C.N. Ramachandran, J.
1. These are appeals filed by the Revenue under Section 260(A) of the Income Tax Act raising two issues arising from orders of the Income Tax Appellate Tribunal disposing of assessment appeals of the assessee for the assessment years 1996-97 and 1997-98. Respondent assesee died during pendency of the appeals and therefore at the request of the department, we have by separate orders impleaded the assessee’s wife Smt. Primari C. Thomas as the legal heir of the late assessee. Registry will therefore issue the judgment in the name of the legal heir impleaded. However, since the late assessee’s name appears in all orders, for the sake of completeness, Registry will, in the cause title show the name of the assessee also but as ‘deceased’.
2. One of the two issues raised pertains to computation of deduction of export Profit, with reference to the export premium received. This issue stands decided by the Supreme Court in favour of the assessee and against the Revenue in the case Commissioner of Income Tax v. Baby Marine Exports reported in 290 ITR 323. Therefore, following the judgment of the Supreme Court, we answer the issue in favore of the assessee and against the Revenue.
3. We have heard the Senior counsel Sri. P.K.R Menon for the appellant and Sri. A. Kumar for the respondent on the remaining issue.
4. Counsel for the respondent raised an objection that appeals are not tenable because the amounts of deduction and the tax involved with respect to the claim under Section 80-O of the Income Tax Act is below one lakh for both the years and under the norms prescribed by the CBDT, department cannot file appeal on such issues. However, senior counsel appearing for the Appellant submitted that appeals were filed on two issues and the combined tax effect is much more than the amount covered by the norms prescribed. Appellant’s counsel also pointed out that as on the date of filing the appeal, i.e, 1.4.2004, the relevant Circular is of the year 2005 under which Appeal is maintainable irrespective of the tax effect. Revenue’s counsel also referred to the decision of the Honourable Supreme Court reported in Commissioner of Income Tax v. Surya Herbal Ltd. (2011 (243) CTR 327) wherein the Supreme Court held that the High Court can ignore the Circulars and proceed to decide the appeals on merits, if the question involved is substantial and arising in many cases and for subsequent years or in large number of matters. Since the issue raised in these appeals is a substantial question of law, we reject the objection on maintainability raised by the respondents and proceed to consider the appeals on merit.
5. During the relevant assessment years the assessee acted as an agent of the foreign buyers of marine products from India. Assessee was engaged to examine quality and suitability of the product for the foreign buyer and only on assessee’s certification, the exporter could ship the goods from India to the foreign buyers. In other words, the assessee was rendering professional service to ensure quality of the product exported to the foreign buyers and the services were rendered in India. The assessee received payment from the foreign buyers for these services rendered, in convertible foreign exchange. When the assessee claimed deduction under section 80-O of the Act, the assessing Officer found that the assessee rendered services only in India and so much so, the assessee is not entitled to deduction under Section 80-O of the Act. However, on appeal by the assessee, the CIT (Appeals) as well as the Tribunal held that the assessee is entitled to deduction mainly because payment for service was received in convertible foreign exchange. It is against this order of the Tribunal, Revenue has filed the appeal. In order to consider the issues we have to necessarily examine the scope of Section 80-O, which we extract hereunder for reference:
80-O: Deduction in respect of royalties etc., from certain foreign enterprises:- 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:
Services rendered or agreed to be rendered outside India shall include services rendered from India but shall not include services rendered in India.
Senior counsel appearing for the Revenue specifically challenged the findings of the Tribunal that “the assessee is not doing any service in India but the assessee is doing services from India for the foreign parties.” Admittedly, the assessee examines the quality and type of Fish processed by the exporters in India and certifies fitness for shipment to the foreign buyers whom he represents in India. Therefore, the service is rendered in India and the finding of the Tribunal to the contrary is factually incorrect. We do not know how the Tribunal can draw distinction between the service rendered in India and service rendered from India in this case because assessee renders full service in India and on assessee’s certification of the product the Foreign Buyer is bound to accept the goods shipped from India. On the facts we have to conclude that assessee’s services are over as and when he certifies the marine products as fit for export to the foreign buyer, whom assessee represents in India. Assessee admittedly does not render any other service from India to the foreign buyers and the only service is physical examination and certification of goods as fit for export to his foreign principal, which is rendered in India. Eligibility for deduction under Section 80-O has to be considered specifically with reference to the service rendered by the assessee which is only in India and the same is over once the goods are certified by the assessee as fit for his parties abroad. In fact, after the certification of fitness the assessee is entitled for payment which admittedly is received in convertible foreign exchange in India.
6. On a reading of the above provisions what we notice is that assesses service is certainly professional services which are covered by the provisions of the Act. However, two conditions have to be satisfied for eligibility for deduction under Section 80-O, the first is that the service should be rendered outside India and the second one is that payment for such services should be received in convertible foreign exchange in India. In this case only one condition is satisfied, i.e., receipt of consideration in convertible foreign exchange and so far as rendering of service is concerned, the entire service is rendered by the assessee in India and no services is rendered outside India. Exporter ships the goods only with assessee’s certificate of fitnesses so that foreign buyer cannot reject the goods. Assessee’s communication with foreign buyers in our view does not amount to rendering of service outside India.
7. Assessee’s counsel has relied on the decisions of the Delhi High Court in LI and Fung India (P) Ltd., v. Commissioner of Income Tax, New Delhi reported (2008) 172 Taxman 236, Commissioner of Income Tax v. Inchcape India P. Ltd., reported in (2005) 143 Taxman 234, Commissioner of Income Tax v. Eicher Consultancy Services Ltd., reported in (2008) 167 Taxman 64 and also clause 3 of the explanation under Section 80-O of the Act. It is contended that service rendered from India will also qualify for deduction under Section 80-O. However, we notice that the decisions cited were only dealing with the supply of commercial information from India to the foreign buyer, whereas in this case, assessee was engaged in verification of quality and fitness of Marine products and assessee only certifies fitness of quality which was done in India. What we notice is that the decision of the Delhi High Court pertains to the transaction of Commercial and Technical information from India to the foreign buyers and not the certification of fitness or quality of goods which is the work done by the assessee in India. So much so, we do not find the ratio of the Delhi High Court decisions can be applied to the facts of this case. So far as the respondents reliance on clause 3 of the explanation is concerned, we find that there is specific bar against the claim if the payment received is for the service rendered in India which is the case herein.
In view of the findings above, we answer the issue raised in the appeal in favour of the revenue and against the assessee and consequently we allow the appeals reversing the orders of the Tribunal and CIT (Appeal) and by restoring the assessment.