Itxa/6303/2010 Of The Commissioner Of Income Tax - 19 Mumbai v. Petroleum India International

sas IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.6157 OF 2010ANDINCOME TAX APPEAL NO.6158 OF 2010ANDINCOME TAX APPEAL NO.6578 OF 2010ANDINCOME TAX APPEAL NO.6579 OF 2010 INCOME TAX APPEAL NO.6303 OF 2010 The Commissioner of Income Tax-19, Mumbai ..Appellant. V/s. M/s. Petroleum India International..Respondent. Mr. Suresh Kumar for the appellant. Mr. S.E. Dastur, senior Advocate with Niraj Seth i/b. Mint & Conferer for the respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ.DATED : 7TH FEBRUARY, 2013 P.C. :- 1.Income Appeal No.6157 of 2010 Is not on Board. It Is mentioned and by consent of the Advocates, the same is taken up with the other four appeals which are on Board. 2.In all these five appeals for assessment years 1993-94, 1994-95, 1995-96, 1996-97 and 1997-98, the revenue has proposed the following questions of law for our consideration:- (a)Whether on the facts and circumstances of the case, the Tribunal is right in holding that the finding of the CIT(A) that the assessee is merely providing and recruiting personnel and the assessee did not render technical services through its employee and, therefore, not entitled to claim deduction u/s.80-O of the Act, 1961, is not correct ?is right in holding that the finding of the CIT(A) that the assessee is merely providing and recruiting personnel and the assessee did not render technical services through its employee and, therefore, not entitled to claim deduction u/s.80-O of the Act, 1961, is not correct ? (b)Whether on the facts and circumstances of the case, the Tribunal is right in holding that assessee rendered technical services outside India and received consideration for doing so in convertible foreign exchange and, therefore, entitled to claim deduction u/s.80-O ?is right in holding that assessee rendered technical services outside India and received consideration for doing so in convertible foreign exchange and, therefore, entitled to claim deduction u/s.80-O ? 2.The hub of the dispute which arises in this appeal is whether: (a) the respondent-assessee is entitled to the benefit of Section 80- O of the Income Tax Act, 1961 (the Act) when it provides service to foreign parties not through its own employees, but by hiring the services of employees of another entity; and to foreign parties not through its own employees, but by hiring the services of employees of another entity; and (b)the service rendered by the respondent-assessee could be considered to be a technical services for the purposes of Section 80-O of the Act as then in the statute. 3.The respondent-assessee is an Association of Persons consisting of 10 public sector undertaking who are engaged in the business of petroleum and petroleum products. The respondent-assessee entered into a contract with the foreign parties for rendering technical services and claimed deduction under Section 80-O of the Act. 4.So far as question (a) is concerned, under the Agreements / Contracts the services are to be provided by the respondent-assessee. These technical services are provided through human agency. These personnel through whom services are rendered are not employees of the respondent-assessee but are employees of member companies. Thus, technical services are rendered through these personnel who are drawn from the member companies of AOP to the third parties. The objection of the Department is that when the services are rendered not by the respondent-assessee through its own employees but through hired personnel or personnel belonging to member companies as in this particular case, the benefit of Section 80-O of the Act is not available. 4.So far as question (a) is concerned, under the Agreements / Contracts the services are to be provided by the respondent-assessee. These technical services are provided through human agency. These personnel through whom services are rendered are not employees of the respondent-assessee but are employees of member companies. Thus, technical services are rendered through these personnel who are drawn from the member companies of AOP to the third parties. The objection of the Department is that when the services are rendered not by the respondent-assessee through its own employees but through hired personnel or personnel belonging to member companies as in this particular case, the benefit of Section 80-O of the Act is not available. 5.The Tribunal in the impugned order placed reliance upon the decision of the Apex Court in the matter of Continental Construction Ltd. V/s. CIT reported in 915 ITR 81 (SC), the Tribunal held that a foreign party would look to the respondent-assessee who has entered into an agreement with it to render the services in terms of the Agreement. As observed by the Apex Court in the above case, it is not necessary for availing the benefit of deduction of technical services that the services should be rendered personally and not through the medium of others. Thus, whether technical services are rendered by employees of the respondent-assessee or by personnel hired by the respondent-assessee is immaterial for the purposes of the benefit of Section 80-0 of the Act. Therefore, in view of the above, question (a) is not entertained. 6.So far as question (b) is concerned, the Tribunal by the impugned order has examined the agreement entered into by the respondent-assessee with the foreign party to render technical services. One such agreements which was produced before the Tribunal provides that the respondent-assessee will render the following services:- (i)To review PETRONOC's existing systems and procedures and advice on improvements and to establish those new systems and procedures approved by PETRONOC.and advice on improvements and to establish those new systems and procedures approved by PETRONOC. (ii)To train counterparts and other managerial and supervisory personnel in their respective spheres of expertise.supervisory personnel in their respective spheres of expertise. (iii)To assist in the coordination of the physical rehabilitation programme financed by the international Development Association (IDA)].programme financed by the international Development Association (IDA)]. 7.On examination of the agreement and the clauses provided therein and referred to hereinabove the Tribunal came to the conclusion that the agreement was for providing technical services through the medium of technical personnel sent by the respondent-assessee under an agreement to provide technical services to the foreign party. Further in terms of the agreement as observed by the CIT(A) it is the obligation of the respondent-assessee to do periodical reviews of the services being rendered and also ensure that there is no break-up or lapse in respect of the services being rendered. In the aforesaid circumstances, we find the impugned order granting benefit to the respondent-assessee of Section 80-0 of the Act is based upon a finding of fact. Therefore, we do not entertain question (b). itxa6157-10++ 6.Accordingly, all the five appeals are dismissed with no order as to costs. (M.S. SANKLECHA, J.) (J.P. DEVADHAR, J.)