Deduction u/s.80-O of Income-tax Act, 1961 : A.Y. 2003-04 : Supply of architectural designs for use outside India : Receipt of fees in foreign exchange : Assessee entitled to deduction u/s.80-O.

[CIT v. Charles M. Correa; 232 CTR 61 (Bom.)]

The assessee is an architect. In the A.Y. 2003-04 the
assessee had claimed deduction u/s.80-O of the Income-tax Act, 1961, in respect
of the professional fees received in convertible foreign exchange for providing
design to foreign enterprise. The Assessing Officer disallowed the claim. The
Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Bombay High Court upheld the
decision of the Tribunal and held as under :

“(i) The object underlying S. 80-O is to allow a deduction
in respect of incomes received in convertible foreign exchange in
consideration for the use outside India of certain categories of intellectual
property, namely, patents, inventions, designs or registered trademarks. The
fact that the assessee supplies designs is not in dispute.

(ii) The contention that the assessee was providing
professional services and could not regarded as the owner of the intellectual
property has no merit. The income in respect of which a deduction is claimed
u/s.80-O was not income, generally speaking, received for rendering
professional services outside India. The income which was received was
specifically in consideration for use outside of the designs which were
supplied by the assessee.

(iii) For the purposes of S. 80-O, use that is made outside
India may be single or multiple use, which may vary upon the facts and
circumstances of each case. So long as the use has taken place outside India
and the payment which is received in convertible foreign exchange is in India,
the benefit of the deduction would have to be granted.

(iv) The assessee had prepared designs in India and had
supplied them to its foreign counterpart outside India in pursuance of the
contracts. Explanation (iii) to S. 80-O clarifies that services rendered or
agreed to be rendered outside India, would include services rendered from
India but shall not include services rendered in India. There is no dispute
about the fact that the designs were supplied and used outside India. All the
conditions requisite for an exemption u/s.80-O were fulfilled. For the
aforesaid reasons no substantial question of law would arise.”