CONTINENTAL CONSTRUCTION LTD. versus COMMISSIONER OF INCOME-TAX, CENTRAL-I

Citation: [1992] 1 S.C.R. 57 · Decided: 15-01-1992 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Dismissed

Judgment (excerpt)

CONTINENTAL CONSTRUCTION LTD. 
COMMISSIONER OF INCOME-TAX, CENTRAL-I 
JANUARY 15, 1992 
A 
[S. RANGANATHAN, V. RAMASWAMI AND N. D. OJHA, JJ.] 
B 
Income-Tax Act, 1961 : Ss. 9(1)(vi), (vii), 119(1), 80-0, 80-HHB : 
Assessee-Engineering and Construction Company-Undertaking of 
foreign projects-Approval by Central Board of Direct Taxer-Payments in 
respect of consideration for supply of technical information for use outside C 
India and rendering Technical Services to foreign Government Enterprise--
Whether 'similar' to 'royalty', 'Commission' or 'fee' etc.-Deductions-
Scope of-Assessee-Whether entitled to relief under S. 80-0 for assessment 
years earlier to 1983-84-Whether eligible for deductions under s. 80-HHB 
for assessment years 1983-84 onwards. 
Assessee Company-Foreign contracts-Execution of-Construction of 
dam and i"igation project, water supply project etc.-Services involving 
specialised knowledge, experience and skill in constructional operations--
Whether are technical services. 
D 
"Technical Services"-Whether can be rendered through medium of E 
employees, skilled and unskilled. 
Foreign projects of 'composite' activities-Activities falling partly 
under S. 80-0 and partly under S. 80-HHB-Whether relief can be granted 
under each sections separately. 
F 
>--" 
Activities of foreign contract falling under S. 80-0 as well as Section 
80-HHB--Deductions-Whether can be computed under S. 80-HHB only. 
Central Board of Direct Taxe~irculars No. 187 dated 23.12.1975 & 
253 dated 30.4.1979. Letters dated 28.10.83 and 31.7.1985-Boar<f s power G 
to grant approval to foreign contracts-Purpose and scope of: Guidelines for 
approval nature of: Approval once grante"'Whether to continue for subse-
quent assessment years for the same agreement. 
Words and Phrases: 
H 
57 
A 
B 
c 
D 
E 
F 
G 
H 
58 
SUPREME COURT REPORTS 
(1992] 1 S. C.R. 
'business of execution of a foreign project', 'profits derived', 'royalty', 
'similar', 'technical services'-Meaning of. 
Section 80-0 of the Income Tax Act, 1961 provides for a deduction 
in computing the total income, in respect of royalty, commission, fees, or 
any similar payment received by the assessee from the Government of a 
foreign State or a foreign enterprise in consideration for the use outside 
India of any patent, invention, model, design, secret formula or process, 
or similar property right or information concerning industrial, commer-
cial or scientific knowledge, experience or skill made available or pro-
vided or agreed to be made available or provided to such Government 
or enterprise by the assessee or in consideration of technical services 
rendered or agreed to be rendered outside India to such government or 
enterprise by the assessee ·under an agreement approved by the Central 
Board of Direct Taxes in this behalf. 
The appellant-assessee, a civil construction company, describing 
itself as Engineers and Contractors, executed projects overseas and in 
India. It undertook certain contracts for construction, inter alia, of a dam 
and irrigation project, a fibre-board factory and a huge water supply • 
project in foreign countries. One of its projects, called the Karkh 
Project, which constituted a major portion of its gross total income was 
with the Iraqi ~overnment through the Baghdad Water Supply Admini-
stration (BWSA). The contract was for the design, manufacture, deliv-
ery, supply, construction and installation for the first stage of Karkh 
Water Supply Scheme. Since tenders had been called for from consortia 
the assessee associated with the State Contracting Company for Water 
and Sewerage Projects, Baghdad (SCC) and formed a consortium and 
the said consortium entered into an agreement on 17 .12.1980 with the 
Iraqi Government. The terms of the consortium between the assessee 
and SCC were set out in another agreement dated 18.12.1980 dividing 
the area~ of responsibility (the packages) under the contract between the 
two. 
The assessee applied to the Central Board of Direct Taxes (CBDT) 
for latter's approval to the contracts ''for the supply of Civil construction 
know-how to the Government of Iraq" under Section 80-0 of the 
Income-Tax Act, 1961. In para S(a)(ii) of the proforma of the application 
prescribed for the purpose, the assessee indicated that "information 
concerning industrial, commercial, or scientifac knowledge or skill" was 
being made available outside India; and in Column S(b) thereof it 
mentioned that technical services would be

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