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PETITIONER: CENTRAL BOARD OF DIRECT TAXES & ORS. NEW DELHI

       Vs.

RESPONDENT: OBEROI HOTELS (INDIA) PVT. LTD.

DATE OF JUDGMENT:       30/03/1998

BENCH: SUJATA V. MANOHAR, D.P. WADHWA

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T D.P. Wadhwa, J.      Central Board  of Direct  Taxes (CBDT) is in appeal. It is aggrieved  by the  judgment  dated  May  29,  1981  of  a Division Bench  of the  Delhi High  Court quashing  its  non approval under Section 80-0 of the Income Tax Act, 1961 (for short ’the  Act’) to  an agreement  dated November  29, 1969 entered into  by the respondent with M/s. Soaltee Hotel Pvt. ltd. Kathmandu (Nepal) a foreign enterprise. Section 80-0 is as under:      "80-0, Where the gross total income      of  an  assessee  being  an  Indian      company 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 services      rendered or  agreed to  be rendered      outside India to such Government or      enterprise by  the assessee,  under      an agreement  approved by the Board      in this  behalf, and such income is      received  in   convertible  foreign      exchange in  India, or  having been      received in convertible having been      converted into  convertible foreign      exchange outside  India, or  having      been  converted   into  convertible

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    foreign exchange  outside India, is      brought  into   India,  buy  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   the  whole  of  the      income so  received in,  or brought      into India  in computing  the total      income of the assessee;           Provided that  the application      for the  approval of  the agreement      referred to  in this sub-section is      made to  the Board  before the  1st      day of  October of  the  assessment      year  in   relation  to  which  the      approval in first sought:           Provided further that approval      of the Board shall not be necessary      in the  case of  any such agreement      which has  been  approved  for  the      purposes  of  the  deduction  under      this   section   by   the   Central      government before  the 1st  day  of      April,   1972 and every application      for  such   approval  of  any  such      agreement pending  with the Central      Government immediately  before that      day shall  stand transferred to the      Board for disposal.           Explanation. -  The provisions      of the  Explanation to  Section 80N      shall apply  for  the  purposes  of      this Section  as they apply for the      purposes of that section....."      The impugned judgment is reported in (1982) 135 ITR 257 (Del).      As required  by Section  80-0,  the  respondent  sought approval of  the agreement  as falling within the purview of the section.  CBDT declined  to grant  approval. However, it did not  communicate any ground as to on what basis approval was not  granted Respondent  filed a  writ petition  in  the Delhi High  Court, it  being Civil Writ Petition No. 1301 of 1975. The  writ petition  was allowed by a Division Bench of the Delhi  High Court on January 5, 1979 with a direction to the CBDT  to consider  the matter afresh and give a decision after granting  hearing to the respondent. This order of the Division Bench is reproduced hereunder:      "The impugned  order  declining  to      give  approval   to  the  agreement      under Section  80-0 of  the  Income      Tax Act,  1961, does  not give  any      reasons  for   the  decision.   The      reasons now  stated in  the counter      affidavit have become known to t he      petitioner for  the first time. The      petitioner had  no  opportunity  of      meeting  the   same.  The  impugned      order is,  therefore, set aside and      the case  is sent back to the Board      for a  fresh consideration  of  the      request of   the petitioner for the

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    approval  of  the  agreement  under      Section 80-0  and the  new decision      by the  Board will  be given  after      giving a hearing to the petitioner.      The writ petition is allowed in the      above terms. No order as to costs."      After that  respondent represented its case before CBDT but again  CBDT did not find any ground under the Section to approve the  agreement and by order dated February 26, 1980, communicated its  decision to  the respondent.  We reproduce the relevant portion of this order of CBDT as under : (pages 63-64 of the PB)      "2.  The   Board   have   carefully      reconsidered    the    matter    in      pursuance    o    the    directions      contained in  the judgments of  the      Delhi High  Court in the Civil Writ      Petition Nos.  429 of 1974 and 1301      of  1975,   on  the  basis  of  the      written and oral arguments advanced      by you.  It is  regretted that  the      Board   does    not   consider   it      necessary to  revise the  decisions      already communicated to your in the      Board’s orders  referred  to  above      owing to the following reasons:-      (1) The  services being rendered by      you to  the foreign  party in  both      cases     are  in   the  nature  of      managerial services. As observed by      the Delhi  High Court in Civil Writ      No. 901  of 1975  (M/s. J.K. Bombay      Ltd.  vs.  CBDT  and  another)  the      running  of   a  business   or  the      management of  a business  does not      amount   to    the   rendering   of      technical services.      (2) What  is being  given under the      agreements can  also not  be viewed      as      information      concerning      industrial,      commercial      or      scientific knowledge  or skill.  It      is not  as if  some information  is      being supplied by you which is made      use  of  by  the  foreign  parties.      Under the  two agreements,  you are      yourself functioning in the foreign      countries.      (3)  Though   your  name  is  being      utilised by the two foreign hotels,      and the fee received for the use of      your trade name would be covered by      the provisions  of Section 80-0 yet      the amount relatable to this aspect      of  the   total  services  rendered      under the  two agreements  would be      so small  that it  is not  easy  to      quantity the  same for  purpose  of      Section 80-0 of the Income Tax Act,      1961"      This led  the respondent  to approach  the  High  Court again by  filing writ  petition on  July 28,  1980 which was allowed by  judgment  dated  May  29,  1981,  which  is  now impugned  before  us.  In  order  to  appreciate  the  rival contentions, it  will be appropriate to refer to some of the

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clauses of  the agreement  which the respondent entered into with the foreign enterprise.      Foreign enterprise  owned  and  operated  in  Kathmandu (Nepal) a  hotel under  the name  and style of Soaltee and a restaurant at  Tribhuvan Airport,  Kathmandu.  This  foreign enterprise  wanted   to  construct  and  add  to  its  hotel approximately 190  more rooms  and  also  wanted  to  obtain contracts  for   various  airlines   catering  operating  at Tribhuvan Airport.  Respondent  had  a  name  and  worldwide reputation in  the hotel  field and  was experienced and had the   technical    skill   for    providing    professional, architecture, engineering  and decorating  services and  was qualified to  assist in  planning, designing,  constructing, furnishing and  equipping of  hotels and was also engaged in the development,  leasing and  operation of hotels under the name  "Oberoi   Group"  in   the  interest  of  facilitating international travel  and trade.  In view  of the  name  and tradition, experience  and  skill  of  respondent  in  hotel industry for profitable operation of hotels and for bringing the hotel to international standards and for ensuring better operational results  and promotion  of  business  of  Hotel, foreign enterprise desired that its operations be taken over by the respondent with effect from December 1, 1969 on terms and conditions  set out  in the  agreement.  Parties  agreed (formulated form the agreement): (1)  During the  term of  the agreement hotel of the foreign enterprise shall  be  known  and  designated  as  the  Hotel Soaltee Oberoi. (2)  Agreement will  remain in  force for  fifteen years. It could be  extended for a further period of five years at the option of the respondent on the same terms and conditions. (3)  Respondent would  recruit and train the requisite staff of   the hotel  through such  training  programme  including hotel schedule, if any, and other training techniques, as it shall  deem  necessary.  Respondent  shall  select  suitable personnel  for   adequate  and   proper  training  in  hotel management and  operation, always  giving preference however to Napalese nationals. (4)  Respondent would  use its best efforts to advertise and promote the  business of  the  hotel  through  the  existing facilities. Soaltee  Hotel, the  foreign enterprise, subject to later  amortisation and reimbursement as provided in  the agreement shall  pay or reimburse the respondent in full for all costs  and expenses of the said training and for all the costs of  advertising,  promotion,  literature,  travel  and business entertainment including celebrations and ceremonies incurred prior to or concurrently with the beginning of full operation of the hotel by the respondent. (5)  Respondent in consultation with foreign enterprise will make available  for the  hotel, its staff of consultants and specialists who  were qualified  to provide  advice  in  the various departments  and aspects  of hotel  operations.  The services of  the members  of respondent  staff  and  of  any outside consultants  engaged by  respondent on retainer will be rendered  on the  basis of  reimbursement by  the foreign enterprise  through   the  respondent  of  the  salaries  of respondent personnel  during the time they rendered services directly for  hotel Soaltee and reimbursement of the amounts paid to  such consultants  under their  retainer plus  other expenses incurred  by  such  personnel  and  consultants  in performing services for the hotel of the foreign enterprise. (6)  Respondent was  to provide training and instruction for key personnel for the hotel Soaltee in order to prepare them to serve the hotel in the capacities for which they would be trained. Such  key personnel to be trained will be placed in

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existing hotels of the respondent and will be instructed and supervised by  the Management  of such  hotels and  progress reports will  be  made  to  the  Board  on  such  personnel. Travelling and other expenses of the trainees shall be borne by the  foreign enterprise  though the respondent shall make arrangement for  their boarding and lodging at its own costs and also pay suitable pocket allowances to them. (7)  Respondent to  use the  hotel Soaltee  solely  for  the operation of  a first class hotel on international standards and  all   activities  in  connection  therewith  which  are customary or usual for such operation. It is understood that respondent shall  have within the term and provisions of the agreement, absolute discretion in the operation of the hotel but the  same shall  always be  and be deemed to be owned by the foreign enterprise exclusively. (8)  Foreign enterprise and the respondent shall be entitled to 85%  and 15%  respectively of the Gross Operating Profits as defined  under the  terms of the agreement. The agreement prescribed as  to how  payments of  their respective  shares would be met for each financial year. (9)  The respondent  to maintain  full and adequate books of accounts and  other records  reflecting the  results of  the operation of the hotel in accordance with the uniform system of accounts  for hotels  though not  inconsistent  with  the provisions of law applicable in Nepal. (10) Provision to  be made  as to  how the  amount  received during the  operation of the hotel shall be deposited in the bank account  and how  that  account  had  to  be  operated. Respondent was  to submit monthly budget of estimated income and expenditure in detail and the Gross Operating Profits in terms of  the  agreement  to  the  foreign  enterprise.  The agreement contained  details as  to how allocation was to be made for meeting different expenses and for payment of taxes etc. Gross Operating Profits and Gross Operating Losses were defined. Limit  was put  on  expenses  to  be  incurred  for advertisement etc.  which could  not be  more than 3% of the total sales. (11) For  worldwide   promotion  of   the  hotel,   foreign, enterprise desired  that respondent  shall, in any manner it regards fit and proper, make necessary arrangements with any company or  companies, agency or agencies in any one or more countries  for  specialised  hotel  services  and  worldwide reservation facilities. (12) At  the time  of taking over the operation of the Hotel Soaltee, respondent  to purchase  the existing stock of food and beverages  etc. and the foreign enterprise shall be paid the cost  thereof. The  amount paid  by  respondent  to  the foreign enterprise shall be payable to the respondent out of the revenue of the hotel before the expiry of one year. (13)  There   is   provision   for   repairs,   maintenance, alterations, structural repairs and changes in the hotel. (14) Respondent to  deliver to  the foreign enterprise on or prior to  the end  of each month a profit and loss statement showing the  results of  the operation  of the hotel for the preceding calendar  month and  year to-date  and  containing other details. (15) Respondent to  have due  representation in the Board of Directors of  the foreign enterprise and at least one person nominated by  respondent which  always would represent it in all  the   meetings,  deliberations  any  decisions  arrived therein in connection with the hotel business.      These are some of the main terms of the agreement which according to  the appellant  did not satisfy the requirement of Section 80-0 of the Act.      High Court  in the  impugned judgment,  after examining

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the term  of the agreement in detail, observed that it could not be disputed that  the running of a modern hotel required highly specialised  management techniques, i.e., combination of scientific  management and highly specialised inn-keeping and that  the modern  system  of  preparation  of  food  and beverages also  involved considerable  technical  skill  and know-how. High  Court, however,  negatived the  plea of  the respondent that  it was  making  available  to  the  foreign enterprise the information concerning industrial, commercial or scientific  knowledge, experience  or skill as High Court did not find any such provision in the agreement. High Court was, therefore,  of the  opinion  that  the  respondent  was rendering technical  services to  the foreign enterprise and would in any case fall within the purview of Section 80-0 of the Act.      Mr. Shukla,  learned counsel  for CBDT,  contended that since the  High Court did not agree with the respondent that it was  giving any information to a foreign company as there was no  provision in  the agreement,  it was  only the first part of  Section 80-0 which this Court was to examine if the agreement  was   in  consideration   of  technical  services rendered or  agreed to  be rendered  out side  India by  the respondent that  it could  claim  deduction  of  the  Income received in India or abroad in computing the total income of the  respondent   which  is  received  by  way  of  royalty, commission fee  or any  other similar  payment.  We  do  not think, however,  that  we  can  debar  the  respondent  from bringing its  case in  the first  part of Section 80-0 which provides for  similar payment  received by  the assessee  in consideration for  use outside India, information concerning industrial, commercial  and scientific knowledge, experience or skill  made available  or provided  or agreed  to be made available  or  provided  to  a  foreign  enterprise  by  the assessee. Respondent  can certainly support the agreement as falling under  Section 80-0  on any  ground on  which it had approached the  High Court  in its  writ  jurisdiction.  We, therefore, have  to examine  if the  agreement  in  question falls within  the purview  of Section  80-0 on  any  of  the conditions stipulated  therein entitling  the respondent  to claim deduction.  Mr.  Shukla  referred  to  the  guidelines issued by  the CBDT  to examine if the agreement provides of technical services  or managerial  services or  bot. He also referred to  circular No. 187 dated December 23, 1975 of the CBDT. The  circular is  reproduced  in  (1976)  102  ITR  83 (Statutes). The  circular also  sets out  the  form  of  the application for approval of the agreement under Section 80-0 of the  Act. We  may reproduce relevant part of the circular as under:      "Circular No.  187, dated  December      23, 1975.      Subject :  Section  80-  0  of  the                Income-tax  Act,  1961  -                Guidelines  for  approval                of agreements.           With the  twin  objectives  of      encouraging the  export  of  Indian      technical know-how and augmentation      of the  foreign exchange  resources      of the Country, Section 80-0 of the      Income-tax Act,  1961, provides for      concessional   tax   treatment   in      respect  of   income  by   way   of      royalty,  commission  fees  or  any      similar  payment  received  from  a      foreign  Government  or  a  foreign

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    enterprise,    subject    to    the      satisfaction of  certain conditions      laid down in the said section.      2.  One   of  the   conditions  for      availability of  the tax concession      under Section  80- 0  is  that  the      agreement should be approved by the      Central Board  of Direct  taxes  in      this behalf.  The  application  for      the approval  of the  agreement  is      required to  be made to the Central      Board of  Direct Taxes  before  the      1st   day   of   October   of   the      assessment  year   in  relation  to      which the approval is first sought.      The form  of application  for  this      purpose has been standardised and a      specimen is given in the Appendix.      3. The object of the provision when      it was  first introduced as Section      85C in  the Income-tax  Act,  1961,      was stated  in Board’s Circular No.      4P (LXXVI-  61) of  1966, to  be to      encourage   Indian   companies   to      export their technical know-how and      skill  abroad   and   augment   the      foreign exchange  resources of  the      country.  This  was  reiterated  in      Board’s Circular  No. 72 explaining      the  changes   introduced  by   the      Finance (No.2)  Act, 1971.  Keeping      in view the purpose behind this tax      incentive and  the requirements  of      the statutory provisions, the Board      have    evolved    the    following      guidelines for  the grant  of  such      approval:-      (i) ....      (ii) An  agreement which is in very           general or  broad terms  or is           either vague  or does not give           sufficient details  may not be           approved.      (iii) .....      (iv)     Information     concerning           industrial,   commercial    or           scientific          knowledge,           experience   or   skill   made           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 Indian  party           and which is made available or           provided to  the foreign party           under      the      agreement.

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         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 or           electricity or  any other form           of     power,      or      (c)           constructional, industrial  or           manufacturing  operations,  or           (d)   engineering    services.           Services   such    as    those           relating    to    managements,           organisation,  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.      (viii) .....      (ix) ......      (x) ............      (xi) ................           It may  be  pointed  out  that      these   guidelines    are    merely      illustrative  and   should  not  be      taken as  exhaustive. these  may be      modified  or  supplemented  in  due      course  in   the   light   of   the      different types of cases which come      up for  approval.  Even  where  the      agreement is bona fide and genuine,      the Board  may refuse  approval  in      appropriate  cases   where  in  the      opinion  of  the  Board,  grant  of      approval would not be in the larger      public interest  or where  it would      not    further    the    objectives      underlying the tax concession.      (4) ............      (5) ............      (6) ............      (7) ...............      It  was   submitted  that   taking  into   account  the provisions  of  Section  80-0  and  the  guidelines  on  the subject, CBDT  rightly  came  to  the  conclusion  that  the agreement did  not justify itself for approval. There was no

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arbitrariness  or  discrimination  in  the  guidelines.  Mr. Shukla  said  that  the  agreement  was  basically  for  the respondent to manage and run the entire hotel of the foreign enterprise. He  stressed on  the recital  in  the  agreement which said  that the agreement was to be run and operate the hotel by  the respondent  for a  period of  15 years with an option to  extend the  agreement for  a further  period of 5 years. Mr. Shukla referred to other clauses of the agreement relating  to   operation,  the   amount  payable,  accounts, capital, representation in the Board of Directors, filing of suits and  to defend  the same  as  agents  of  the  foreign enterprise and  also the  clauses relating  to  training  of hotel personnel  and providing  consulting services  and the like clauses.  he said  that other  clauses of the agreement merely provided  as to  how the agreement was to operate and what  were   the  rights,  duties  and  obligations  of  the respondent  while   operating  the   hotel  of  the  foreign enterprise. It  was only  the expertise of the respondent in the area   of  running hotel  which it was going to provide. Mr. Shukla,  said that  it was, in fact, only the managerial services that  were to  be provided  under the agreement and that management  of hotel  of foreign  enterprise would  not fall within  the provision of Section 80-0. It was submitted that it  could not  be said  that CBDT  did not consider the terms of  the agreement  with reference  to Section 80-0 and the guidelines issued by it and arrived a decision which was unreasonable  under   the  circumstances.   He   said   that considering the  scope of  judicial review of administrative decisions which  might even  be quasi  judicial, this  Court should set  aside the impugned judgment of the High Court as that court  wrongly interfered  in exercise  of its power of judicial review  of the  decision  taken  by  the  CBDT  not granting approval  to the  agreement. After  all, it was the CBDT which  was the  best judge  to  see  if  the  agreement fulfilled the  requirements of  law as it was the CBDT which was concerned  authority to  grant or  not to grant approval and had  the advantage  of various agreements which came for its approval  by other  assesses. Mr.  Shukla said  that two earlier judgments  of the  Delhi High Court in J.K. (Bombay) Ltd. vs. Central Board of Direct Taxes & Anr. (1979) 118 ITR 312 (Del)  ] and Ghai Lamba Catering Consultants P. Ltd. vs. Central Board  of Direct  Taxes &  Anr. [(1980)  124 ITR 301 (Del) were not correctly distinguished by the High Court. In the present  case, he said that if t he principles laid down in those two judgments were applied, the agreement certainly would not  come within  the scope  of grant of approval. Mr. Shukla said  that the  respondent took  complete  charge  of running the  hotel of  the foreign  enterprise as  terms  of agreement showed  and as  a matter fact respondent took over the hotel  of the foreign enterprise itself for 20 years. He referred to  the decision of the Karnataka High Court in HMT Ltd. vs.  Central Board  of Direct  Taxes & Anr. [(1991) 188 ITR 457  (Kar)]. Finally,  Mr. Shukla  said that one did not have to  render services  by becoming  master. He  said that respondent might  be good  in hotel  management and it might earn profit  and bring  the money to the country but then it had to  pay taxes as per the law of this country and that it was not   that all agreements entered by any assessee with a foreign enterprise  must  fall  under  Section  80-0  merely because the agreements would bring precious foreign exchange to the country.      Mr. Dave, learned counsel for the respondent, submitted that there  was no  contradiction in  the principles laid by the Delhi High Court in its earlier two decisions and in the present impugned  judgment. He  referred to  the decision of

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this Court in Continental Construction Ltd. vs. Commissioner of Income- tax [(1992) 195 ITR 81 (SC) ]. Mr. Dave submitted that perception of management had undergone a big change. He said the  distinction drawn  by the CBDT was superficial and the agreement  squarely satisfied the ingredients of Section 80-0.  What   Section  80-0  provided  was  allowance  of  a deduction of  an amount  equivalent to  50% of  t he  income received by  way of  royalty etc.  in consideration  of  use outside India  information concerning industrial, commercial for   scientific   knowledge,   experience   or   skill   or alternatively payment received in consideration or technical services made  available outside  India. Mr. Dave dwelled at length as  to what  would be technical services. He referred to  the   dictionary  meaning   of  the   terms   ’technical assistance’ and  ’technology’. But  then one has to refer to dictionary definition  if there is a dispute if the services rendered are of technical nature or not.      Mr. Dave  referred to us the judgment of the Delhi High Court in J.K. (Bombay)’s case and Ghai Lamba’s case and said that these  judgments considered  a very;  narrow concept of "technical services"  or the  "managerial services". He said there was  a qualitative  difference in  the  agreements  in those two  cases and  the subject matter of the agreement in the present  case. The  statement in  J.  K.  Bombay’s  case [(1979) 118   ITR  312) that  the management as a process is practised  throughout   in  every   organisation  from   top management  through   middle   management   to   operational management and, on the other hand, technical services occupy a  much   narrow  field  than  the  field  occupied  by  the management  was   explained  in   the  case  of  Continental Construction Company’s case by the Supreme Court Judgment of this  Court   in  Continental  Construction  Company’s  case widened the scope of term used in Section 80-0.      Mr. Dave  referred to the "New Encyclopedia Britannica" where the  term "technical assistance" had been consider. It states that technical assistance may involve sending experts into the  field to teach skills and to help solve problem in their  areas   of  specialization,   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 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. it is submitted that the term "technical"  should  receive  broad  interpretation  to include   professional    services   as   well.   The   term "professional" was  added in  Section 80-0  w.e.f. April  1, 1992 by  amending the  section. This  court  in  continental Construction Company’s case had stated that the insertion of the term  "professional"  in  Section  80-0  was  merely  of clarificatory  nature   and  "technical   services"   always included in  it "professional  services". Reference was then made to  CBDT circular  No. 72  dated January  6, 1972 which dealt with  the scope and effect of amendment of Section 80- 0 which  was substituted  in place of earlier one by finance (No.2) Act,  1971 w.e.f.  April 1,  1972. According  to this circular, the  objective of  this provision  is to encourage Indian companies  to develop  technical know-how and made it available to  foreign companies so as to augment our foreign exchange earnings  and establish  a  reputation  for  Indian technical know-how  in foreign countries and further in this concessions which  were earlier  available to companies only are now  available in all cases where the technical know-how

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or technical  services are  provided to a foreign Government or a  foreign enterprise, regardless of whether t he foreign enterprise is  a corporate  body or  not. Referring  to  the later circular  No. 187 dated December 23, 1975 of the CBDT, Mr. Dave said that the case of the respondents squarely fell within clause  (iv) and  he said  that Clause (v) might even require reconsideration  by the CBDT in view of the judgment of this Court in Continental Construction Company’s case. He also referred  to clause  (vii) of  circular No. 187. It was also the  submission of  Mr. Dave  that  construction  which benefited the  assessee should  be adopted and that circular should receive  liberal interpretation  keeping in  view the object of  introduction of  Section 80-0  in the statute. In this context,  he referred  to  certain  decisions  of  this Court.  In   CIT,  Bombay   vs.  M/s.   Gwalior  Rayon  Silk Manufacturing Co. Ltd. (1992) 3 SCC 326 this Court said that the words  in the  taxing statute  should be  given  liberal interpretation. Nothing  is to  be read in, nothing is to be implied; one  can only  look fairly at the language used and nothing more and nothing less. It went on to add that it was settled law  that the  expressions used  in a taxing statute would ordinarily be under stood in the sense in which it was harmonious with  the object of the statute to effectuate the legislative animation.      In Hotel Balaji and others vs. State of A.P. and others (1993) Supp (4) SCC 536 this Court observed as under:      "Though the  Central Sales  Tax  is      levied   and   collected   by   the      Government of India, Article 269 of      the   Constitution   provides   for      making over  the tax  collected  to      the  States   in  accordance   with      certain   principles.   Where,   of      course, the  sale is an export sale      within the  meaning of Section 5(1)      of  the   Central  Sales   Tax  Act      (export sales)  the State  may  not      get any revenue but larger national      interest is  served thereby.  It is      for these  reasons that  tax on the      purchase of  raw material is waived      in  these   two  situations.  Thus,      there   is   a   very   sound   and      consistent policy,  underlying  the      provision".      In Commissioner of Income Tax, Amritsar vs. Straw Board manufacturing Co.  Ltd. 1989  Supp (2)  SCC 523 the assessee had claimed  concessional rates  of income  tax, development rebate at  higher rate  and deduction  under Section 80-E of the Income  Tax Act, 1961 on the ground that the manufacture of straw  board was a priority industry. The question before this Court  was whether  straw board  could be  said to fall within the  expression "paper  and pulp"  mentioned  in  the Schedule. The  Income-tax Authority  held that  the assessee could  not   be  described  as  priority  industry  and  the manufacture of  straw board  was not  covered by  the  words "paper and pulp " This Court said:      "We have no doubt in our minds that      it does.  The expression  has  been      used   comprehensively.    It    is      necessary to  remember that  when a      provision is made in the context of      a law  providing  for  concessional      rates of  tax for  the  purpose  of      encouraging an  industrial activity

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    a liberal  construction  should  be      put  upon   the  language   of  the      statute. From  the material  before      us,   which   we   have   carefully      considered,  that   is   the   only      reasonable conclusion to be reached      in these cases."      In Central  Board of Direct Taxes and others vs. Aditya vs. Birla 1988 (Supp) SCC 120 this Court was considering the scope of  the term "remuneration" as appeared in Section 80- RRA of  the Act. Under this Section assessee was entitled to certain relief in respect of remuneration received by him in foreign currency  from any employer for any service rendered by him outside India if he is a technician and the terms and conditions of his service outside India are approved in this behalf  by   the  Central   Government  or   the  prescribed authority. Various  terms  like  foreign  currency,  foreign employer,  technician   are  defined  in  the  section.  The question involved  in  the  appeal  before  this  Court  was whether any  remuneration was  received by the respondent in foreign currency from his employer, being a foreign employer for service  rendered by  him  outside  India.  It  was  the contention of  the revenue  that construction  of  the  term "remuneration" should  be confined  to deduction to be given only in  the case  of remuneration  given to an employee and not the  fees paid  to a  consultant or  a technician.  This court did not accept this contention and said that there was nothing to  warrant a  restricted construction was canvassed by the  revenue. The Court said that it was significant that Section 80-RRA of the Act used the expression "remuneration" and not  salary to  be entitled  to deduction and that there was no  warrant to  restrict the  meaning of  the expression "remuneration" to a salary revived by an employee abroad.      In Commissioner  of Income-tax,  Madras vs. South Arcot District Co-operative Marketing Society Ltd. [(1989) 176 ITR 117] this  Court was considering if certain amount described as a  commission received  by the  assessee from  the madras Government under  an agreement for stock and distribution of ammonium sulphate  was exempted  under Section  14(3)(iv) of the Income Tax Act, 1992. This Court observed as under:      "We  have   considered  the  matter      carefully and to our mind, it seems      clear that  the Appellate  Tribunal      and High Court are the right in the      view  adopted   by  them.   As  was      observed by  the Gujarat High Court      in CIT  vs. Ahmedabad Maskati Cloth      Dealers   Co-operative   Warehouses      Society Ltd.  (1986) 162  ITR  142,      While  considering   the  analogous      provision of  Section BOP(2) (e) of      the  Income-tax   Act,   1961   the      provision   for    exemption    was      intended to  encourage  cooperative      societies to  construct  warehouses      which were  likely to  be useful in      the development  of  rural  economy      and  exemption   was  granted  from      income-tax  in  respect  of  income      derived from  the letting  of  such      warehouses  for   the  storage   of      fertilisers   and   other   related      commodities     concerned      with      cooperative    marketing.    Having      regard to the object with which the

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    provision has  been enacted,  it is      apparent     that     a     liberal      construction should be given to the      language of the provision and that,      therefore, in  the circumstances of      the  present   case,  it   must  be      regarded that what the assessee did      was to  let out its godowns for the      purpose  of  storing  the  ammonium      sulphate handed  over to  it by the      State Government."      As to  what is  the scope  of a  circular issued by the CBDT, reference  was made  to a  decision of  this Court  in Keshavji Ravji  and Co. and Anr. vs. Commissioner of Income- tax [(1990)  2 SCC  231] wherein  this Court was considering the contention that circular of 1965 of the Central Board of Direct Taxes  was binding  on the  authorities under the Act and should  have been  relied upon  by  the  High  Court  in support of  the court’s  construction of  Section  40(b)  to accord with the understanding of the provision made manifest in the circular. This Court held as under:      "This    contention     and     the      proposition  on   which  it  rests,      namely, that  all circulars  issued      by the  Board have  a binding legal      quality, incurs,  quite  obviously,      the criticism  of being too broadly      stated. The  Board cannot pre-scope      and ambit  of a  provision  of  the      ’Act’ by  issuing circulars  on the      subject.  This  is  too  obvious  a      proposition to require any argument      for  it.  A  circular  cannot  even      impose on  the tax  payer a  burden      higher than  what the Act itself on      a true  interpretation of  the laws      is  the  exclusive  domain  of  the      courts. However, - this is what Sri      Ramachandran really  has in  mind -      circulars   beneficial    to    the      assessee and  which tone  down  the      rigour  of   the  law   issued   in      exercise  of  the  statutory  power      under Section  119 of  the  Act  or      under corresponding  provisions  of      the predecessor  Act are binding on      the     authorities      in     the      administration  of   the  Act.  The      Tribunal, much less the High Court,      is an  authority under the Act. The      circulars do not bind them. But the      benefits of  such circulars  to the      assessees  have  been  held  to  be      permissible   even    though    the      circulars might  have departed from      the strict  tenor of  the statutory      provision and  mitigated the rigour      of the  law. But  that is  not  the      same  thin   as  saying  that  such      circulars  would   either  have   a      binding     effect      in      the      interpretation  of   the  provision      itself or that the tribunal and the      High   court    are   supposed   to      interpret the  law in  the light of

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    the circular.  There  is,  however,      support   of    certain    judicial      observations for the view that such      circulars constitute  external aids      to construction.           In State  Bank  of  Travancore      vs.  CIT,   however,   this   Court      referring to  certain circulars  of      the Board  Said: (SCC p.51 para 43:      ITR p. 139)                "   ...    The    earlier           circulars being  executive  in           character  cannot   alter  the           provisions of  the Act.  These           were   in   the   nature   off           concessions and  could  always           be  prospectively   withdrawn.           However,  on  what  lines  the           rights of  the parties  should           be adjusted in consonance with           justice  in   view  of   these           circulars  is  not  a  subject           matter to be adjudicated by us           and as  rightly  contended  by           counsel for  the revenue,  the           circulars cannot  detract from           the Act."           The expression  ’executive  in      character’ is,  presumably, used to      distinguish  them   from   judicial      pronouncements.    The    circulars      referred to  in that case were also      of  the  Central  Board  of  Direct      Taxes and  were,  presumably  also,      statutory in character.           However, this  contention need      not detain us, as it is unnecessary      to  examine  whether  or  not  such      circulars      are      recognised,      legitimate   aids    to   statutory      construction. In  the present case,      the  circular   of   1965   broadly      accords with  the view  taken by us      on    the     true    scope     and      interpretation  of   Section  40(b)      insofar as  the  quantification  of      the  interest   for   purposes   of      Section 40(b)."      On Board  Circular Collector  of Central  Excise, Patna vs. Usha  Martin Industries  (1997) 7 SCC 47, this Court was considering the  binding effect  of a circular issued by the central Board  of Excise  and Customs  under Section 37-B of the Central  Excise Act  1944. The Court observed that there were catena  of decisions  of this  Court holding  that  the revenue could  not be  permitted to take a stand contrary to the instructions  issued by  the Board  and that  it  was  a different matter that an assessee could contest the validity or legality  of a  departmental instruction.  But that right could not be conceded to the Department, more so when others had acted  according to  those instructions. It was observed that of course the appellate authority was also not bound by the interpretation  given by  the Board  but  the  assessing authority could  not take  a view  contrary to  the  Board’s interpretation. This  Court referred to its earlier decision in Poulose and Mathen vs. Collector of Central Excise & Anr.

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[(1997) 3 SCC 50= (1997) 90 ELT 264] to paragraph 15 therein which is as under:      " 15.  One aspect  deserves  to  be      noticed  in   this   context.   The      earlier Tariff  Advice  No.  83  of      1981 on  the basis  of which  Trade      Notice No.  220 of  1981 was issued      by the  Collector of Central Excise      and  Customs   is  binding  on  the      department.  It   should  be  given      effect to.  There is no material on      record to  show that  this has been      rescinded  or  departed  from,  and      even  so,   to  what  extent.  Even      assuming that  the later  different      view -  about  which  there  is  no      positive material - the facts point      out that  the department  concerned      itself  was   having   considerable      doubts  about   the   matter.   The      position was  not free  from doubt.      It was  far from  clear. In  such a      case,  where   tow   opinions   are      possible, the  assessee  should  be      given the benefit of doubt and that      opinion  which  is  in  its  favour      should be  given effect  to. In the      light   of   the   above,   it   is      unnecessary to adjudicate the other      points involved  in the  appeal  on      the merits."      Mr. Dave then referred to a treatise on the business of hotels by  S. Medlik  to contend  that to run a hotel skills and  techniques   are   required   like   hotel   reception, housekeeping, food  and drink  service and  especially  food preparation  and   accounting   and   marketing,   personnel management, maintenance  and other specialist functions of a hotel. He  also dwelved on the importance of hotel in modern day life and the role which hotels play in many countries in providing facilities  for the  transaction of  business, for meetings and  conferences, for  recreation and entertainment and as  attraction for  visitors, foreign  currency earners, employers of  labours, outlets  for the  products  of  other industries and as an important source of amenities for local residents. We do not think it is necessary for us to go into all these  aspects of  hotel management  as we are concerned with the  origin of  the  law  in  its  application  to  the agreement in question.      Lastly,  Mr.   Dave  said  that  use  of  the  name  of respondent was  not ordinary matter and it could not be said as held  by the appellant in its impugned order that the fee received for  the use of the trade name of respondent though covered by  the provisions  of Section  80-0 yet  the amount relatable to  this aspect  of the  total  services  rendered would be  so small that it was not easy to quantify the same for the purpose of Section 80-0.      We may  now consider  the judgments  referred to during the course of arguments in somewhat greater detail.      In J.K. (Bombay) Ltd. vs. Central Board of Direct Taxes and another (1979) 118 ITR 312 (Del) a Division Bench of the Delhi  High  Court  was  considering  the  question  whether services of managing agents rendered by an Indian company to a foreign  company were  not "technical services" within the meaning of  Section 80-0  of the  Act. The  Court said  that managerial service may be professional service like legal or

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medical service,  but that  would not  be technical  service like engineering  service. After examining the provisions of Section 80-0  and the  relevant Board Circular No. 187 dated 23rd December, 1975, the High Court held as under:      "To sum up, the main reason why the      word ’technical’  in s.80-0  cannot      be given a wider meaning to include      ’managerial’  or   ’Commercial’  is      that the  performance of managerial      or commercial services by an Indian      company for  a  foreign  enterprise      would amount  to virtually managing      or running  the foreign company and      remuneration obtained by running or      managing a foreign company would be      in the  nature  of  profits,  while      s.80-0    deliberately    restricts      itself to income by way of royalty,      commission  or  fees  and  excludes      other types of remunerations." The Court,  therefore, held  that  the  petitioner  was  not entitled to allowance under Section 80-0 or any payment from the foreign  company received by it towards such services as managing agents.      In Ghai  Lamba Catering  Consultant P. Ltd. vs. Central Board of  Direct Taxes  and another (1980) 124 ITR 301 (Del) Delhi High  Court was again considering the scope and intent of Section  80-0. On  the facts  of the  case the High Court held that  the agreement  which the  petitioner had  entered with a  foreign enterprise  was nothing but a joint venture. It noted  that under  the agreement the main function of the petitioner was to manage and run the restaurant of M/s. G.L. Restaurant Ltd., an English company, in return for a certain percentage of the profits. The Court held that the agreement did not in terms state as to what type of technical services were to  be  rendered  by  the  petitioner  to  the  foreign company. The  Court referred to its earlier decision in J.K. (Bombay) Ltd.  vs. CBDT (118 ITR 312) where it had said that if the  Indian Company  was  in  fact  running  the  foreign company it was difficult to separate the management function exercised by  the Indian company from the day to day working of the foreign company and that Section 80-0 postulated that the Indian  company did  not become  a part  of the  foreign enterprise. Applying  those  tests,  the  Court  upheld  the refusal to grant approval to the agreement by the respondent under Section 80-0 of the Act.      In Godrej  and Boyce  Mfg. Co.  Ltd. vs.  S.P.  Potnis, Chief Commissioner  of Income-tax  and others (1993) 203 ITR 947 (Bombay),  a Division  Bench of  the Bombay  High  Court (where one  of us  was a member) held that the order denying approval under  Section 80-0 was not justified. In that case the petitioner  entered into two agreements with the foreign company for  establishing  a  plant  in  Indonesia  for  the manufactured by  it. One  agreement  was  titled  "technical assistance  agreement"   .  The   second  agreement   titled "management service  agreement" provided  for the petitioner to  take   over  the  responsibility  for  the  working  and management of  the foreign  company for  a period of twenty- five years.  For this purpose the petitioner was required to loan to  the foreign  company  the  services  of  it  "fully qualified and  experienced managers, engineers, technicians, production specialists  and such  other personnel  as may be necessary not  only for the setting up of the Company’s said plant but also for the overall working and management of the company".  The   agreement   also   contained   wide-ranging

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provisions for  the giving  of  all  marketing,  industrial, manufacturing,  commercial     and   scientific   knowledge, experience  and   skill  for   the  efficient   working  and management of  the  foreign  company.  Petitioner  was  also required to  have control  over "general  management" of the foreign  company’s  business  transactions  and  charge  and custody of  all the  property,  books  of  account,  papers, documents and  effects belonging  to  the  foreign  company. While the respondent granted approval to the first agreement it denied  its approval  to the second agreement. Respondent was of  the view  that the  second agreement did not qualify for approval  under Section  80-0 of the Act, since the crux of the management service agreement was that the petitioners would  take   over  responsibility   for  the   working  and management of  the foreign  company for  a stipulated period and that  managerial services  did not  amount to "technical services" within  the meaning  of Section  80-0. On this the respondent had  relied on  the decision  of the  Delhi  High Court in  J.K. (Bombay)  Ltd.’s case. Bombay High Court took notice of  the  later  decision  of  the  Supreme  Court  in Continental construction  Ltd. vs.  CIT (1992)  195  ITR  81 where this  court  took  the  view  that  even  professional service, perhaps,  amounted to  technical service within the meaning of Section 80-0 of the Act. Notice was also taken of the impugned  decision of  the Delhi  High Court  in  Oberoi Hotels (India)  Pvt. Ltd.  vs. CBDT (1982) 135 ITR 257 where Delhi High  Court struck  somewhat a  different note  to its earlier decision  in J.K.  (Bombay)’s case.  The court  also noted another  decision of  this Court  in Bajaj Tempo. Ltd. vs. CIT (1992) 196 ITR 188 where this Court highlighted that a provision  in a  taxing statute  granting  incentives  for promotion of  growth and  development  should  be  construed liberally and  hat since  a provision for promoting economic growth has  to be  interpreted liberally, the restriction on it too  has to  be construed  strictly so  as to advance the objectives of the provision and not to frustrate it. Keeping in view this principle and on the terms of the agreement the High Court  was of the view that when the respondent did not grant approval it was not having the benefit of the decision of the  Supreme Court  in Continental’s case. The Court said that  it  was  not  possible  to  postulate,  as  a  general proposition  of   law,  that  all  managerial  service  must necessarily be nontechnical services and that it depended on the nature  of the  expertise  required  for  rendering  the managerial services.   The  Court, therefore,  held that the respondent  took  somewhat  rigid  view  of  the  matter  in refusing to  grant approval  to the  second  agreement.  It, therefore, quashed  the order  of the respondent refusing to grant approval  to the  second agreement. The application of the petitioner  for grant  of approval  was sent back to the respondent for reconsideration in accordance with the law.      In HMT  Ltd. vs.  Central Board  of  Direct  Taxes  and another (1991)  188 ITR  457 (Karnataka)  the petitioner had entered into  an  agreement  with  Nigerian  Government  and sought approval  of the  agreement under Section 80-0 of the Act. The  agreement consisted of various types of passing of technical information,  know-how, designs,  trade mark, logo and also training of Nigerian personnel in India among other matters. On  the questions of training of Nigerian personnel in India  and technical  fee paid  thereof,  the  respondent stated that  the training  of Nigerian  personnel  in  India would mean  a service  rendered in  India and therefore, the fee receivable  in that respect would not be entitled to the benefit of  Section 80-0  of the  Act. The High Court upheld the view  of the  respondent and this is how the Court dealt

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with the matter:      "I will  proceed on  the basis that      the   service   rendered   by   the      petitioner in imparting training to      the Nigerian  personnel in India is      not a  technical  service  for  the      purpose of  this case.  It  is  not      necessary to  decide  whether  such      imparting of  knowledge also  falls      within the expression of "rendering      of    technical    service".    The      petitioner gives  training  to  the      personnel    of     the    Nigerian      Government in  India. Section  80-0      of the Act provides that, where any      considered     consideration     is      received in  respect of any patent,      invention,  model,  design,  secret      formula   or    processor   similar      property  right,   or   information      concerning  industry,  commerce  or      scientific knowledge, experience or      skill made available or provided or      agreed  to  be  made  available  or      provided to such enterprises by the      assessee for use outside India, the      deduction would be attracted. It is      clear from a reading of this clause      that   imparting    of   scientific      knowledge, experience or skill made      available shall  be of the assessee      as  the  latter  clause  "  by  the      assessee"  Clearly   controls   the      earlier expressions  used  in  this      connection. Here,  in  the  present      case, the  Nigerian  personnel  are      trained in  India and, once they go      out of  the  country, it is not the      skill of  the assessee that it used      outside. Therefore,  even  assuming      for a  moment that  the argument of      learned counsel  for the petitioner      is right, that does not come within      the expression "technical service",      and as such service is not rendered      by the  assessee outside  India, by      imparting training to the personnel      of  the   Nigerian  Government,  it      cannot be  said that the same would      fall within  the deduction  granted      under  Section  80-0  of  the  Act.      Therefore, the view of the Board on      this aspect  of the  matter appears      to be correct."      In Continental  Construction Ltd  vs.  commissioner  of Income-tax (1992)  195 ITR  81 (S.C.)  one of  the questions before this court was if the Appellate Tribunal was right in holding   that the income arising from the activities of the petitioner in pursuance to seven agreements for construction of various  project with  foreign Government/enterprise were governed by  the provisions of Section 80HHB and not Section 80-0 of  the Act.  Petitioner had  claimed  deduction  under Section 80-0  which provides  for a  deduction, in computing the total  income, in respect of royalties etc. from certain foreign enterprises.  The Court  noted that  this topic  was

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originally dealt  with in  Section 85-C  . Section  80-0 was substituted in  its place with effect from April 1, 1968 and that the section had since undergone amendments from time to time. It is not necessary for us to analyse this judgment in any detail  and as  here we  are not concerned only with the interpretation of  Section 80-0. What judgment lays down for our purposes is: (1)  The  job   of  the   assessee  involved   survey,  soil investigation, design, detailed drawings and construction of all civil works and pipelines (other than trunk pipe lines). Even  these   activities  involve  technical  knowledge  and expertise.  It   cannot,  therefore,  be  doubted  that  the assessee under the contract, had to make use, outside India, of its  industrial,  commercial  and  scientific  knowledge, experience and skill. (1-A) There  is equally  no doubt  that,  in  executing  the contract, the  assessee has rendered technical services. Any engineering contract involves technical services; more so, a contract of the nature and magnitude involved in the present case. (2)   Where  a person employs an architect or an engineer to construct a house or some other complicate type of structure such as a theater, scientific laboratory or the like for him it will  not be  incorrect to  say  that  the  engineer,  in putting up  the structure,  rendering him technical services even though  the actual  construction and  even  the  design thereof may  be done by the staff and labour employed by the engineer or  architect. Where a person consults a lawyer and seeks opinion from him on some issued the advice provided by the lawyer would be a piece of technical service provided by him even  though he  may have  got the  opinion drafted by a junior of  his  or  procured  from  another  expert  in  the particular branch of the law. (3)  No doubt that "professional services" have been brought within the  scope of  Section 80-0  only by and amendment by the Finance  (No.2) Act, 1991 and that too, with effect from April 1,  1992, which  is proposing to substitute the worked "technical or  professional services"  in place  of the word "technical services" now used in the Section. It seems to us that this  amendment may only of a clarificatory nature. the expression   "technical   services"   has   a   very   broad connotation. (4)  Firstly whatever  may be  the position  regarding other "professional services",  there can hardly be any doubt that service  involving  specialised  knowledge,  experience  and skill  in   the  field   of  constructional  operations  are "technical services".  would be  "technical services" or not has no  impact on  the point  we are  trying to  make, viz., that, in  order to  say that  a  person  is  rendering  such services to  another, it  is not necessary that the services should be  rendered by the former personally and not through the medium of others. (5)  It is  a well-settled principle that excitability of an item to tax or tax deduction can hardly be made to depend on the label  given to  it by  the parties.  As assesses cannot claim deduction  under Section  80-0 in  respect of  certain receipts merely  on the  basis that  they are  described  as royalty, fee  or commission  in  the  contract  between  the parties. By the some taking, the absence of a specific label cannot be destructive of the right of an assessee to claim a deduction, if,  in fact,  the consideration for the receipts can be  attributed to  the sources indicated in the section. contracts of  the type envisaged by Section 80-0 are usually very complex  ones and  cover a multitude of obligations and responsibilities. It  is not  always possible  or worthwhile

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for the  parties to  dissect the consideration and apportion it to  the various  ingredients or elements comprised in the contract.      There is  no gainsaying  that running  a well  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  for 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  (203 ITR 947 ) 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.  (188 ITR  457) 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 by 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

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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  of  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.      Accordingly, the  appeal is  dismissed and the judgment of the Delhi High Court is affirmed.