The Supreme Court of India, while dismissing the appeal held that the appellant has failed to bring any material on record to show if it had received any specific consideration from foreign enterprises to the activities envisaged by Section 80-O of the Income Tax Act, 1961.
The appellant, Ramnath, and Co. is engaged in providing services to certain foreign buyers of frozen seafood and marine products and had received service charges from such foreign enterprises in foreign exchange, claimed deduction under Section 80-O of the Act of 1961.
The AO denied such claim for deduction essentially with the finding that the services rendered by assessees were the ‘services rendered in India’ and not the ‘services rendered from India’ and, therefore, the service charges received by the assessees from the foreign enterprises did not qualify for a deduction in view of Section 80-O of the Act of 1961.
The ITAT, Cochin Bench accepted the claim for such deduction under Section 80-O of the Act with the finding in case of the assessee Ramnath & Co. for the assessment year that as per the agreements with the referred foreign enterprises, the assessee had passed on the necessary information which was utilized by the foreign enterprises concerned to make a decision either to purchase or not to purchase; and hence, it was a service rendered from India.
The revenue preferred appeals before the High Court against the orders so passed by ITAT in favor of the appellants. The High Court has essentially held that the assessees were merely marine product procuring agents for the foreign enterprises, without any claim for expertise capable of being used abroad rather than in India and hence, the services rendered by them do not qualify as the ‘services rendered from India’, for the purpose of Section 80-O of the Act of 1961. Therefore, the High Court has allowed the appeals of revenue while setting aside the respective orders of ITAT.
The issue raised before the Apex Court is whether the income received by the appellants in foreign exchange, for the services provided by them to foreign enterprises, qualifies for deduction under Section 80-O of the Income Tax Act, 1961.
The division bench of Justice K.M. Khanwilkar and Justice Dinesh Maheshwari while upholding the decision of the High Court held that the appellant has failed to bring any material on record to show if it had received any specific consideration from foreign enterprise to the activities envisaged by Section 80-O of the Income Tax Act, 1961.
“In our view, the High Court has rightly analyzed the entire matter with reference to the relevant questions and has rightly proceeded on the law applicable to the case. The impugned judgment calls for no interference,” the division bench said.
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