The Bombay High Court held that merely brandishing newspaper cuttings does not amount to the proof of sharing commercial expertise.

The Court held thus in an Income Tax Appeal preferred by the Hindustan Export & Import Corporation Private Limited (company) against the Deputy Commissioner of Income Tax.

A Division Bench of Justice K.R. Shriram and Justice Neela Gokhale observed, “The present case displays an obvious attempt on the part of Appellant in creating an illusion of acting in aid of the agreement, on the basis of the approval granted by the CCIT, while at the same time refusing to produce any evidence in respect of which relief is being sought. Merely brandishing newspaper cuttings does not amount to proof of sharing commercial expertise with its French counterpart as mandated by Section 80-O of the Act.”

Senior Advocate J.D. Mistri appeared for the appellant while Advocate P.C. Chhotaray appeared for the respondents.

In this case, the question of law that arose for determination was a complex interpretation of Section 80-0 of the Income Tax Act, 1961 (ITA) and the effect of an amendment to that Section. The appellant was a private company and an agreement was executed in 1987 between the appellant and M/s. Arianespace France. The main business of Arianespace was to launch satellites and place them in orbit above the earth. In a bid to gain entry into the global satellite launch market, Arianespace was desirous of reducing its cost by placing bulk orders on its subcontractors on the basis of information about launch business worldwide, collected from their international network of consultants.

The appellant was one such consultant of Arianespace appointed pursuant to the said agreement. It received a sum of Rs. 75,11,850/- and claimed a deduction of Rs. 30,40,740/-. The Assessing Officer (AO) refused the same due to which the appellant approached the Commissioner of Income Tax (Appeals) [CIT(A)]. However, the CIT dismissed the appeal as a result of which it approached the Income Tax Appellate Tribunal (ITAT) but it also confirmed the non-allowance of deduction. Therefore, the appellant was before the High Court.

The High Court in view of the facts and circumstances of the case noted, “Mr. Mistry made a valiant effort to distinguish the facts of the present case from that in the cases of B.L.Passi (supra), Ramnath & Co.(supra) and Khursheed Anwar (supra). On B.L.Passi (supra), Mr. Mistry contends that Appellant in that matter was a managing agent and there was a principal-agent relationship between the parties and the deduction under 80-O of the Act was dependent upon the agent’s consideration calculated based on invoice amount received by his principal. On Ramnath & Co (Supra), Mr. Mistry says that the remuneration of the assessee was dependent upon satisfaction of the principal about the quality of goods supplied. He thus distinguishes the facts in the present case from the others by contending that the agreement entered into by Appellant in the present matter with Arianespace provides for a fixed consideration. Mr. Mistry has pointed out certain other differences in the facts of the present matter and those relied upon by the Revenue.”

The Court further said that the AO is well within his jurisdiction to verify whether the information shared is attributable to the information or service contemplated by the provision and the AO is in fact required to make such an enquiry and for that purpose, the assessee is required to place on record requisite material supporting its claim for deduction and on the basis of which approval was procured from the CCIT.

Accordingly, the High Court dismissed the appeal.

Cause Title- Hindustan Export & Import Corporation Private Limited v. The Deputy Commissioner of Income Tax & Anr. (Neutral Citation: 2024:BHC-OS:7459-DB)


Appellant: Senior Advocate J.D. Mistri, Advocates Fenil Bhatt, Prem Tripathi, and Atul K. Jasani.

Respondents: Advocates P.C. Chhotaray and Sangita Choure.

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