1. The appeal has been filed by the assessee against the order of the CIT(A), dt 29th Dec., 1998, pertaining to asst. yr. 1994-95. The first ground of appeal relates to deduction under Section 80-O of the Act.
2. The assessee-company provides professional services in the field of medicines. It is headed by Dr. N.P.S. Chawla and Dr. (Miss) Devjit Kinberlay Chawla, as directors. The assessee-company got the necessary expertise in the matter of providing emergency medical assistance to any person anywhere in India on call. It has on its own panel several qualified doctors who always remain on call, provide necessary medical services wherever required and give professional information to foreign insurers. It is patronised by almost all the insurance companies in the world and some important select embassies of foreign countries, though no formal agreement exist in some of the cases. After providing required treatment they are also provided qualified doctor to escort them back to their destination/country, if required. The insurer's in their bid to limit their claims, seek information from the assessee-company. about the condition of the patient. This is how the assessee provides professional services to the insurers by providing them medical information about their customers. These services are provided either through overseas calls or telex or fax messages. Such services, though provided from India are provided to foreign parties located outside India. The billing for providing professional services is made directly to the insurers and is credited under the head 'consultation charges'. For all other services provided in India separate billing is made and credited under other heads of income. The assessee, therefore, claimed deduction under Section 80-O of the Act on the amount of service charges received from foreign insurer for the services rendered to them abroad by the assessee though from India.
However, the AO did not allow deduction under Section 80-O on the basis that the professional services are rendered in India and not from India. The foreign visitors to India in case of any medical problems are treated by the assessee-company with the help of a team of doctors and such medical services are rendered in India. Aggrieved by the above finding of the AO the assessee took up the matter in appeal. It was submitted before the CIT(A) that no deduction under Section 80-O has been claimed on the amount received from foreign tourists in India for providing them any professional or medical facilities or services.
Thus, the AO was incorrect in stating that any deduction under Section 80-O has been claimed on the amount received for providing medical facilities to the tourists visiting India. That deduction has been claimed on the amount received from foreign enterprises for providing outside India the professional/technical services. While relying on Board's Circular No. 77, dt. 23rd March, 1995, it was claimed before the CIT(A) that the assessee was entitled to deduction under Section 80-O even if services were rendered from India. It was claimed that such services are rendered through telex messages and fax messages, a few copies of which were also filed before the CIT(A). The CIT(A) considered the submissions of the assessee and perused the documents filed before him. However, he felt that the messages faxed/telexed to foreign enterprises contained general information about the patients like where they are treated, what is their condition and what medicines, etc. were being given to them. Such information is passed on to the foreign insurers. He observed that passing of such general information cannot be termed as providing professional or technical information within the meaning of Section 80-O of the Act.
3. He also felt that the activities carried on by the assessee will not amount to rendering any services outside India but only services rendered in India. The CIT(A), therefore, confirmed the order of the AO on this point. Aggrieved by the order of the CIT(A) the assessee has come up in appeal before us.
4. It was argued by the learned counsel that the AO/CIT(A) appears to have disallowed the claim of the assessee on two grounds--firstly, the services rendered by the assessee were not in the nature of technical or professional services and secondly, the services have been rendered in India and not outside India.' It was argued by the learned counsel that when any foreign tourists propose to visit India he gets himself insured in his country before coming to India. The appellant-company has an agreement with such foreign insurer companies according to which the appellant will be providing medical facilities, etc. to these foreign tourists in India who asked for it. The payment for such professional services is received from such foreign tourists on which no deduction under Section 80-O has been claimed. But the foreign tourists who visited India and made payment to the appellant claims certain reimbursements from their insurer-company when they go back to their countries. The insurer company cannot settle their claims without having authentic information for the same. The assessee is, therefore, having a memorandum of understanding with the foreign enterprises by which it will provide them certain information. Such information is given from India to foreign enterprises. It was claimed that the AO/CIT(A) were incorrect in stating that the information supplied to foreign enterprises was in the nature of general information.
Information sent to them by way of fax messages/telex messages was purely a professional or technical information (or which the appellant receives the payment in convertible foreign exchange from foreign enterprises. It was also argued that such technical information supplied by the appellant has to be used by the foreign enterprises in their own country. The learned counsel also filed copies of various telex/fax messages which were sent to foreign enterprises to prove that the information passed on to the foreign enterprises was purely technical or professional information. Summing up his arguments the learned counsel pleaded that it was the professional/technical services provided to the foreign enterprises such services have been rendered outside India though from India and, therefore, was covered by Board's Circular No. 700, dt. 23rd March, 1995. The amount has been received from foreign enterprises in convertible foreign exchange. The information supplied by the appellant has to be utilised by the foreign enterprises in their own countries. Thus, all the conditions for grant of deduction under Section 80-O have been satisfied and the AO/CIT(A) were not justified in disallowing the claim of the appellant.
5. Supporting the order of the CIT(A) the learned Departmental Representative argued that from the reading of the telex messages it appears that the amount received from various enterprises was for some services which were not in the nature of professional or technical services. For this purpose the learned Departmental Representative made a specific reference to the amount received as "intervention charges".
It was stated that passing of certain information cannot be termed as rendering services. He argued that the actual services were rendered in India and only the information was being passed on to foreign enterprises. It was stated that furnishing of information to foreign enterprises was only ancillary to main object of rendering medical facility in India. It was argued that Circular No. 700 cited by the learned counsel was not applicable because the services were rendered in India from India. He, therefore, pleaded that the order of the CIT(A) deserves to be upheld.6. We have considered the rival submissions. As mentioned above when the foreign tourists visit India they get themselves insured with some enterprises in their own countries. The effect of such insurance is that if the tourist incurs any expenditure on medical treatment, etc.
while visiting India, the insurer will make some reimbursement to the tourists when he goes back and makes a claim to that effect. But in turn the insurer company has also to safeguard its interest so that unreasonable/exhorbitant claims were not made by such tourists. The agreement was, therefore, entered into between the appellant-company and some foreign enterprises by which the appellant was to render two types of services, (1) to provide medical and other facilities to the tourists if the tourists was in need, and (2) to provide necessary information to foreign enterprises where such tourists were insured, about the physical condition of the tourists, the treatment needed, the medical test required, the drugs being administered and further suggestion about administering other drugs. Such information was sent to foreign enterprises by way of telex/fax messages. For providing medical aid to foreign tourists in India the appellant bills the tourists directly who pays the "amount. Such amount has been credited to the accounts of the appellant as professional charges. But for rendering the services to foreign enterprises by way of fax/telex messages the appellant receives certain amount in convertible foreign exchange from such foreign enterprises on which deduction under Section 80-O has been claimed.
7. Before going into the merits of the appellant's claim it will be desirable to produce the provisions of Section 80-O of the Act which was applicable during the relevant period. The provisions read as under: "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 by way of royalty, commission, fees or any similar payment received by the assessee from the Government of a foreign State or a foreign enterprise in consideration for the use outside India 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 made available or provided or agreed to be made available or provided to such Government or enterprise by the assessee, or in consideration of (technical or professional services) rendered or agreed to be rendered outside India to such Government or enterprise by the assessee, and such income is received in convertible foreign exchange in 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.
Provided that such income is received in India within a period of six months from the end of the previous year, or where the (Chief CIT or CIT) is satisfied (for reasons to be recorded in writing) that the assessee is, for reasons beyond his control, unable to do so within the said months, within such further period as the (Chief CIT or CIT) may allow in this behalf).
(i) 'convertible foreign exchange' means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the law for the time being in force for regulating payments and dealings in foreign exchange; (iii) services rendered or agreed to be rendered outside India shall include services rendered from India but shall not include services rendered in India." 8. The provisions make it clear that in order to claim deduction under Section 80-O the following requirements have to be satisfied : (i) The income of the assessee includes any payment received by the assessee from foreign enterprise; (ii) The payment received was in consideration for the use outside India; (iii) Such payments received by the assessee should be in respect of information concerning industrial, commercial or scientific knowledge etc. or; (iv) The payment received should be in consideration of technical or professional services rendered outside India to such foreign enterprises; and (v) Such amount is received in convertible foreign exchange in India.
9. There is no dispute that the assessee is a resident company and it has received fee or similar payment from a foreign enterprise. There is also no dispute that such amount has been received by the appellant in India in convertible foreign exchange. We will, therefore, take up the other requirements which are in dispute.
(1) Whether the information given abroad was in the nature of technical or professional services; 11. As regards the nature of information sent to foreign enterprises, one factor which is to be kept in mind is that the assessee-company has two directors who are professionally welt-qualified as doctors. A doctor can give medical advice to his clients in writing. Similarly an advocate can give professional advice to his clients by even giving his opinion. In the instant case the appellant-company has given its advice in writing to his client who is abroad. Thus, we have to consider the nature of information whether the same was general information or professional/technical information. For this purpose we have perused a few copies of the fax messages sent by the assessee to his client abroad. An advice/service given by the assessee has placed at p. 2 of the paper book. Information inter alia, includes results of laboratory tests, injection/medicine being provided and the likely period of hospitalisation. At p. 4 of the paper book another information given by the assessee is placed. It includes the diagnosis of the patient, the particular medicine provided to the patient and other advice. Similar informations have been placed at pp. 6,7,8, 16, 17 and 18 of the paper book. At p. 30 of the paper book another advice given by the assessee-company to its client abroad is mentioned. Certain tests have been prescribed for the purpose. Similar advices have been kept on record which are about 200 in numbers. In some of these advices the present position of the patient, likely period of hospitalisation, laboratory test to be done, etc. have been suggested. The details mentioned in such messages clearly show that the assessee-company has not sent general information about the patient. Any information relating to health/treatment/administering of particular drugs and further advices about medical test, etc. is professional or technical information which can be imparted only by a professional/technical person. Under these circumstances we feel that the information furnished by the assessee-company to foreign enterprises was in the nature of technical and professional information. By sending such information the assessee has rendered technical/professional services to its client abroad.
12. Now we come to next issue whether the information sent by the assessee-company was used by foreign enterprises abroad or the same was used in India. As mentioned above the foreign insurer abroad insures the health of the tourist for which the premiums are charged by the insurer. The insurer will, therefore, indemnify the expenses to be met by the tourist while touring in India. The foreign enterprise therefore, wanted the technical information from the assessee-company which also included information about the approximate expenses for the treatment. Such informations are required by the foreign enterprises because these have to be considered at the time of reimbursing the medical expenses to the concerned tourist. Such information is essential to insure that the exhorbitant claim has not made by the insured person. Such information received by the foreign enterprise is of no use to the tourist in India. Such information is of great concern of the foreign enterprise relatable to its insurance business. How the foreign enterprise uses such information, the assessee is not concerned. At the cost of repetition it may be pointed out that the assessee is in receipt of two types of income--(1) which is received from the tourist for providing them medical facilities on which no deduction under Section 80-O is claimed, and (2) the amount received from foreign enterprises for providing them professional/technical services abroad which are to be used by them abroad. The foreign enterprise makes the payment to the assessee into convertible foreign exchange because they feel such technical/professional information sent by the assessee to be more useful in the business carried on by them.
Otherwise there cannot be any other motive behind such payment. It is nobody's case that the foreign enterprise reimburses partly the medical expenses incurred by the assessee on the foreign tourists who were insured by the foreign enterprise. Under these circumstances we hold that the technical/professional information supplied by the assessee abroad was for the use outside India.
13. As regards the services rendered abroad the facts on record clearly indicate that the technical/professional information was sent abroad.
This information was not supplied to anyone in India. Sending technical/professional information abroad is rendering professional/technical services abroad. In view of Board's circular mentioned earlier the services couid be rendered from India. On the basis of these facts we hold that the conditions for grant of deduction under Section 80-O have been fulfilled in this case. We accordingly vacate the order of the CIT(A) and direct the AO to allow deduction under Section 80-O of the Act.
14. The next ground of appeal relates to l/6th disallowance out of car maintenance expenses and car depreciation.
15. The AO disallowed part of the expenses for non-business user which was also confirmed by the CIT(A). In appeal before us the learned counsel stated that the assessee is a company and in the case of a company there cannot be personal user. While relying on the decision ITO v. Ashoka Betelnut Co. (P) Ltd. (1985) 21 TTJ (Mad) 465 (TM) : (1984) 10 JTD 788 (Mad) (TM) the learned counsel stated that the disallowance made by the AO and confirmed by the CIT(A) deserves to be deleted. On the other hand, the learned Departmental Representative supported the order of the CIT(A).
16. We have considered the rival submissions. Whether the expenditure incurred on car maintenance, etc. could be disallowed in the case of the companies or not was considered by the Hon'ble Court in the case CIT v. Chitram & Co. (P) Ltd. (1991) 191 WR 96 (Mad). Respectfully following the same we hold that the disallowance out of car expenses in the case of companies was Justified. We also find that only l/6th disallowance has been made for non-business user. This cannot be considered to be excessive or unreasonable. Accordingly this ground of appeal is dismissed.
1. I have had the privilege of going through the proposed order of learned AM and except for ground No. 1, I fully agreed and concur with his findings and conclusions drawn by him. As regards ground No. 1, I record my dissent and reasons for the same are as follows.
2. So far as facts and arguments of both the sides are concerned, I need not repeat those and adopt the same as recorded by learned AM and advert directly to point at issue which briefly stated, is as under: "Whether the information given by the assessee to foreign enterprises can be said to be in the' nature of technical or professional service which has been rendered and used outside India for which consideration has been received ?" 3. It is assessee's case that the nature of information sent to foreign enterprises is that of professional/technical nature as fax and telex messages sent by the assessee to his client abroad, inter alia, includes results of laboratory test, injections being provided and likely period of hospitalization, etc. It also includes the diagnosis details of the patient, the particular medicine provided to the patient and other advice and treatment, etc. apart from certain tests which has been prescribed for the purposes. In certain cases, likely period of hospital and laboratory tests to be done, etc. has also been suggested.
So the details mentioned in such messages clearly show that the assessee-company has not sent general information but information relating to health/treatment/ administering of particular drugs and further advice about medical tests, etc. So it is in the nature "of professional and technical services which can be imparted only by professional/technical persons- So under these circumstances, it was strongly pleaded that information furnished by the assessee-company to foreign enterprises was in the nature of technical and professional services which has been utilised by them abroad and consideration received by the assessee for that qualifies for deduction envisaged under Section 80-O of the IT Act, 1961.
4. It is Department's case that the deails about patients, treatment, diagnosis, etc. is merely an information and can't be equated with technical or professional service, nor it has been used outside India, therefore, the action of AO in disallowing the deduction as claimed under Section 80-O and that of CIT(A) in confirming the same is justified and proper and further confirmation was sought.
5. After considering arguments of both the sides, looking into the orders of authorities below, relevant record and provisions, I am of the considered opinion that case made out by the assessee is altogether besides the point and it fell short of the condition precedent for grant of deduction as envisaged under Section 80-O. In this case from the facts, I find that assessee had not made available either technical or professional services to the foreign enterprises for use outside India nor it had rendered any technical services to the foreign enterprises outside India and looking into the nature of information made available to the foreign enterprises the same cannot be held to be either technical or professional services rendered. Nor such information about the patients treated in India could be said or held to have been used outside India by such foreign enterprises. The main work undertaken by the assessee's-company for the foreign enterprises was to give treatment and other services as enumerated in the agreement entered into by the assessee with different foreign enterprises whose clients visited India for travelling purposes and needed medical treatment as well as other services. So the work in treating the clients of the foreign enterprises while travelling in India commenced and stood completed in India itself and merely sending information about the whereabouts of the patients, treatment given, diagnostic detail, medicines provided, cannot in any manner or under any circumstances, be held to be technical or professional service's' rendered by the assessee outside India to foreign enterprises to be used by them moreso when the services have been rendered in India for which assessee charged fee, etc. and Expln. III to Section 80-O clearly provides that services rendered or agreed to be rendered outside India shall include services rendered from India but shall not include service rendered in India and in fact, assessee has rendered services only in India and he has just been passing data and information to insurer companies (foreign enterprises regarding persons visiting India who were treated by the assessee in India and hence deduction under Section 80-O is found to be not allowable to the assessee in this case and same has rightly been rejected by the AO and action of learned CIT(A) in confirming the action of AO is found to be justified.
Therefore, while upholding the action of tax authorities, I dismiss ground No. 1 of the appeal of the assessee.
Since there is difference of opinion between the Members of the Bench, we state following point of difference and refer the same to the Hon'ble President for further necessary action as envisaged under Section 255(4) : "Whether, in view of facts and circumstances of the case, the assessee is entitled to deduction under Section 80-O of the IT Act, 1961 or not ?" 1. The following question was referred to me as a TM under the following s, 255(4) of the IT Act, 1961, by the Hon'ble President : 2. Before I proceed to resolve the point one way or the other, I would like to mention that vis-a-vis the facts of the case, there is no difference of opinion between the learned Members constituting the Division Bench, but to summarise these it is necessary on my part to mention that the assessee-company provides professional services in the field of medicine and its two directors are qualified doctors. The company possesses necessary expertise for providing emergency medical assistance to any person anywhere in India on call. It has its own panel of qualified doctors, who are always on call providing necessary medical services whenever required. As per record the assessee is patronised by various insurance companies in the world as also some select embassies of foreign countries although no formal agreement exists in some of the cases.
3. It is also an undisputed fact that in some cases after providing treatment the patients are also provided qualified doctors to escort them back to their destination/country, if required. It is also an undisputed fact that most of the persons, who patronise the assessee are insured with various companies in their respective countries and from whom they claim the medical expenses incurred in India and the insurance companies with a view to limit their claims "seek information" from the assessee-company about the patient. These services admittedly are provide either on telephone or telex or through fax messages. The billing for providing these services is made directly to the insurance companies and on receipt in convetible foreign exchange these are credited under the head "consultation charges". It is in respect of the income registered under the aforesaid head that the assessee claimed deduction under Section 80-O of the Act. The AO rejected the claim, observing as under: "Circular No. 700, dt. 23rd March, 1995 of CBDT enclosed with the submission also clarified that as long as the technical and professional services are rendered from India and are received by a foreign enterprise outside India, deduction under Section 80-O would be available to the person rendering the services even if the foreign recipient of the services utilised the benefit of such services in India. In the present case, the professional services are rendered in India and not from India. Foreign visitors to India, in case of any medical problem are treated by the assessee-company with the help of a team of doctors and such medical services are rendered in India. Hence, the assessee's claim for deduction under Section 80-O is not acceptable." 4. Being aggrieved the assessee moved the CIT(A) and at which stage it was submitted that deduction under Section 80-O was available as per the circular aforesaid wherein it had been clarified that as long as the technical and professional services were rendered from India and were received by the foreign enterprises outside India deduction under Section 80-O would be available to the person rendering the services.
In order to support its case the assessee produced before the CIT(A) copies of certain telex and fax messages. This is what the CIT(A) observed after perusing the said telex messages, etc. : "I have gone through some of the messages I find that they contain general information about whereabouts of the patients and where they are treated and what is their condition and what medicines are being given to them. These informations have been passed on to foreign insurance companies for their use. I do not find professional or technical information, which has been passed by the appellant outside India, which have been used by foreign parties. Giving the detail of whereabouts of the patients and their treatment, names of doctors and hospitals where they are treated cannot be called professional and technical services being rendered outside India.
Hence, the appellant is not entitled to deduction under Section 80-O. Whatever services the appellant are rendering are being rendered in India and for the same the appellant charges fee, etc.
Sub-section (iii) of Explanation to Section 80-O states clearly that services rendered or agreed to be rendered outside India shall include services rendered from India, but shall include services rendered from India, but shall not include services rendered in India. The appellant is rendering services only in India. The appellant has also not agreed to render any service outside India.
It is only passing data and information to insurance companies regarding persons visiting India. Hence, deduction under Section 80-O has rightly been rejected by the AO. The appellant's claim is rejected." 5. On the matter travelling to the Tribunal the assessee's main submissions before the Division Bench were as under : "(i) That whenever any foreign tourist proposes to visit India, he gets himself insured in the country of his origin before coming to India; (ii) The assessee-company had agreements with foreign insurance companies whereby it would be providing medical facilities to the foreign tourists in India; (iii) The payment for such professional services was received from such foreign tourists in India and on which no deduction under Section 80-O had been claimed; (iv) The foreign tourists who visited India made payments to the assessee- company and claimed reimbursement from their respective insurance companies when they went back to their countries and such claims could not be settled without receiving authentic information from the assessee about the person/persons treated; (v) The assessee had a memorandum of understanding with the foreign enterprises whereby it would provide them certain information and which was transmitted to the foreign companies abroad; (vi) It was incorrect on the part of the AO/CIT(A) to state that the information supplied to the foreign enterprises was in the nature of general information since information sent by fax messages/telex messages was purely of a professional and technical nature for which the payment .was received in convertible foreign exchange from the foreign enterprises; (vii) That such technical information supplied by the assessee was to be used by the foreign enterprises in their own countries; and (viii) The point at issue was squarely covered by CBDT Circular No. 700, dt. 23rd March, 1995, since professional/technical services provided to the foreign enterprises had been rendered outside India though from India.
6. On the basis of the aforesaid, the ultimate submission was that various conditions stipulated by Section 80-O having been satisfied, the claim for deduction under Section 80-O was tenable.
7. As against the aforesaid submissions the learned Departmental Representative on behalf of the Revenue supported the order passed by the tax authorities, highlighting the following : (i) A reading of the telex messages showed that the amounts received from various foreign enterprises were for "some services", but which were not in the nature of professional or technical services; (ii) That passing of certain information could not be termed as rendering services; (iii) That actual services were rendered in India and only information thereof was passed on to foreign enterprises;' (iv) Furnishing of information to foreign enterprises was only ancillary to the main object of providing medical facilities in India; and (v) Circular No. 700 cited on behalf of the assessee was not applicable because the services were rendered in India from India.
8. The learned AM who passed the initial order set out in para 6 of his order the nature of the services rendered by the assessee to the foreign tourists in the form of medical aid/assistance as also referred at length and minutely the nature of services, which were to be rendered to the foreign insurance companies vis-a-vis the provisions of Section 80-O of the Act which were set out in para 7 of the order.
Inasmuch as the factual position is not disputed between the learned Members of the Division Bench, I proceed to extract para 6 of the order of the learned AM : "We have considered the rival submissions. As mentioned above when the foreign tourists visit India they get themselves insured with some enterprises in their own countries. The effect of such insurance is that if the tourist incurs any expenditure on medical treatment, etc. while visiting India, the insurer will make some reimbursement to the tourists when he goes back and makes a claim to that effect. But in turn the insurer company has also to safeguard its interest so that unreasonable/exhorbitant claims were not made by such tourists. The agreement was, therefore, entered into between the appellant-company and some foreign enterprises by which the appellant was to render two types of services, (1) to provide medical and other facilities to the tourists if the tourist was in need, and (2) to provide necessary information to foreign enterprises where such tourists were insured about, the physical condition of the tourist, the treatment needed, the medical test required, the drugs being administered and further suggestion about administering other drugs. Such information was sent to foreign enterprises by way of telex/fax messages. For providing medical aid to foreign tourists in India the appellant bills the tourists directly who pays the amount. Such amount has been credited to the accounts of the appellant as professional charges. But for rendering the services to foreign enterprises by way of fax/telex messages the appellant receives certain amount in convertible foreign exchange from such foreign enterprises on which deduction under s, 80-O has been claimed." 9. It is quite apparent from a reading of the aforesaid that there were two types of receipts which accrued to the assessee in India, i.e., one for rendering medical aid/assistance and the other for providing information to the insurance companies and both are inter-linked as the source is the same i.e. the insurance company. To elucidate the tourists, who approach the assessee for medical aid/assistance are admittedly insured in the countries of their origin and they are in fact obliged to contact the assessee and the insurance company in turn wants to ensure that the claims for reimbursement made by the tourists on their return back are proper and not inflated. In other words, the agreement between the assessee-company and the foreign insurance companies ensures a steady stream of foreign tourists, who may require medical treatment/assistance on their visit to India and the assessee by means of telex/fax-telephone passes on information to the foreign insurance companies about the treatment given to the various persons, who are insured with such foreign insurance companies. Before I proceed to say anything further on this aspect of the matter, I would revert back to the order of the learned AM where after reproducing the relevant provisions of Section 80-O he proceeded to discuss the facts of the assessee's case vis-a-vis such provisions.
10. Adverting to the facts of the assessee's case on the touchstone of the aforesaid provisions the learned AM referred to the issues which were in dispute and these being : (i) Whether the information given abroad was in the nature of technical or professional services (iii) Whether such services were rendered abroad According to him there was no dispute that the assessee, was a resident company and that it had received the amount in question from foreign enterprises and that also in convertible foreign exchange.
11. Coming to the first aspect i.e., the nature of the information, the learned AM noted that the assessee-company had two directors, who were qualified doctors and further a doctor could render medical advice to his client in writing just as an advocate could give professional advance in writing to his clients. In the instant case i.e., of the assessee the learned AM observed that the advice had been given in writing to clients abroad and in coming to such a conclusion the learned AM referred to the copies of certain fax messages placed on the paper book. It was observed that the information pertained to the results of laboratory tests, injections and medicines administered and the likely period of hospitalization. It was also noted that some of the fax messages included the diagnosis of the patient and the medicine, which was to be administered and other connected advice. Then again, referring to certain other fax messages it was noted by the learned AM that these contained information about the present position of the patient likely period of his hospitalization, laboratory tests to be done, etc.
12. On a perusal of the aforesaid fax messages, the learned AM came to the conclusion that the information transmitted was not of a general nature as held by the tax authorities and it in fact constituted professional/technical information which could only be imparted by a professional/technical person. In other words, the ultimate conclusion was that the sending of information by fax/telephone, etc. constituted technical/professional services rendered to clients abroad.
13. In para 12 of his order the learned AM also opined that the information sent by the assessee- company was used by the foreign enterprises abroad since it was to help the foreign insurance company/companies to work out the quantum of expenses to be indemnified to the foreign tourist on his return back to his parent country.
14. As regards the place where the services were rendered i.e. whether in India or abroad, the learned AM opined that the technical/professional information was sent abroad from India and utilized abroad. In other words, the learned AM, in the ultimate analysis, concluded that the conditions for grant of deduction under Section 80-O had been fulfilled and he, therefore, proceeded to vacate the orders of the tax authorities directing the AO to allow deduction to the assessee.
15. The learned JM however, did not subscribe to the view expressed by the learned AM and, he, therefore, agreed with the view taken by the tax authorities. According to him the assessee-company had not rendered any technical services to the foreign enterprises outside India and the information about the patient treated in India could not be said or held to have been used outside India by such foreign enterprises. It was also the further observation of the learned JM that the main work undertaken by the assessee-company for the foreign enterprises was to give treatment and other services as enumerated in the agreement entered into by the assessee with such foreign companies, whose clients visited India for travelling, etc. and needed medical treatment as also other services. According to him the work of treating the clients of foreign enterprises while travelling in India commenced and stood completed in India itself and mere sending of information about the whereabouts of the patients, treatment given, diagnosis details, medicine provided, etc could under no circumstance be held to be in the nature of technical or professional services rendered by the assessee outside India to foreign enterprises to be used by them. In conclusion he proceeded to uphold the action of the tax authorities.
16. Before me the learned counsel for the appellant reiterated the arguments advanced before the tax authorities and subsequently before the Division Bench. It was highlighted that the assessee was not claiming deduction under Section 80-O on the amounts earned for providing medical treatment, etc. to the foreign tourists and the claim was restricted to the amounts received from foreign insurance companies for transmitting to them information pertaining to their clients and such information was of a technical nature which only a qualified doctor could provide. In referring to the various fax messages already placed on the paper book, the learned counsel submitted that the information pertaining to the laboratory tests, medicines prescribed, etc. constituted technical and professional services within the meaning of Section 80-O. The further submissions made by him were in complete support of the order passed by the learned AM. In conclusion it was urged that the view taken by the learned AM be approved.
17. The learned Departmental Representative, on the other hand, vehemently supported the action of the tax authorities in rejecting the claim and which would mean supporting the order of the learned JM.Detailed submissions were made in respect of the objects of Section 80-O and copy of CBDT circular explaining the objectives of the said section was placed on record. A reference was made to the written submissions, dt. 12th April, 1995, filed by the assessee before the AO and wherein it had been accepted that the medical information was sought by the foreign insurance companies about its customers from the assessee with a view to limit their claims".
18. The further submissions of the learned Departmental Representative were to the effect that the assessee was merely supplying information about the treatment given to the clients of the foreign insurance companies, who came to it for medical treatment/assistance and there was nothing technical about the information provided. In reverting to the provisions of Section 80-O the further arguments of the learned Departmental Representative were to the effect that the assessee had not transferred any special skill or know-how to the foreign insurance companies. She in fact went on to contend that "know-how" was not mere passing of information to outside parties. The further submissions of the learned Departmental Representative were a reiteration of the reasons recorded by the tax authorities in rejecting the assessee's claim.. In support thereof, reliance was placed on the following decisions : (i) Eastman Consultants (P) Ltd. v. CBDT and Anr. (1981) 132 FTR 637 (Bom); (iii) Searle (India) Ltd. v. CBDT and Anr. (1984) 145 ITR 673 (Bom), and (iv) CBDT and Anr. v. Obemi Hotels (India) (P) Ltd. (1998) 231 ITR 148 (SC).
19. In a short reply the learned counsel for the assessee stated that the CBDT circular relied upon by the learned Departmental Representative was not relevant as it pertained to approval of agreements with reference to provisions of Section 80-O and which was not the issue in the present appeal It was reiterated that only a qualified medical practitioner could furnish information to the foreign insurance company as was the type of information sent by the assessee-company through fax, through telex and by telephone. As regards the various decisions relied upon on behalf of the Department the learned counsel referred to two of these i.e., (1981) 132 ITR 637 (Bom) (supra) and (1998) 231 ITR 148 (SC) (supra) contending that these were not applicable as they pertained to the old provisions and not the provisions of Section 80-O as would be relevant to the assessment year under consideration.
20. The aforesaid submissions made in the reply by the learned counsel were commented upon by the learned Departmental Representative, who submitted that it was the object behind the provision which was relevant and the changes would, therefore, not be relevant.
21. I have examined the rival submissions and have also minutely perused the order passed by the learned Members constituting the Division Bench. At the outset, I would refer to the objective, which were sought to be achieved by introducing provisions of Section 80-O and the CBDT circular relied upon by the learned Departmental Representative categorically mentions twin objectives i.e., encouraging the export of Indian technical know-how and the augmentation of the foreign exchange resources of the country. It is further clarified that the object of the provisions when it was initially introduced was to encourage Indian companies to export their technical know-how and skill abroad and augment the foreign exchange resources of the country. No doubt the circular relied upon by the learned Departmental Representative pertained to the approval of agreements, but it was clarified therein that an agreement which in the opinion of the Board was not bona fide and genuine and was in fact a collusive arrangement for abuse of the tax concession admissible under Section 80-O would not be approved. It was further clarified that an agreement which was general or was vague or did not give sufficient details was also not to be approved. The following terms of the circular are also relevant and these throw light on what qualifies and what does not: "(iv) Information concerning industrial, commercial or scientific knowledge, experience or skill make available or provided, or agreed to be made available or provided, should be information not merely of a statistical type collected or collated from commercial or scientific journals or other commonly available sources of information, but it should be information, concerning the industrial, commercial or scientific knowledge, experience or skill possessed or developed by the Indian party and which is made available or provided to the foreign party under the agreement.
Information regarding trade enquiries or reports regarding the credit or trade worthiness in individual cases will not qualify for this purpose.
(v) The technical services rendered or agreed to be rendered to the foreign party should relate to productive fields such as (a) mining, or (b) generation or distribution of electricity or any other form of power, or (c) constructional, industrial or manufacturing operations, or (d) engineering services. Services, such as those relating to management, organization, sales, finance and accounts, will not qualify for this purpose. Technical services which are rendered or to be rendered in India will also not qualify for this purpose.
(vi) Agreements for recruitment or mere supply of technical personnel from India for service outside India will not be eligible for approval.
(vii) Agreements which provide for participation in business or management operations abroad simpliciter in return for a specified percentage of commission or profit will not be eligible for approval." 22. It is apparent from a reading of the aforesaid that information of a routine nature, which is collected from other printed material does not qualify and even information given consequent to trade enquiries being received from abroad does not qualify. It is also observed that agreements for recruitment or mere supply of technical personnel from India for rendering services outside India will not be eligible for approval.
23. In dealing with the various decisions relied upon by the learned Departmental Representative, in the case of Searle (India) Ltd. v. CBDT (supra) there was an agreement between the assessee-company and the foreign company which imported psyllium husk from India. The assessee was required to carry out certain tests in its laboratory in India and forward to the foreign company, the results of those tests with a certificate that each lot of psyllium husk conformed to the specifications of the foreign company. The agreement provided that the foreign company would pay to the assessee 50 dollars for each lot of psyllium husk in respect of which the assessee conducted the quality tests. The assessee applied to the CBDT for approval of the agreement under Section 80-O and which was rejected by the CBDT on the ground that the technical service was not rendered outside India. A single Judge of the Hon'ble High Court dismissed the writ petition filed by the assessee on the ground that the work was done by the assessee in India. On appeal. Their Lordships of the Hon'ble Bombay High Court held that under the agreement what was rendered by the assessee was more or less a technical service since the assessee merely tested the samples and gave the results-to the foreign company. Further, since the testing and certification was done by the assessee in India, the assessee was not entitled to a deduction of the technical service fees received from the foreign company under Section 80-O.24. In the other decision of the Hon'ble Bombay High Court in the case of Eastman Consultants (P) Ltd. v. CBDT (supra) the assessee-company acted as a recruiting bureau for foreign employers and located prospective candidates or employees and collected their bio-data and particulars. The selection of the candidates was made in India itself and at times by a representative of the foreign company coming to India for that purpose. In several letters-cum-agreements the foreign employers authorised the assessee-company itself to select and recruit candidates in India and in some cases the assessee was asked to keep candidates ready for interview in India by the representative of the foreign employer. The fees charged by the assessee was primarily for locating and providing information for which the assessee claimed to have a vast staff which located the required category of personnel and then processed their applications to see whether they were technically fit for the job and the entire service was undertaken and performed in India. The assessee entered into various agreements in the form of cryptic letters with foreign employers and "conveyed the names" of suitable candidates to the foreign employers.
25. On the basis of the aforesaid facts the assessee claimed exemption under Section 80-O on the ground that it was providing "information" which was imparted by means of conveying the names of suitable candidates to the foreign employers. On the matter travelling to the Hon'ble High Court, Their Lordships held that "information" provided by the assessee could not be said to partake of the nature of "industrial, commercial or scientific knowledge, experience or skill" within the meaning of Section 80-O. It was further held that the assessee did not satisfy the conditions laid down in the second limb that the industrial, commercial or scientific knowledge, experience or skill must be made available for "use outside India". Their Lordships further observed that the fact that the selected candidates went abroad and worked outside India was not relevant because that work had nothing to do with the assessee's work in India.
26. In the case of CBDT & Am: v. Obeioi Hotels (P) Ltd. (supra) Their Lordships of the Hon'ble Supreme Court affirmed the view taken by the Hon'ble Delhi High Court in Obeioi Hotels (India) (P) Ltd. v. CBDT (1982) 135 ITR 257 (Del), the relevant facts being that there was an agreement between Oberoi Hotels (India) (P) Ltd. and a Nepal company which owned and operated a hotel in Kathmandu. For ensuring better operational results and promotion of the business of its hotel the foreign enterprise desired that its operations be taken over by the respondent with effect from 1st Dec., 1969, on the terms and conditions. The CBDT did not grant approval under Section 80 0 and on a writ petition filed by the assessee the Delhi High Court quashed the order of non-approval under Section 80-O passed by the Board. The matter was thereafter taken to the Hon'ble Supreme Court, which upheld the view taken by the Hon'ble Delhi High Court. At p. 150 of the report, Their Lordships took into account the amendment to Section 80-O carried out by the Finance (No. 2) Act, 1991, when the words "technical or professional services" were inserted in place of the words "technical services'. It was held by Their Lordships that the amendment was of a clarificatory nature and the term "technical services" always included within it professional services as well. The following observations of Their Lordships at p. 150 of the report are relevant : "The basic purpose of Section 80-O 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 in that process to receive income to augument the foreign exchange resources of the country.
The assessee can also make available to the foreign enterprise, technical and professional services, experience of which it possesses for earning foreign exchange for the country." 27. I am not in agreement with the submissions of the learned counsel that the CBDT circular does not apply as it pertains to the question of approval or for that matter a particular judgment does not deal with the amended provisions. These have been relied upon by the learned Departmental Representative on behalf of the Department for projecting the objectives behind the introduction of Section 80-O. In examining the CBDT circular as also perusing the judgments, one thing becomes quite clear and that is the transmitting of general information, howsoever important it may be, to the foreign enterprise is not at all a relevant factor since it has been seen that even collecting information/bio-data of Indian citizens and transmitting the same abroad has been held to be of a nonqualifying nature vis-a-vis Section 80-O. It has also been held in the aforesaid judgments that something taken from local journals or printed material and forwarded to a foreign enterprise does not qualify. It is also the view of the Board that agreement which is general, vague and gives an impression that the same is not bona fide and represents a collusive arrangement is not entitled for the relevant tax concession under Section 80-O.28. In the present case the foreign companies have entered into an agreement/arrangement with the assessee-company on two scores, the first for treating the persons who are insured with such foreign companies as and when they need medical assistance in India and second once the medical services have been rendered, then the assessee-company forwards the details of the treatment so rendered to the foreign insurance companies by telex/fax or merely on telephone. Can it be said under the aforesaid circumstances that the assessee is rendering any technical services, which would entitle it to claim under Section 80-O In my opinion the answer would be no as the assessee's case does not fall under this category and nor does it fall under any of the other categories stipulated by Section 80-O. I have perused the copies of the various fax messages, etc. which have already been placed on the paper book and which were considered by the Division Bench and I do find that these merely contain general information on the patient who is the client of the foreign insurance company as to how many days he stayed in India, what was the nature of his ailment, what was the medicine administered and when did he recover or he was likely to recover. In my opinion, such information can be transmitted to a foreign enterprise even by a person who knows how to operate a fax machine and merely because a qualified medical practitioner may have perused the text of the telex messages, it does not convert an information which is purely of a general nature into rendering of technical or professional services or transmitting of know-how to a foreign enterprise. It must be emphasized that the information about the patient is prepared when his treatment is in India and its transmission to the foreign enterprise by any mode is not a separate and independent activity de hors the treatment.
29. As rightly pointed out by the learned Departmental Representative the assessee has accepted at the assessment stage and which is not varied either before the Division Bench or before me in this reference that the transmission of this information to the foreign companies is only for the purpose of limiting their liability to their clients and nothing more. In other words, the foreign companies admittedly want to ensure that their clients do not present them any bills for reimbursement which are not genuine and which are inflated and do not represent the correct stage of affairs. Reliance on behalf of the assessee on CBDT Circular No. 700, dt. 23rd March, 1995, is misconceived since it clarifies the following question only : "The matter has been considered by the Board. It is clarified that as long as the technical and professional services are rendered from India and are received by a foreign Government or enterprise outside India, deduction under Section 80-O would be available to the person rendering the services even if the foreign recipient of the services utilises the benefit of such services in India.
30. The assessee, however, has to cross the first hurdle and which is whether, it has provided technical or professional services to a foreign enterprise and which, in my opinion, it has not done since the information transmitted is only of a general and routine nature and it would not fall under the category of "technical" or "professional" services. In the view that I have taken, I do not find it necessary to examine the assessee's case with reference to CBDT Circular No. 700, dt. 23rd March, 1995.
31. In the final analysis, I uphold the view taken by the tax authorities in rejecting the assessee's claim for deduction under Section 80-O of the IT Act, 1961. The matter may be placed before the Division Bench for passing an order in accordance with the majority view.