and other services in connection with operating of the hotel. Section 80-0, was enacted with the twin objects of encouraging the expert of Indian technical know-now and augmentation of foreign exchange resources of the country. Therefore, F considering the scope of the agreement and the width of Section 80-0, it could be said that the agreement provides for "information concerning industrial, commercial or scientific knowledge, experience or skill made available" by the respondent to the foreign enterprises for running of the Hotel. !525-G-H; 526-A-CI G 1.2. The view that remuneration obtajned by running or managing a foreign· company would be in the nature of profits with Section 80-0 deliberately restricts itself to income by way of royalty, commission or fees and included other types of remuneration would not be tenable as the royalty, commission or fees can be in terms of percentage of profits earned by the foreign enterprise on account of services rendered by the Indian company. H It is substa
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