Case: Central Board Of Direct Taxes &amp; Ors. New Delhi Vs. Oberoi Hotels (India) Pvt. Ltd

elements comprised in the contract. 26. There is no gainsaying that running a w ell equipped modern hotel is no ordinary affair. One needs a great deal of expertise skill and technical knowledge for the purpose. If we examine the agreement, it provides for rendering of technical services and also professional services fo r obtaining of Hotel Soaltee, a foreign enterprise. CBDT fell into an error in considering particularly the clause in the agreement which provided for operation of the Hotel Soaltee by the respondent. The agreement has to be seen as a whole and so examined it is quite apparent that it provided for rendering of not only technical services for operating the hotel of the foreign enterprise but also providing for professional and other services in connection with operating of the hotel. Section 80-0 was enacted with the twin objects of encouraging the export of Indian technical know-how and augmentation of foreign exchange resources of the country. We have seen above that after the amendment of section 80-0 by Finance (No. 2 Act of 1991) the words "technical or professional services" have been inserted in place of the words "technical services". But this Court in Continental Construction Ltd. case took the view that the amendment was only of clarificatory nature and the term "technical services" always included within it professional services as well. This Court has gone even to the extent that when a person consults the lawyer and seeks his opinion on certain issue the advice rendered by the lawyer would be a piece of technical service. Considering the scope of the agreement and the width of Section 80-0 we are of the opinion that the agreement provides for "information concerning industrial, commercial or scientific knowledge, experience or skill made available " by the respondent to the foreign enterprise for running of the Hotel Soaltee. Mr. Dave is right when he submits that in view of the judgment of this court in Continental Construction Ltd. case Circular No. 187 dated December 23, 1975 of the CBDT may perhaps require certain changes so as it is in conformity with Section 80-0 of the Act. In J.K. (Bombay) Ltd. case Delhi High court was of the view that remuneration obtained by running or managing a foreign company would be in the nature of profits while Sections 80-0 deliberately restricted itself to income by way of royalty, commission or fees and included other types of remuneration. We do not think that this is a correct statement as the royalty, commission or fees can be in terms of percentage of profits earned by the foreign enterprise on account of services rendered by the Indian Company. It is substance of the case which matters and not the name. The view taken by the Bombay High Court in Godrej and Boyce Mfg. Co. Ltd. case commends to us. As it is more in consonance with the provision of Sections 80-0 and the object which it seeks to achieve. Karnataka High Court in the case of HMT Ltd. has rather taken a narrow view of the provision of Sections 80-0. Applying the principles of law as laid down by Court in Continental Construction Ltd. case and the term "technical services" which included "professional services" and the nature of services agreed to be rendered by the respondent to the foreign enterprise we are of the view that CBDT was not right in not granting approval of the agreement to the respondent under Sections 80-0 of the Act. We have also seen the scope of circulars issued b y the CBDT and had these are to be acted upon in various decisions of this Court. In the matter of the nature as in the present case and the legislative intention to give relief we have to draw interpretation to the term "technical services" which includes "professional services" as well. basic purpose of Sections 80-0 is the spread by an Indian assessee of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill of the assessee for use outside India and it that process to receive income to augment the foreign exchange resources of the country. The assessee can also made available to foreign enterprise technical and professional services expertise of which it possesses for earning foreign exchange for the country.When exercising power of judicial review, courts have to see that the authority acts within the scope o f its powers and, if discretion is conferred on the authority, it exercises the same in reasonable manner keeping in view the object which the statute seeks to achieve. We have no doubt that the decision of CBDT in not granting approval to the agreement was in good faith and it is the latest development of law both on the scope of judicial review and interpretation of Sections 80-0 that the decision has to be reversed. As law stands today with reference to Section 80- 0, it can be said that CBDT took into account the considerations which were not relevant or germane to the real issue. In this view of the matter there is no ground for interference in the impugned judgment of the High Court. It was submitted by Mr. Shukla that in view of the decision in Godrej and Boyce Mfg. Co. Ltd. (supra) of the Bombay High Court, this Court, if it decides to hold that the decision of the CBDT was not correct, the matter should be again remanded back to CBDT to grant approval or otherwise of the agreement keeping in view the latest development in law and the parameters laid down by us in this case. Normally, we would have adopted this very course, but in the present case, the matter relates to the year 1970 we do not find it will be proper for us to interfere in the impugned judgment of the High Court and sent the matter back to the CBDT for fresh appraisal. 27.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]There is no gainsaying that running a w ell equipped modern hotel is no ordinary affair. One needs a great deal of expertise skill and technical knowledge for the purpose. If we examine the agreement, it provides for rendering of technical services and also professional services fo r obtaining of Hotel Soaltee, a foreign enterprise. CBDT fell into an error in considering particularly the clause in the agreement which provided for operation of the Hotel Soaltee by the respondent. The agreement has to be seen as a whole and so examined it is quite apparent that it provided for rendering of not only technical services for operating the hotel of the foreign enterprise but also providing for professional and other services in connection with operating of the hotel. Section 80-0 was enacted with the twin objects of encouraging the export of Indian technical know-how and augmentation of foreign exchange resources of the country. We have seen above that after the amendment of section 80-0 by Finance (No. 2 Act of 1991) the words "technical or professional services" have been inserted in place of the words "technical services". But this Court in Continental Construction Ltd. case took the view that the amendment was only of clarificatory nature and the term "technical services" always included within it professional services as well. This Court has gone even to the extent that when a person consults the lawyer and seeks his opinion on certain issue the advice rendered by the lawyer would be a piece of technical service. Considering the scope of the agreement and the width of Section 80-0 we are of the opinion that the agreement provides for "information concerning industrial, commercial or scientific knowledge, experience or skill made available " by the respondent to the foreign enterprise for running of the Hotel Soaltee. Mr. Dave is right when he submits that in view of the judgment of this court in Continental Construction Ltd. case Circular No. 187 dated December 23, 1975 of the CBDT may perhaps require certain changes so as it is in conformity with Section 80-0 of the Act. In J.K. (Bombay) Ltd. case Delhi High court was of the view that remuneration obtained by running or managing a foreign company would be in the nature of profits while Sections 80-0 deliberately restricted itself to income by way of royalty, commission or fees and included other types of remuneration. We do not think that this is a correct statement as the royalty, commission or fees can be in terms of percentage of profits earned by the foreign enterprise on account of services rendered by the Indian Company. It is substance of the case which matters and not the name. The view taken by the Bombay High Court in Godrej and Boyce Mfg. Co. Ltd. case commends to us. As it is more in consonance with the provision of Sections 80-0 and the object which it seeks to achieve. Karnataka High Court in the case of HMT Ltd. has rather taken a narrow view of the provision of Sections 80-0. Applying the principles of law as laid down by Court in Continental Construction Ltd. case and the term "technical services" which included "professional services" and the nature of services agreed to be rendered by the respondent to the foreign enterprise we are of the view that CBDT was not right in not granting approval of the agreement to the respondent under Sections 80-0 of the Act. We have also seen the scope of circulars issued b y the CBDT and had these are to be acted upon in various decisions of this Court. In the matter of the nature as in the present case and the legislative intention to give relief we have to draw interpretation to the term "technical services" which includes "professional services" as well. basic purpose of Sections 80-0 is the spread by an Indian assessee of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill of the assessee for use outside India and it that process to receive income to augment the foreign exchange resources of the country. The assessee can also made available to foreign enterprise technical and professional services expertise of which it possesses for earning foreign exchange for the country.When exercising power of judicial review, courts have to see that the authority acts within the scope o f its powers and, if discretion is conferred on the authority, it exercises the same in reasonable manner keeping in view the object which the statute seeks to achieve. We have no doubt that the decision of CBDT in not granting approval to the agreement was in good faith and it is the latest development of law both on the scope of judicial review and interpretation of Sections 80-0 that the decision has to be reversed. As law stands today with reference to Section 80- 0, it can be said that CBDT took into account the considerations which were not relevant or germane to the real issue. In this view of the matter there is no ground for interference in the impugned judgment of the High Court. It was submitted by Mr. Shukla that in view of the decision in Godrej and Boyce Mfg. Co. Ltd. (supra) of the Bombay High Court, this Court, if it decides to hold that the decision of the CBDT was not correct, the matter should be again remanded back to CBDT to grant approval or otherwise of the agreement keeping in view the latest development in law and the parameters laid down by us in this case. Normally, we would have adopted this very course, but in the present case, the matter relates to the year 1970 we do not find it will be proper for us to interfere in the impugned judgment of the High Court and sent the matter back to the CBDT for fresh appraisal.