ORDER
G.E. Veerabhadrappa, A.M.
1. This appeal by the Revenue arises out of the order of the CIT(A), dt. 22nd Nov., 2000, for the asst. yr. 1997-98.
2. The assessee is an individual. He was previously employed in Associated Instrument Manufacturers (India) Ltd., upto 1995, and was regularly assessed in salary circle. Retainer fee/consultancy charges are received from x-ray Research GmbH in convertible foreign exchange in India. The assessee claimed that he is a qualified technician in the field of instrumentation for x-ray crystallography. While attending a seminar, he came into contact with the director of M/s X-ray Research GmbH, Hamburg, Germany, and claimed to have entered into an oral agreement with it as the company was desirous of entering the Indian market, in order to establish their presence by supplying scientific, industrial and commercial information regarding sales potentiality of the Indian market. With the help of the assessee, the business of the German company was established in India. The assessee claimed deduction under Section 80-O at 50 per cent from his net income from retainer fee and consultancy charges. Relying upon Expln. (iii) to Section 80-O, the AO denied the claim of the assessee. According to him, the services rendered outside India which was one of the ingredients of Section 80-O, included services rendered from India but shall not include services rendered in India. According to the AO, the services were provided by the assessee to a foreign enterprise only in India and, therefore, such services rendered cannot be considered as services rendered outside India, within the meaning of the aforesaid Explanation. With these observations, the assessee’s claim for deduction under Section 80-O was not accepted. The CIT(A), however, following the decision of the Authority of Advanced Rulings in the case of A.S. Mani, In re (1997) 227 ITR 350 (AAR), (Supra) was of the view that the assessee was entitled for deduction. The Revenue disputes this finding of the CIT(A).
3. The learned Departmental Representative strongly argued that the facts of this case are distinguishable from the facts in the case of AS. Mani (supra). According to him, the assessee in that case was a non-resident and an expert in petroleum industry having specialised knowledge in JN production, import and other aspects pertaining to oil industry. He entered into consultancy agreement with Swiss company which included studying petroleum sector, analysing products to various customers by Swiss company. The services rendered by him amounted to technical services to a foreign enterprise. In that case, according to the learned Departmental Representative, the services were rendered outside India. Moreover, the learned Departmental Representative pointed out that the payment to the assessee in that case was not in consideration for the use outside India of any patent, invention, model, design or registered trademark. The assessee has only rendered service by providing commercial information regarding sales potentiality in Indian market. The learned Departmental Representative disputed the claims of the assessee.
4. The learned counsel, on the other hand, strongly relied upon the discussions made in the impugned order.
5. I have carefully gone through the records and considered the rival submissions. Section 80-O of the IT Act, 1961, reads as under :
Section 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 received by an assessee from the Government of a foreign State or foreign enterprise in consideration for the use outside India of any patent, invention, design or registered trademark and such income is received in convertible foreign exchange outside India, or having been received in convertible foreign exchange outside India, or having” been converted into convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction of an amount equal to fifty per cent of the income so received in or brought into India, in computing the total income of the assessee.
6. The principal conditions to be fulfilled for a claim of deduction under Section 80-O are :
(i) the recipient must be an Indian company or any other person who is resident in India;
(ii) the income must be received by the, assessee from the Government of a foreign State or a foreign enterprise;
(iii) the payment is in consideration for the use outside India of any patent, invention, design or registered trademark; and
(iv) such income is received in convertible foreign exchange in India, etc.
The assessee in this case, as found by the CIT(A), entered into an oral agreement, with the German company, which expressed its desire of entering the Indian market. It may be mentioned that M/s X-ray, Research GmbH, is a company which was engaged in the manufacture of x-ray instruments. The assessee is a qualified technician and had several years of experience by working for several companies in similar field, In other words, the assessee has helped the overseas manufacturer to find its market in India. The consideration if at all paid by the German company was for helping the said company for finding its market in India, it is not a consideration for the use outside India of any patent, invention, design or registered mark which was developed by the assessee. The tax incentives contemplated under Section 80-O are basically for encouraging Indian companies/experts to export their know-how and skill abroad. Mere supply of particulars or bio-data of various Indians willing to work abroad and their selection or recruitment accordingly in India is a situation falling far too short of the requisites necessary for attracting the benefit of this section. Reference may be made to the decision of the Bombay High Court in Eastman Consultants (P) Ltd. v. CBDT (1981) 132 ITR 637 (Bom).
6.1 In this context, as the wordings of the section go, the principal objective of Section 80-O is mainly the supply of technical know-how or technical services to developing countries. The records do not speak that the assessee has got the retainer fee or consultancy charges mainly as a consideration for the use outside India of patent, design, invention or registered trademark. I am, therefore, on the facts of the case, unable to accept the claim of the assessee. The AO has correctly denied the benefit to the assessee. Moreover, as already been pointed out by the AO, the entire services in this connection were rendered for a foreign company from India. I, therefore, do not also agree that the case of A.S. Mani (supra) is of any help for advancing the case of the assessee. In any event, in the light of the clear language of the section and the assessee failing to satisfy the requisite conditions of the said section, is not entitled for any relief under Section 80-O. The order of the CIT(A), which is contrary to this is, therefore, reversed.
7. In the result, the appeal of the Revenue is allowed.