1986 PLP 576 (PTD)

LENTIN, J.‑‑Amongst its other activities the petitioner‑Company, which is incorporated under the Companies Act, 1956, carries out scientific tests in its research laboratory in India. G.D. Searle & Co. which is incorporated in the United States of America. Imports psyllium husks from India required to conform to its quality specifications. An Agreement was entered into on 1st January, 1975 between the petitioner and G . D . Searle & Co. of the U.S.A. whereby the petitioner was required to carry out certain tests in its laboratory in India and forward to G.D. Searle & Co. in the United States, the result of those tests with a certificate that each lot of psyllium husk conformed to the specifications of G.D. Searle e, Co. on 22nd March, 1977 the petitioner applied to the Central Board of Direct Taxes for approval of the Agreement, dated 1st January, 1975 under section 80‑0 of the Income‑tax Act, 1961. That application was rejected by the order, dated 19th January, 1978 on the ground that the technical service was not rendered outside India. That order was challenged by the petitioner in a writ petition in this Court. That writ petition was summarily rejected by the learned Single Judge on the ground that the work was done by the petitioner in India, hence section 80‑0 was not applicable. Hence the present appeal.

2. The only question that arises in this appeal is whether the Central Board of Direct Axes is liable to grant approval to the petitioner's agreement under section 80‑

0. In order to ascertain whether section 80‑O would or would not be applicable, reference to the relevant terms of the Agreement, dated 1st January, 1975 between the petitioner and G . D . Searle & Co. of U.S.A. would be material. Clause 1 of that Agreement reads as under:‑ A. Searle will initially provide Limited (i.e. the appellant before us) with the Specifications. Thereafter; Limited will conduct for use by Searle outside India such quality assurance procedures as are necessary in their opinion to establish that the Specifications have been satisfied within the tolerance limits with respect to each lot of psyllium husk submitted. Limited shall "certify in writing that each lot of psyllium husk conforms to said Specifications." Clause 2 pertains to payment and provides that G. D. Searle & Co. will pay 50 dollars for each lot of psyllium husk in respect of which the petitioner conducts the quality assurance tests.

3. With these provisions of the Agreement in mind, reference can conveniently be made to section 80‑0 of the I.T. Act, the relevant excerpts whereof are as under:‑ "Where the gross total income of an assessee, being an Indian company, includes any income by way of .... payment received by the assessee from a foreign enterprise in consideration for the use outside India of information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to such .... enterprise by the assessee, or in consideration of technical services rendered or agreed to be rendered outside India to such . ... enterprise by the assessee, under an agreement approved by the Board in this behalf, and such income is .... brought into India by . the assessee there shall be allowed, a deduction of the whole of the income so received in, or brought into India in computing the total income of the assessee."

4. With this section in the forefront, and reading the Agreement, it is not difficult to come to the conclusion that the work which the petitioner was required to do was to render a technical service by carrying out certain tests and certifying that each lot of psyllium husk conformed to the specifications of G.D. Searle & Co. This is manifest from the terms of the Agreement itself. In other words, all that the petitioner did was to send to G.D. Searle & Co. in the U.S.A. the test results with the requisite certificate whether the article fell within the required specifications. Such is the purpose of the agreement, I dated 1st January, 1975. What was given by the petitioner was merely a technical service and nothing else. The petitioner merely tested and samples and gave the results to G.D. Searle & Co. Indisputably that testing certification were done by the petitioner in India and not outside India so as to attract the provisions of section 80‑0

5. The reliance placed by Mr. Mehta, the learned counsel appearing on behalf of the petitioner, on the decision of the Delhi High Court in E.F.W. Da Costa v. Union of India. (1980) 121 ITR 751: (1979 Tax LR (NOC) 71) can be of no assistance to the petitioner. The agreement in that case has not the slightest semblance or bearing to the agreement in the present matter. Hence it is unnecessary for us to digrees at any length on the judgment in that case.

6. We agree with the learned Single Judge in his summary dismissal of the writ petition. The appeal is also dismissed with costs. M. B. A. Reference answered.