Case: B.L. PASSI Vs. COMMISSIONER OF INCOME TAX (XI)

facts of the case at hand, it is evident from record that the major information sent by the Appellant to the Sumitomo Corporation was in the form of blue prints for the manufacture of dies for stamping of doors. Several letters were exchanged between the parties but there is nothing on record as to how this blue print was obtained and dispatched to the aforesaid company. It is also evident on record that the Appellant has not furnished the copy of the blue print which was sent to the Sumitomo Corporation neither before the Assessing Officer nor before the Appellate authority nor before the Tribunal. The provisions of Section 80-O of the IT Act mandate the production of document in respect of which relief has been sought. We, therefore, have to examine whether the services rendered in the form of blue prints and information provided by the Appellant fall within the ambit of Section 80-O of the IT Act or any of the conditions stipulated therein in order to entitle the assessee to claim deduction.14. In New Encyclopaedia Britannica, where the term?technical assistance?had been considered, it has been stated that technical assistance may involve sending experts into the field to teach skills and to help solve problems in their areas of specialisation, such as irrigation, agriculture, fisheries, education, public health, or forestry. In New Webster?s Dictionary of the English Language the word?technical?means what is characteristic of a particular art, science, profession, or trade and the word?technology?means the branch of knowledge that deals with the industrial arts and sciences; utilisation of such knowledge; the knowledge and means used to produce the material necessities of a society.15. In J.K. (Bombay) Ltd. vs. Central Board of Direct Taxes and Another (1979) 118 ITR 312 (Del.) , the interpretation of technical assistance has been described as under:-?We have shown above that adopting the wider meaning of the word?technical?would defeat the object of Section 80-O by enabling the remuneration for management or running of a foreign company to be eligible for deduction under Section 80-O. On the other hand, the narrower meaning of the word?technical?seems to be more in keeping with the object of the section. It has to be remembered that the word?technology?,which has affinity with the word?technical?is concerned with the control of material environment by man. This is done by two means. Firstly, by the use of tools, and, secondly, by the application of reason to the properties of matter and secondly, by the application of reason to the properties of matter and energy. It would appear, therefore, that it would be reasonable to think that technical services should include the use of tools and machinery in addition to the use of reason. Managerial services which do not include any use of tools and machinery may not be regarded as technical services.?16. The blue prints 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 blue prints is available on record. The said blue prints were not even produced before the lower authorities. In such scenario, when the claim of the Appellant is solely relying upon the technical assistance rendered to the Corporation in the form of blue prints, its unavailability creates a doubt and burden of proof is on the Appellant to prove that on the basis of those blue prints, the Corporation was able to start up their business in India and he was paid the amount as service charge.17. Further, with regard to the remuneration to be paid to the Appellant for the services rendered, in terms of the letter dated 25.01.1995, it has been specifically referred that the remuneration would be payable for the commercial and industrial information supplied only if the business plans prepared by the Appellant results positively. Sumitomo Corporation will pay to PASCO International service charges equivalent to 5% (per cent) of the contractual amount between Sumitomo and its customers in India on sales of its products so developed. From a perusal of the above, it is clear that the Appellant was entitled to service charges at the rate of 5% (per cent) of the contractual amount between Sumitomo Corporation and its customers in India on sales of its products so developed but there is nothing on record to prove that any product was so developed by the Sumitomo Corporation on the basis of the blue prints supplied by the Appellant as also that the Sumitomo Corporation was able to sell any product developed by it by using the information supplied by the Appellant. Meaning thereby, there is no material on record to prove the sales effected by Sumitomo Corporation to its customers in India in respect of any product developed with the assistance of Appellant?s information and also on as to how the service charges payable to Appellant were computed.18. In view of the foregoing discussion, 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.19. Before parting with the appeal, it is pertinent to mention here that it is settled law that the expressions used in a taxing statute would ordinarily be understood in the sense in which it is harmonious with the object of the Statute to effectuate the legislative animation. The Appellant was a managing agent and the High Court was right in holding the principal agent relationship between the parties and there is no basis for grant of deduction to the Appellant under Section 80-O of the IT Act.20.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 0

Reasoning from the judgment:
0[ds]The blue prints 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 blue prints is available on record. The said blue prints were not even produced before the lower authorities. In such scenario, when the claim of the Appellant is solely relying upon the technical assistance rendered to the Corporation in the form of blue prints, its unavailability creates a doubt and burden of proof is on the Appellant to prove that on the basis of those blue prints, the Corporation was able to start up their business in India and he was paid the amount as serviceFurther, with regard to the remuneration to be paid to the Appellant for the services rendered, in terms of the letter dated 25.01.1995, it has been specifically referred that the remuneration would be payable for the commercial and industrial information supplied only if the business plans prepared by the Appellant results positively. Sumitomo Corporation will pay to PASCO International service charges equivalent to 5% (per cent) of the contractual amount between Sumitomo and its customers in India on sales of its products so developed. From a perusal of the above, it is clear that the Appellant was entitled to service charges at the rate of 5% (per cent) of the contractual amount between Sumitomo Corporation and its customers in India on sales of its products so developed but there is nothing on record to prove that any product was so developed by the Sumitomo Corporation on the basis of the blue prints supplied by the Appellant as also that the Sumitomo Corporation was able to sell any product developed by it by using the information supplied by the Appellant. Meaning thereby, there is no material on record to prove the sales effected by Sumitomo Corporation to its customers in India in respect of any product developed with the assistance of Appellant?s information and also on as to how the service charges payable to Appellant wereIn view of the foregoing discussion, 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 Sectionof 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 Sectionof the ITBefore parting with the appeal, it is pertinent to mention here that it is settled law that the expressions used in a taxing statute would ordinarily be understood in the sense in which it is harmonious with the object of the Statute to effectuate the legislative animation. The Appellant was a managing agent and the High Court was right in holding the principal agent relationship between the parties and there is no basis for grant of deduction to the Appellant under Sectionof the IT