SHRI KANTILAL V. VAKHARIA, MUMBAI V. THE JTCIT OSD CEN-II, MUMBAI

ITA 6524/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1116 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1995-1996
• Appeal Filed On: 26-10-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR HARGOVIND SI NGH
• Keywords: Source of fund; TDS; Set aside; Capital Gains
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI. BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER I.T.A. NOS. 6524 & 6525/MUM/2007 ASSESSMENT YEARS : 1995-96 & 1996-97. KANTILAL V. VAKHARIA, JT. COMMISSIONER OF 48, SAGAR DARSHAN, VS. INCOME TAX, OSD CEN.II. OPP. BREACH CANDY HOSPITAL, MUMBAI. 81/83, BHULABHAI DESAI RD., MUMBAI 400 036. PAN AABPV2302A APPELLANT. RESPONDENT APPELLANT BY : SHRI PRAM OD KUMAR PARIDA. RESPONDENT BY : DR. HARGOVIND SINGH. O R D E R PER J. SUDHAKAR REDDY, A.M. BOTH THESE APPEALS WERE RESTORED TO THE FILE OF T HE TRIBUNAL FOR A FRESH DECISION BY THE HONBLE HIGH COURT OF B OMBAY, IN INCOME TAX APPEAL NOS. 2282 OF 2009 ALONG WITH INCOME TAX APPEAL NO. 2726 OF 2009, ORDER DATED 21 ST JANUARY, 2010 FOR THE ASSESSMENT YEARS 1995-96 AND 1996-97. THE HONBLE HIGH COURT OBSERVED THAT A S, PRIMA FACIE THE ORDER OF THE TRIBUNAL, DID NOT INDICATE CONSIDERATI ON OF THE PROVISIONS OF SECTION 80-O AS THEY STOOD AT THAT MATERIAL POINT O F TIME, THE PROCEEDINGS ARE REMITTED BACK TO THE TRIBUNAL FOR A FRESH DECIS ION. ALL THE RIGHTS AND CONTENTIONS OF THE PARTIES WERE KEPT OPEN. 2 2. IN VIEW OF THE ABOVE ORDER, THE CASES ARE TAKEN UP FOR FRESH HEARING. AS THE ISSUE ARISING IN BOTH THE APPEALS I S THE SAME, AND AS IT ARISES OUT OF AN IDENTICAL ORDER OF THE CIT(APPEALS ), FOR THE SAKE OF CONVENIENCE, WE CLUB BOTH THE APPEALS AND DISPOSE O F THE SAME BY WAY OF THIS COMMON ORDER. 3. FACTS OF THE CASE: THE ASSESSEE IS AN INDIVIDUAL AND HAS FILED HIS R ETURN OF INCOME FOR BOTH THE ASSESSMENT YEARS I.E. ASSESSMEN T YEARS 1995-96 AND 1996-97, CLAIMING DEDUCTION U/S 80-O OF THE ACT. TH E CONTENTION IS THAT, IT HAD RECEIVED REMUNERATION FROM A FOREIGN ENTERPR ISE, IN CONSIDERATION FOR THE USE OF COMMERCIAL INFORMATION, MADE AVAILAB LE BY THE ASSESSEE TO THE FOREIGN ENTERPRISE. THE AO REJECTED THE CLAIM O F THE ASSESSEE ON THE GROUND THAT : A) THE MAJOR JOBS DONE BY THE ASSESSEE ON BEHALF OF NR I CLIENTS SHOWS THAT HE WAS PROVIDING PRIMA FACIE, NOT ANY TE CHNICAL SERVICES, RATHER HE WAS ACTING AS AN AGENT IN INDIA OF THE NR I. B) INSPITE OF OPPORTUNITIES GIVEN, THE ASSESSEE FAILED TO GIVE ANY EVIDENCE SO AS TO KNOW EXACTLY, WHAT INFORMATION WA S PASSED ON TO THE NRI. C) NO INFORMATION WAS GIVEN AS TO THE BASIS ON WHICH H E IS CHARGING FEES FOR THE SERVICES RENDERED. D) THAT THE ASSESSEE GAVE DETAILS ONLY IN RESPECT OF 7 NRIS, INSPITE OF THE FACT THAT DURING THE YEAR UNDER CONSIDERATION, HE HAS SHOWN TO HAVE RECEIVED COMMISSION FROM 28 NRIS. E) THE AO FURTHER OBSERVED THAT FROM THE DETAILS GIVEN IN RESPECT OF 7 NRIS, THE ASSESSEE HAD PROVIDED THE ACCOUNTS OF EAC H NRI, INTO THREE COMPONENTS I.E. (A) PROFIT ARISING ON SALE/PURCHASES OF SHARES OWNED BY THE NRI AND THE TRANSACTIONS ARE DONE BY THE ASSESSEE AS TH EY ARE POWER OF ATTORNEY HOLDER OF THE NRI. (B) DIVIDENDS/DEBENTURES INTEREST/BANK INTEREST WHICH I S RECEIVED BY THEM AT THEIR OWN ADDRESSES AND IS DEPO SITED BY 3 THEM IN THE RESPECTIVE BANK ACCOUNTS OF NRIS, AS TH E HOLDER OF POWER OF ATTORNEY OF NRI. THE ASSESSEE FURTHER STATED THAT IN COL. (B) THE RE CEIPTS ARE ON ACCOUNT OF INCOME TAX REFUND AND IT ARISES WHEN THE ASSESSEE FILED THE RETURN OF INCOME ON BEHALF OF TH EIR NRI CLIENT. IN COL. (C), THE TDS DEDUCTED BY THE BANK I S REFLECTED. F) THE AO CONCLUDED THAT FROM THE DETAILS, IT IS SEEN THAT THE ASSESSEE IS NOT PROVIDING ANY TECHNICAL SERVICES AND RATHER HE IS ACTING AS AN EMPLOYEE G) THAT THE ASSESSEE HAS NOT PROVIDED ANY EVIDENCE TO SHOW AS TO WHAT SERVICES WERE RENDERED OUTSIDE INDIA OR RENDERED FR OM INDIA TO THE NRIS. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL. FOR THE ASSESSMENT YEAR 1996-97, THE ASSESSEE ALSO CHALLENGED THE REOP ENING OF THE ASSESSMENT. THE FIRST APPELLATE AUTHORITY, IN THE F IRST ROUND OF APPELLATE PROCEEDINGS, VIDE HIS ORDER DATED 06-03-2002, HAD H ELD THAT THE REOPENING IS BAD IN LAW. ON AN APPEAL FILED BY THE REVENUE, T HE TRIBUNAL HAD REVERSED THE DECISION OF THE FIRST APPELLATE AUTHOR ITY ON THE ISSUE OF REOPENING AND HAD SET ASIDE THE MATTER TO THE CIT ( APPEALS) FOR ADJUDICATION ON MERITS. CONSEQUENT TO THIS SET ASID E ORDER, THE FIRST APPELLATE AUTHORITY VIDE ORDER DATED 12-09-2007 HAD DISMISSED THE APPEAL OF THE ASSESSEE BY UPHOLDING THE ORDER OF THE AO ON MERITS. WHILE DOING SO, SHE HELD THAT; A) CONSULTANCY WAS NOT RENDERED TO ANY FOREIGN ENTERPR ISE OR FOREIGN GOVERNMENT. NRIS FROM WHOM THE ASSESSEE HAD RECEIVE D COMMISSION ARE NOT A FOREIGN ENTERPRISE WITHIN TH E MEANING OF SECTION 80-O. B) THAT THE ASSESSEE WAS NOT PROVIDING TECHNICAL SERVI CES. C) NO EVIDENCE WAS ADDUCED TO SHOW AS TO WHAT SERVICE WAS RENDERED, EITHER OUTSIDE INDIA OR RENDERED FROM INDIA. D) THE ASSESSEE COULD NOT EXPLAIN THE BASIS ON WHICH H E HAD RECEIVED COMMISSION FROM NRIS. 4 E) THE ASSESSEE HAS NOT EARNED FOREIGN EXCHANGE AS CLA IMED BY HIM AND THE NRIS HAVE SENT MONEY TO NRE ACCOUNT AND THE ASS ESSEE HAS SIMPLY MANAGED THE FUND. THUS SHE DISMISSED THE APPEAL, BY HOLDING THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS PRESCRIBED U/S 80-O OF THE INCOME-TAX ACT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON T HE FOLLOWING GROUNDS : 1. THE LD. CIT(A) ERRED IN DISMISSING APPEAL AND CONFI RMING THE DISALLOWANCE U/S 80-O, BY HOLDING THAT NO TECHNICAL SERVICES RENDERED TO ANY FOREIGN ENTERPRISES. AS THE EARNING OF FOREIGN EXCHANGE AGAINST THE RENDERING OF TECHNICAL SERVICE S IS NOT IN DOUBT, THE CLAIM UNDER A BENEFICIAL AND INCENTIVE PROVISIO N OF SECTION 80-O OUGHT TO HAVE BEEN ALLOWED. 2. ON MERITS, THE APPELLANT DENIES ITS LIABILITY TO PE NAL INTEREST U/S 234B & 234C. 5. MR. PRAMOD KUMAR PARIDA, LEARNED COUNSEL FOR TH E ASSESSEE, SUBMITTED THAT THE ASSESSEE IS HAVING RICH EXPERIEN CE OF 23 YEARS IN TECHNICAL ANALYSIS OF COMPANIES AND IN INVESTMENT DECISION MAKING AND THAT BY VIRTUE OF HIS GOODWILL, HAS BUILT UP HIS C LIENTS BASE, COMPRISING OF VARIOUS NRIS SPREAD ACROSS COUNTRIES AND THAT T HE ASSESSEE HAD RENDERED TECHNICAL, MANAGERIAL, CONSULTANCY AND ADV ISORY SERVICES TO PARTIES RESIDING OUT OF INDIA AND THAT THESE SERVIC ES ARE CONSOLIDATEDLY CALLED PROFESSIONAL SERVICES. HE SUBMITTED THAT T HE ASSESSEE HAS CLAIMED DEDUCTION U/S 80-O, ON CONSULTANCY FEES REC EIVED FROM SUCH ADVISORY SERVICES. HE DISPUTED THE FINDINGS OF THE AO THAT THE SERVICES RENDERED BY THE ASSESSEE, ARE LIKE THE SERVICES OF AN AGENT. HE ALSO DISPUTED THE FINDINGS OF THE CIT(APPEALS) THAT NO S ERVICE WAS RENDERED TO ANY FOREIGN ENTERPRISE ETC. HE REFERRED TO THE SUBM ISSIONS MADE BEFORE THE CIT(APPEALS) AS WELL AS THE OPINION OF A SENIOR CO UNSEL STATING THAT THE ASSESSEE IS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80- O. HE SUBMITTED THAT; 5 A) FOREIGN ENTERPRISE, U/S 80-O, MEANS A PERSON WHO IS A NON- RESIDENT. B) CONSULTANCY FEES RECEIVED FOR PROFESSIONAL AND MANA GERIAL SERVICES FROM NRIS ARE ELIGIBLE FOR THE BENEFIT OF SECTION 80- O. RELIANCE IS PLACED ON CBDT CIRCULAR NO. 700 DT. 23-03- 1995 REPORTED IN 212 ITR (ST.) 78 AND CBDT CIRCULAR NO. 533 DT. 27-03-1989 REPORTED IN 177 ITR (ST.) 33, CB DT CIRCULAR NO. 731 DT. 20-12-1995 REPORTED IN 217 ITR (ST.) 5. C) THAT INCOME IS RECEIVED IN FOREIGN EXCHANGE, THROUG H THE NRI ACCOUNT, IN CONSIDERATION OF PASSING A COMMERCI AL INFORMATION AND RENDERING OF PROFESSIONAL MANAGEMEN T SERVICES. D) THAT THE ASSESSEE HAS RENDERED SERVICES FROM INDIA AND HAS TRAVELLED 3 OR 4 TIMES OUTSIDE INDIA AND THAT HE HA S THE EXPERIENCE TO ADVICE. E) THAT SECTION 80-O SHOULD BE LIBERALLY INTERPRETED. HE RELIED ON THE FOLLOWING CASE LAWS: (I) CIT VS. MITTAL CORPORATION 272 ITR 87 (DEL.). (II) CIT VS. INCHCAPE INDIA PVT. LTD. 273 ITR 92 (DEL.). (III) AFM INDIA LTD. VS. JCIT 160 TAXMAN 125 (DEL.). (IV) ITO VS. K.L. BHAKRI 4 SOT 510 (DEL.) 6. ON A QUERY FROM THE BENCH ON THE OBSERVATION OF THE AO AS WELL AS THE C.I.T.(A),THAT THE ASSESSEE HAS NOT PRO VIDED ANY EVIDENCE IN SUPPORT OF HIS PROVIDING SERVICES FROM INDIA ETC., THE LEARNED COUNSEL DREW THE ATTENTION OF THE BENCH TO PAGES 8 AND 9 OF THE PAPER BOOK SUBMITTED BY HIM AND HAS ALSO DREW THE ATTENTION OF THE BENCH, TO THE LIST OF LOCAL ADDRESSES PROVIDED TO THE A.O., WHICH WERE SHOWN/DISCLOSED BY THE NRIS IN THEIR PASS PORTS. HE SUBMITTED THAT THE NATURE OF SERVICES HAVE BEEN PROVIDED TO THE AO. 7. THE LEARNED DR, DR. HARGOVIND SINGH, ON THE OTH ER HAND, OPPOSED THE CONTENTIONS OF THE ASSESSEE AND SUBMITT ED THAT A PERUSAL OF THE NATURE OF SERVICES RENDERED BY THE ASSESSEE CLE ARLY DEMONSTRATE THAT 6 THE ASSESSEE WAS ACTING AS AN AGENT OF THE NRIS. HE ALSO SUBMITTED THAT IT IS NOT CLEAR AS TO WHAT IS THE QUALIFICATION OF THI S ASSESSEE TO PROVIDE THE COMMERCIAL INFORMATION ON INVESTMENT IN SHARES ETC. TO THE NRIS. HE SUBMITTED THAT THE ASSESSEE HAD FAILED TO PRODUCE A NY EVIDENCE WHATSOEVER EITHER BEFORE THE A.O. OR THE C.I.T(A) O R THE TRIBUNAL , THAT ANY SERVICES WERE RENDERED BY HIM OR THAT ANY INFORMATION WAS PASSED BY HIM FROM INDIA TO THE PLACES WHERE THE NR IS STAY. HE RELIED ON THE DECISION REPORTED IN 272 ITR 87. HE ALSO RELIED ON THE REASONS GIVEN BY THE AO AS WELL AS THE CIT(APPEALS). 8. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERA TION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL O F THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITED, WE HOLD AS FOLLOWS. 9. THE AO IN THIS CASE HAS HELD THAT THE ASSESSEE HAS NOT FURNISHED EVIDENCE TO DEMONSTRATE HIS CLAIM THAT SE RVICES WERE RENDERED OUTSIDE INDIA OR SERVICES WERE RENDERED FROM INDIA TO PERSONS RESIDING OUTSIDE INDIA. HE ALSO RECORDED THAT THE ASSESSEE H AD NOT PRODUCED ANY CORRESPONDENCE OR ANY OTHER DOCUMENT, TO PROVE THAT HE HAS PROVIDED ANY TECHNICAL OR COMMERCIAL INFORMATION OR DATA OF ANY TYPE TO THE NRI. THE C.I.T(A) ALSO CONFIRMED THIS FACTUAL FINDING IN HER ORDER. THE ASSESSEE HAS NOT RAISED ANY SPECIFIC GROUND AGAINST THIS FIN DING BEFORE US. 10. WHEN A SPECIFIC QUERY WAS RAISED BY THIS BENCH ON THE ISSUE OF EVIDENCE, THOUGH NO SPECIFIC GROUND WAS RAISED,T HE LEARNED COUNSEL DREW OUR ATTENTION TO PAGES 8 AND 9 OF THE ASSESSEE S PAPER BOOK, WHICH CONTAINS A PHOTO COPY OF A LETTER WRITTEN BY THE A SSESSEE ON 23 RD FEB., 2001 TO THE JOINT COMMISSIONER OF INCOME-TAX, WHO I S THE ASSESSING 7 OFFICER. IN THIS LETTER THE FOLLOWING SUBMISSION IS MADE TO THE A.O., ON THE ISSUE OF SERVICES : WE ARE SUPPLYING FOLLOWING COMMERCIAL INFORMATIO N TO OUR NON RESIDENT INDIAN CUSTOMERS BY REGULARLY VISITING THE FOREIGN COUNTRIES WHERE NRIS ARE BASED:- A) HELPING THE NRIS EXECUTE POWER OF ATTORNEY AND OPEN ING OF BANK ACCOUNT IN INDIA. B) PARTICULARS OF PUBLIC ISSUES WHICH ARE LIKELY TO CO ME IN THE MARKET. C) TO PREPARE PROFILE REGARDING COMPANIES LIKE PROMOTE RS BACKGROUND POTENTIAL OF PRODUCTS MANUFACTURED BY TH E COMPANY AND DETAILED ANALYSIS OF THE COMPANY. D) GIVING ADVICE TO NRI REGARDING SALE OF SHARES HELD BY THEM. E) GIVING ADVICE TO NRI REGARDING TAX IMPLICATIONS OF CAPITAL GAINS IN INDIA. F) ADVICE TO INVESTMENT IN SECONDARY MARKET THROUGH PO RTFOLIO MANAGEMENT SCHEME. IN ANNEXURE-I OF THE ABOVE LETTER, IT WAS SUBMITTE D AS FOLLOWS : DETAILED NOTE ON NATURE OF BUSINESS I AM HAVING PROPRIETARY CONCERN M/S VAKHARIA INVESTMENT CENTRE AND WHERE I AM WORKING AS A NRI INVESTMENT ADVISORS VIZ : 1. MANAGING THE INVESTMENT PORTFOLIO OF THE NRIS. 2. EARNING OF COMMISSION ON ALLOTMENT OF SHARES THROUG H PUBLIC ISSUES. 3. EARNING OF COMMISSION ON SALE OF SHARES OF THE NRIS . 4. EARNING OF COMMISSION ON NRI PORTFOLIO MANAGEMENT I N REPATRIABLE INDIAN RUPEES. I AM THE POWER OF ATTORNEY HOLDER OF NUMEROUS NRIS WHO HAVE INVESTED THEIR FOREIGN EXCHANGE SAVINGS IN INDIA. I AM: A) MANAGING THEIR BANK ACCOUNTS. B) INVESTING THEIR FUNDS IN SHARES AND DEBENTURES. C) SELLING SUCH SHARES AND SECURITIES. D) MAINTAINING THEIR FULL ACCOUNT. E) OBTAINING RELEVANT RBI PERMISSION FOR REPATRIATION ON SALE OF SHARES. 8 F) FILING THEIR INCOME-TAX RETURNS, ETC. 11. THE AO HAS EXTRACTED THESE SUBMISSIONS IN HIS ORDER. A PERUSAL OF THE SUBMISSIONS MADE BY THE ASSESSEE, SH OW THAT THE ASSESSEE WAS MANAGING THE INVESTMENT PORTFOLIOS OF THE NRIS AND WAS EARNING COMMISSION ON SALE OF SHARES OF THE NRIS AND ALSO E ARNING COMMISSION ON NRI PORTFOLIO MANAGEMENT. HE WAS ALSO RENDERING ALLIED SERVICES SUCH AS MAINTAINING ACCOUNTS ETC. THE SOURCES OF INCOME INDICATED IN THE SUBMISSIONS OF THE ASSESSEE, TO THE AO, DOES NOT SH OW THAT THE ASSESSEE HAS EARNED COMMISSION, FOR PROVIDING COMMERCIAL INF ORMATION OR, FOR SERVICES RENDERED OR AGREED TO BE RENDERED OUTSIDE INDIA OR FROM INDIA,TO NON RESIDENT INDIAN CUSTOMERS. 12. WHILE THE ASSESSEE CLAIMED TO HAVE SUPPLIED CO MMERCIAL INFORMATION ETC. TO THE NRI CUSTOMERS, NO EVIDENCE WHATSOEVER HAS BEEN FURNISHED IN SUPPORT OF SUCH A CLAIM. SUBMISSIONS C ANNOT TAKE THE PLACE OF EVIDENCE. IN THIS CASE THE ASSESSEE IS ONLY MAKI NG STATEMENT AND SUBMISSIONS THAT HE HAS PROVIDED SERVICES AND SUPPL IED INFORMATION TO NRI CUSTOMERS. THESE SUBMISSIONS ARE NOT BACKED BY EVIDENCE EITHER BEFORE THE A.O., C.I.T (A) OR THE TRIBUNAL. NOTHING IS PRODUCED TO CONTROVERT THE FINDINGS OF FACT CONFIRMED BY THE C. I.T (A). UNDER THESE CIRCUMSTANCES, WE HAVE TO NECESSARILY UPHOLD THE FI NDINGS OF FACT BY THE AO, AS CONFIRMED BY THE FIRST APPELLATE AUTHORITY. 13. AS ON FACTS, WE HAVE UPHELD THE ORDERS OF THE REVENUE AUTHORITIES, NORMALLY, WE WOULD NOT HAVE ADJUDICATE D, THE LEGAL ISSUE, AS LAW FALLOWS THE FACT AND IT WOULD BE AN ACADEMIC EX ERCISE AND AS IT WOULD NOT CARRY THE CASE OF THE ASSESSEE ANY FURTHER. BUT AS THE MATTER HAS TRAVELLED TO THE HIGH COURT AND HAS BEEN REMANDED B ACK TO US, AND AS THE 9 ASSESSEE HAS RAISED ONLY THESE LEGAL GROUNDS WE, FO R THE PURPOSE OF COMPREHENSIVENESS, ADJUDICATE THE MATTER ON THE LEG AL ASPECTS. 14. SECTION 80-O, AS IF THEN STOOD READS AS FOLLOW S: 80-O [WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE, BEING AN INDIAN COMPANY [OR A PERSON (OTHER THAN A COMPANY) WHO IS RESIDENT IN INDIA]], INCLUDES ANY INCOME BY WAY OF ROYALTY, COMMISSION, FEES OR ANY SIMILAR PAYMENT RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT OF FOREIGN STATE OR A FOREIGN ENTERPRISE IN CONSIDERATION FOR THE USE OUTSIDE INDIA OF ANY PATE NT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS, OR SIMILA R PROPERTY RIGHT, OR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL MADE AVAILABLE OR PR OVIDED OR AGREED TO BE MADE AVAILABLE OR PROVIDED TO SUCH GOV ERNMENT OR ENTERPRISE BY THE ASSESSEE, OR IN CONSIDERATION OF [TECHNICAL OR PROFESSIONAL SERVICES] RENDERED OR AGREED TO BE REN DERED OUTSIDE INDIA TO SUCH GOVERNMENT OR ENTERPRISE BY THE ASSES SEE, AND SUCH INCOME IS RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE IN INDIA, OR HAVING BEEN RECEIVED IN CONVERTIBLE FOREIGN EXCHANG E OUTSIDE INDIA, OR HAVING BEEN CONVERTED INTO CONVERTIBLE FO REIGN EXCHANGE OUTSIDE INDIA, IS BROUGHT INTO INDIA, BY OR ON BEHA LF OF THE ASSESSEE IN ACCORDANCE WITH ANY LAW FOR THE TIME BEING IN FO RCE FOR REGULATING PAYMENTS AND DEALINGS IN FOREIGN EXCHANG E, THERE SHALL BE ALLOWED, IN ACCORDANCE WITH AND SUBJECT TO THE P ROVISIONS OF THIS SECTION, A DEDUCTION OF AN AMOUNT EQUAL TO FIFTY PE R CENT OF THE INCOME SO RECEIVED IN, OR BROUGHT INTO, INDIA, IN C OMPUTING THE TOTAL INCOME OF THE ASSESSEE]: - - - - - - - - - - - - - - [EXPLANATION.- FOR THE PURPOSES OF THIS SECTION,- -- - - - - - - - (II) FOREIGN ENTERPRISE MEANS A PERSON WHO IS A NON- RESIDENT. (III) SERVICES RENDERED OR AGREED TO BE RENDERED OUTSIDE INDIA SHALL INCLUDE SERVICES RENDERED FROM INDIA BU T SHALL NOT INCLUDE SERVICES RENDERED IN INDIA. 10 15. FROM EXPLANATION (II) IT IS CLEAR THAT THE TER M FOREIGN ENTERPRISE MEANS A PERSON WHO IS A NON RESIDENT. T HUS THE OBSERVATION OF THE CIT(A) THAT THE NRIS ARE NOT FOREIGN ENTERPRISE S IS ERRONEOUS. 16. SECONDLY, BENEFIT OF SECTION 80-O IS ALLOWABLE ON REMUNERATION RECEIVED FOR MANAGERIAL AND PROFESSION AL SERVICES RENDERED FROM INDIA TO NRIS OUTSIDE INDIA. 17. THE CBDT CIRCULAR NO. 700 CLARIFIED THAT AS LO NG AS TECHNICAL AND PROFESSIONAL SERVICES ARE RENDERED FR OM INDIA AND THE SAME IS RECEIVED OUTSIDE INDIA, THE DEDUCTION U/S 80-O W OULD BE AVAILABLE AND CIRCULAR NO. 553 ALSO CLARIFIES THAT 80-O BENEFIT C AN BE AVAILED, EVEN IN CASES WHERE THE RECIPIENT OF THE SERVICES, USES THE INFORMATION IN INDIA. 18. COMING TO THE CASE LAWS, THE HONBLE DELHI HIG H COURT IN THE CASE OF MITTAL CORPORATION (SUPRA) HELD THAT TH E ASSESSEE WILL BE ENTITLED TO CLAIM FOR DEDUCTION U/S 80-O, IF HE PRO VIDES COMMERCIAL INFORMATION. THE OTHER CASE LAWS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE WHAT IS STATED IN THE VARIOU S CIRCULARS OF C.B.D.T. 19. THE LEGAL CONTENTIONS OF THE ASSESSEE AND THE CASE LAWS CITED ARE IN HIS FAVOUR AND TO THAT EXTENT THE ORDER OF T HE C.I.T (A), IS TO BE MODIFIED. BUT, AS THE ASSESSEE HAS NOT PROVIDED EVI DENCE OF HAVING RENDERED SERVICES OUTSIDE INDIA OR FROM INDIA OR OF HAVING PROVIDED COMMERCIAL INFORMATION FROM INDIA, TO THE NRIS, WHO ARE RESIDENT OUTSIDE INDIA, WE HAVE TO NECESSARILY UPHOLD THE ORDER OF T HE FIRST APPELLATE AUTHORITY ON FACTS FOR BOTH THE ASSESSMENT YEARS AN D DISMISS THESE APPEALS OF THE ASSESSEE. 20. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE DISMISSED. 11 ORDER PRONOUNCED ON THI S 16 TH DAY OF JULY, 2010. SD. SD. (D.K. AGARWAL) (J. SUDHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI, DATED : 16 TH JULY, 2010. WAKODE COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, A-BENCH (TRUE COPY) BY ORDER ASSTT .REGISTRAR, I TAT, MUMBAI BENCHES, MUMBAI.