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Judgment
Y. Venkatachalam, J.—Invoking article 226 of the Constitution of India, the petitioner herein has filed the present writ petition seeking for a
writ of certiorarified mandamus to call for the records of the second respondent in F. No. 473/248/88-FTD, dated January 3, 1989, and to quash
the same and also to direct the second respondent to grant approval of the agreement dated June 11, 1985, entered into with Techni Link Ltd.,
Martins Chambers, Channel Islands, by the petitioner u/s 80-O of the Income Tax Act and consequential relief by the second arid third
respondents.
In support of their writ petition, the petitioner-company have 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 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. I have also taken into consideration the various points
raised by learned counsel appearing for the parties, during the course of their arguments.
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 Techni Link Ltd., Martins Chambers, Channel Islands,
for supply of technical know-how in the field of reconditioning/reclaiming automobile components. His case is that Section 80-0 of the Income Tax
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 a foreign State or a foreign enterprise. According to the
petitioner herein, the above said agreement dated June 11, 1985, provides for payment-of US $ 20,000 in four half-yearly instalments by Techni
Link Ltd., to the petitioner. For the assessment years 1986-87 and 1987-88, the petitioner received a sum of Rs. 1,22,750 and Rs. 1,41,470.90,
respectively, from Techni Link Ltd., for the consultancy services rendered outside India, It is admitted that in order to avail of the above said 50
per cent, deduction, the application for the approval of the agreement has to be made to the second respondent-Board before the 1st 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 July 17, 1987, and despatched on July 21, 1987, it was received by the second
respondent only on December 29, 1987. The petitioner also states that he filed the returns of income with the third respondent herein claiming
deduction u/s 80-0 of the Act. The grievance of the petitioner herein is that the third respondent by order dated May 51, 1988, refused to grant
relief u/s 80-0 on the ground that the second respondent had not approved the agreement. In the meanwhile, the second respondent by a
communication dated March 15, 1988, has stated that the application dated July 17, 1987, was out of time for the assessment years 1986-87 and
1987-88 and that the application could be considered only for the assessment year 1988-89. Apart from that the petitioner was also asked to
furnish certain particulars. Thereafter, on April 9, 1988, the petitioner sent a detailed reply praying for condonation of the delay and furnished the
particulars asked for. The second respondent by another communication dated April 15, 1988, asked the petitioner to lead documentary evidence
that the application was sent on July 21, 1987. The petitioner, on April 25, 1988, sent a reply stating that their auditors sent the application on July
21, 1987, that the receipt and postal acknowledgment were misplaced by them and the evidence for receipt of application by the auditors on July
17, 1987, was enclosed. However, by the communication dated May 10, 1988, the second respondent has stated that the agreement for the
assessment year 1988-89 was approved and for the assessment years 1986-87 and 1987-88 was out of time. Thereafter, on June 3, 1988, and
November 3, 1988, the petitioner again sent detailed representations to the second respondent to condone the delay in filing the application.
However, on January 3, 1989, the second 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 a proper exercise of
powers vested in it for the reason that the second respondent has enough power to condone the delay, u/s 119 of the Act. It is significant to note
that the Board is an Income Tax authority within the meaning of Section 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 the powers. Therefore, it is the categoric contention of the petitioner
herein that it is not legally correct to say that the second respondent has no power to condone the delay. Inter alia, it is contended by the petitioner
herein that having called for an explanation for the delay in furnishing the application in the communication dated March 15, 1988, it is not open to
the second 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 second respondent issued the notice dated March 15, 1988, by virtue of the powers given to it u/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 assessments were completed by the third respondent and in such circumstances, the petitioner is entitled for deduction u/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 second respondent is bound to give approval. It is also the contention of
the petitioner that for the same agreement dated June 11, 1985, the second respondent has granted approval from the assessment year 1988-89.
The petitioner submits that if the approval was granted even for the assessment year 1988-89, it is valid for the years 1986-87 and 1987-88 and
the third respondent cannot deny the benefit u/s 80-0 of the Act. Therefore, the petitioner strongly contends that u/s 80-0 it is sufficient if the
second respondent grants approval in any assessment year. Here the second respondent granted approval in the year 1988-89 and the petitioner is
entitled for the benefit of Section 80-O in respect of the amount received under the agreement dated June 11, 1985.
Further, in support of his contentions, learned counsel appearing for the petitioner relies on the following two decisions :
M/s. Continental Construction Ltd. Vs. Commissioner of Income Tax, Central-I, , 86 and
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 (pages 86 and 87) : "" Section 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 receipts flowing therefrom and, once this approval is granted, the assessee is entitled to seek a deduction u/s 80-O 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 u/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
second respondent for the assessment year 1988-89 whereas that has been rejected for the assessment years 1986-87 and 1987-88. In the said
decisions, it has also been held by the Supreme Court as follows (page 87) : ""All that the Central Board has to do u/s 80-0 is to approve an
agreement for the purpose of Section 80-0. It has nothing more to do. Its approval cannot be tentative or provisional 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 that 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 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
(head-note) : ""Clause (b) of Sub-section (2) of Section 119 of the Income Tax Act, 1961, enables or empowers the Board to admit an application
or 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 Clause (b) of Sub-section (2) of Section 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 Clause (b) of Sub-section (2) of Section 119 is quasi-judicial 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 respondents 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
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 a proper exercise of power. 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 second respondent dated January 3, 1989, is
hereby quashed and the second respondent is hereby directed to grant approval of the agreement dated June 11, 1985, entered into with Techni
Link Ltd., by the petitioner u/s 80-0 of the Income Tax Act. So also the other respondents are also directed to pass consequential reliefs.