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Judgment
Y. VENKA TA CHALAM, J.:
Invoking Art. 226 of the Constitution of India, the petitioner herein has filed the present writ petition seeking for a writ of certiorarilied mandamus
to call for the records of the 2nd respondent in F. No. 473/248/88-FTD dt. 3rd Jan., 1989 and to quash the same and also to direct the 2nd
respondent to grant approval of the agreement dt. llth June, 1985 entered into with Mls Techno Link Ltd., Martins Chambers, Channel Islands by
the petitioner under s. 80-0 of the IT Act and consequential relief by the 2nd and 3rd respondents.
In support of their writ petition, the petitioner company has filed an affidavit wherein they have narrated all the facts and circumstances that
forced them to file the present writ petition and prayed that the writ petition may be ordered as prayed for. Though no counter-affidavit has been
filed on behalf of the respondents, they placed their arguments before this Court.
Heard the arguments advanced by the learned counsel appearing for the respective parties. I have perused the contents of the affidavit together
with the relevant material documents available on record in the form of typed set of papers. 1 have also taken into consideration the various points
raised by the learned counsel appearing for the parties, during the course of their argument.
In such circumstances, the only point that arises for consideration in this writ petition is, as to whether there are any valid reasons to allow this
writ petition or not.
In this case, it is not in dispute that the petitioner herein entered into an agreement with Mls Techno Link Ltd., Martins Chambers, Channel
Island for supply of technical know-how in the field 6f reconditioning/reclaiming automobile components. His case is that s. 80-0 of the IT Act
provides for a deduction of an amount equal to 50 per cent of the income received or brought into India by the petitioner in computing the total
income received by way of royalty, commission etc., from the Government of foreign State or a foreign enterprise. According to the petitioner
herein, the abovesaid agreement dt. 11th June, 1985 provides for payment of US S 20,000 in four half-yearly instalments by Mls Techno Link
Ltd., to the petitioner. For the asst. yrs. 198687 and 1987-88 the petitioner received a sum of Rs. 1,22,750 and Rs. 1,41,470.90 respectively
from Mls Techno Link Ltd., for the consultancy service rendered outside India. It is admitted that in order to avail the above said 50 per cent
deduction, the application for the approval of the agreement has to be made to the 2nd respondent Board before the Ist day of October of the
assessment year in relation to which the approval is first sought. That being so, it is the case of the petitioner herein that though the application for
approval was signed by the managing director on 17th July, 1987 and despatched on 21st July, 1987, it was received by the 2nd respondent only
on 29th Dec., 1987. The petitioner also states that he filed returns of income with the 3rd respondent herein claiming deductions under s. 80-0 of
the Act. The grievance of the petitioner herein is that the 3rd respondent by order dt. 31st May, 1988 refused to grant relief under s. 80-0 on the
ground that the 2nd respondent had not approved the agreement. In the meanwhile the 2nd respondent by communication dt. 15th March, 1988,
has stated that the applications dt. 17th July, 1987 were out of time for the asst. yrs. 1986-87 and 1987-88 and that the application could be
considered only for the asst. yr. 1988-89. Apart from that, the petitioner was also asked to furnish certain particulars. Thereafter, on 9th April,
1988, the petitioner sent a detailed reply praying for condonation of the delay and furnished the particulars asked for. The 2nd respondent by
another communication dt. 15th April, 1988 asked the petitioner to lead documentary evidence that the application was sent on 21st July, 1987.
The petitioner on 25th April, 1988 sent a reply stating that their auditors sent the application on 21st July, 1987 that the receipt and postal
acknowledgement
were misplaced by them and the evidence for receipt of application by the auditors on 17th July, 1987 was enclosed. However, by communication
dt. 10th May, 1988, the 2nd respondent has stated that the agreement for the asst. yr. 1988-89 was approved and for the asst. yr. 1986-87 and
1987-88 was out of time. Thereafter, on 3rd June, 1988 and 3rd Nov., 1988 the petitioner again sent detailed representations to the 2nd
respondent to condone the delay in filing the application. However, on 3rd Jan., 1989 the 2nd respondent rejected the application on the ground
that the Board has no power to condone the delay. Aggrieved by the said order, the present writ petition has been filed.
The petitioner herein challenges the impugned order on the ground that it is contrary to law, arbitrary, unreasonable and not proper exercise of
powers vested in it for the reason that the 2nd respondent has enough power to condone the delay, under s. 119 of the Act. It is significant to note
that the Board is an IT authority within the meaning of s. 119(2)(b) and in order to avoid genuine hardship the Board can admit an application for
deduction, under the Act. Therefore, the petitioner submits that even in its representation it has made it clear about its genuine hardship which was
not disputed and under the Act, the Board is given all powers. Therefore, it is the categoric contention of the petitioner herein that it is not legally
correct to say that the 2nd respondent has no power to condone the delay. Inter alia, it is contended by the petitioner herein that having called for
explanation for the delay in furnishing the application in the communication dt. 15th March, 1988, it is not open to the 2nd respondent now, to
reject the application on the ground that it has no power to condone the delay. It is also the contention of the petitioner herein that the 2nd
respondent issued the notice dt. 15th March, 1988 by virtue of the powers given to it under s. 119 and it is estopped from going back from it. It is
also the case of the petitioner that it had valid reasons for the delay in filing the application and the applications were made well before the
assessment were completed by the 3rd respondent and in such circumstances, the petitioner is entitled for deduction under s. 80-0 and the same
cannot be denied to the petitioner on the ground that the application was received beyond time. The petitioner also states that if an application is
made before the assessment it would be sufficient and the 2nd respondent is bound to give approval. It is also the contention of the petitioner that
for the same agreement dt. 11th June, 1985, the 2nd respondent has granted approval for the asst. yr. 1988-89. The petitioner submits that if the
approval was granted even for the asst. yr. 198889, it is valid for the years 1986-87 and 1987-88 and the 3rd respondent cannot deny the benefit
under s. 80-0 of the Act. Therefore, the petitioner strongly contends that under s. 80-0 it is sufficient if the 2nd respondent grants approval in any
assessment year. Here the 2nd respondent granted approval in the year 1988-89 and the petitioner is entitled for the benefit of s. 80-0 in respect
of the amount received under the agreement dt. l lth June, 1985.
Further, in support of his contentions, the learned counsel appearing for the petitioner relies on the following two decisions:
(1) M/s. Continental Construction Ltd. Vs. Commissioner of Income Tax, Central-I, : and
(2) H.S. Anantharamaiah Vs. Central Board of Direct Taxes and others, .
In the first decision cited i.e., in M/s. Continental Construction Ltd. Vs. Commissioner of Income Tax, Central-I, , it has been clearly held by the
Supreme Court as follows:
Sec. 80-0 does not envisage an application for approval of the contract every assessment year or the limitation of the approval granted by the
Board to any particular assessment year. The Board is to grant approval of a contract having regard to the nature of the receipt flowing therefrom
and, once this approval is granted, the assessee is entitled to seek a deduction under s. 80-0 in respect of all the receipts under the contract the
consideration for which is traceable to the three ingredients irrespective of the assessment year in which the receipts fall for assessment. Once a
contract stands approved under s. 80-0 in relation to the first assessment year in relation to which the approval is sought, the approval enures for
the entire duration of the contract"".
In this case it is significant to note that approval has been granted by the 2nd respondent for the asst. yr. 1988-89 whereas that has been rejected
for the asst. yrs. 1986-87 and 1987-88. In the said decision, it has also been held by the Supreme Court as follows:
All that the Central Board has to do under s. 80-0 is to approve an agreement for the purpose of s. 80-0. It has nothing more to do. Its approval
cannot be tentative or proinsional or qualified. It cannot be hedged in with conditions and restrictions. It cannot limit the relief to certain assessment
years only; It cannot restrict or enlarge the scope of the relief than can be granted under the section. The assessment years for which relief is
available, the extent of the receipts that qualify for deduction and all other incidents flow from the language of the section"".
Now coming to the second decision relied on by the learned counsel for the petitioner, i.e., H.S. Anantharamaiah Vs. Central Board of Direct
Taxes and others, , a Division Bench of the Karnataka High Court has held as follows:
Clause (b) of sub-s. (2) of s. 119 of the IT Act, 1961, enables or empowers the Board to admit an application of a claim or return filed after the
expiry of the period specified, for avoiding genuine hardship caused in any case or class of cases. Thus, the statute makes it incumbent upon the
Board to consider the case pleaded under cl. (b) of sub-s. (2) of s. 119 of the Act, by an assessee who files his return beyond time. This power
has to be exercised by the Board alone and not by any other authority. It is not possible to hold that this power is administrative when it relates to
condonation of delay in a case where the return is filed beyond the period prescribed. The Board is required to exercise its discretion by taking
into consideration all the relevant facts and circumstances and determine whether the delay in filing the return should or should not be condoned.
The order must be informed by reasons. It is not an arbitrary exercise of power. This power has all the traits of judicial power. The power
exercisable by the Board under cl. (b) of sub-s. (2) of s. 119 is quasijudicial in nature. When an authority discharges a quasi-judicial function, it
goes without saying that it has to conform to the principles of natural justice. It has to afford an opportunity to the party who is going to be affected
by the decision of the authority"".
That being so, in the instant case, it is the categorical stand of the res56ndents by virtue of the impugned order that the Central Board of Direct
Taxes have no powers to condone the delay in such cases. In the light of the above decision that stand taken by the respondents in this case,
cannot at all be accepted.
In the facts and circumstances of the present case, it is clear that the ratios held in both the above referred to decisions squarely apply to them
and they also support all the contentions raised by the petitioner herein and thus they help the petitioners herein in every aspect of the case on hand.
For all the foregoing reasons and in view of my elaborate discussions with regard to the various aspects of this case and also in view of the two
decisions relied on by the learned counsel appearing for the''petitioners, I am of the view that the impugned order is liable to be quashed as the
same is contrary to law, arbitrary, unreasonable and not proper exercise of powers. Thus, the writ petition succeeds and deserves to be allowed as
prayed for.
In the result, the writ petition is allowed as prayed for no costs.
Consequently the impugned order of the 2nd respondent dt. 3rd Jan., 1989 is hereby quashed and the 2nd respondent is hereby directed to grant
approval of the agreement dt. 11th June, 1985 entered into with Mls Techno Link Ltd., by the petitioner under s. 80-0 of the IT Act. So also the
other respondents are also directed to pass consequential reliefs.
OPEN