The Supreme Court, in B.L Passi vs. Commissioner of Income Tax, held that the supply of blueprints can be considered as technical assistance for the purpose of deduction under section 80-O of the Income Tax (IT) Act, 1961 if the description of the blueprints is available on record.
In the instant case, the appellant filed return disclosing income of Rs.57.4 Lacs while claiming deduction of Rs.58.87 Lacs under Section 80-O of the Income Tax Act, 1961 on a gross foreign exchange receipt of Rs.1.17 Crores received from Sumitomo Corporation, Japan, an entity engaged in supplying dies for manufacturing of body parts to Indian automobile manufacturers. The appellant and the corporation entered into an agreement wherein it was agreed that the appellant would supply commercial & industrial knowledge about the India automobile Industries and that the corporation would pay remuneration at a rate of 5% of the contractual amount between Sumitomo Corporation and its Indian Customers on the sale of its products so developed.
The Assessing Officer (A.O), under Section 143(3) of the Income Tax Act,1961 assessed the total income at Rs. 1.18 crores and determined the sum payable by the assessee to the tune of Rs. 43.25 Lacs. Being aggrieved by the order the Appellant preferred an appeal before the Commissioner of Income Tax (Appeals), wherein the appeal was partly allowed and held that the Appellant is entitled to the deduction under Section 80-O of the IT Act. Aggrieved by the order dated the Revenue appealed before the Tribunal. The Tribunal allowed the appeal filed by the Revenue. The High Court also confirmed the Tribunal’s order. An appeal was filed before the Supreme Court.
The Counsel for the Appellant contended that the Appellant had fulfilled all the conditions as envisaged under Section 80-O of the IT Act inasmuch as he was providing specialized, industrial and commercial knowledge relating to the Indian automobile industry and also detailed information about the industry in India.
The Counsel for the revenue submitted that there was no substantial material on record to prove that the appellant was having any information concerning industrial, commercial or scientific knowledge, experience or skill to supply to the Corporation.
The Court found that the major information sent by the Appellant to the Sumitomo Corporation was in the form of blueprints for the manufacture of dies for stamping of doors and that there was nothing on record as to how the blueprint was obtained and dispatched to the company. The Court also noted that the appellant had not submitted a copy of the blueprints, sent to the company, to the Assessing Officer or before Appellate Authority or the Tribunal. The Court relying in the case of J.K. (Bombay) Ltd. vs. Central Board of Direct Taxes and Another, further observed that the blueprints made available by the Appellant to the Corporation can be considered as technical assistance provided by the Appellant to the Corporation in the circumstances if the description of the blueprints is available on record.
The bench comprising of Justice R.K Agrawal & Justice Abhay Manohar Sapre observed “We are of the considered opinion that in the present facts and circumstances of the case, the services of managing agent, i.e., the Appellant, rendered to a foreign company, are not technical services within the meaning of Section 80-O of the IT Act. The Appellant failed to prove that he rendered technical services to the Sumitomo Corporation and also the relevant documents to prove the basis for alleged payment by the Corporation to him. The letters exchanged between the parties cannot be claimed for getting deduction under Section 80-O of the IT Act.”
