Featured image for Supreme Court Judgment dated 24-04-2018 in case of petitioner name B.L. Passi vs Commissioner of Income Tax, De
| |

Income Tax Deduction Under Section 80-O Denied: Supreme Court Upholds Revenue Decision

The Supreme Court of India, in the case of B.L. Passi v. Commissioner of Income Tax, Delhi, examined a crucial tax dispute regarding the eligibility for deductions under Section 80-O of the Income Tax Act, 1961. The appeal arose from the Delhi High Court’s decision upholding the Income Tax Appellate Tribunal’s ruling against the appellant.

The judgment, delivered by a bench comprising R.K. Agrawal and Abhay Manohar Sapre, focused on whether the appellant was entitled to claim deductions for providing technical and industrial knowledge to a foreign entity. The Court ultimately dismissed the appeal, holding that the appellant failed to substantiate the claim under Section 80-O.

Background of the Case

The appellant, B.L. Passi, filed an income tax return for the assessment year 1997-98, declaring an income of ₹57,40,360. He claimed a deduction of ₹58,87,045 under Section 80-O on foreign exchange receipts from Sumitomo Corporation, Japan. The appellant asserted that he provided specialized commercial and industrial knowledge about the Indian automobile sector, facilitating Sumitomo’s business expansion in India.

Key Legal Issues

  • Whether the services rendered by the appellant qualified as technical or professional services under Section 80-O.
  • Whether the appellant’s role was that of a consultant providing industrial knowledge or merely an agent facilitating business deals.
  • Whether the appellant’s income from Sumitomo Corporation was eligible for tax deductions.

Arguments Presented

Petitioner’s Arguments

The appellant contended that:

  • He had extensive experience in the Indian automobile industry and provided Sumitomo with specialized knowledge about market conditions, manufacturers, and regulations.
  • He played a crucial role in helping Sumitomo secure contracts in India.
  • The revenue authorities erred in classifying his services as that of an agent rather than a technical consultant.

Respondent’s Arguments

The Revenue countered that:

  • The appellant did not provide technical or scientific expertise; rather, he facilitated business relationships.
  • The appellant failed to produce substantial evidence proving that Sumitomo Corporation secured contracts based on his specialized knowledge.
  • The payments made to the appellant were linked to business success rather than the transfer of technical know-how.

Supreme Court’s Observations

The Supreme Court thoroughly examined the provisions of Section 80-O, which allows tax deductions on income earned in foreign exchange for providing technical or professional services to foreign entities. The Court stated:

“The major information sent by the appellant to Sumitomo Corporation was in the form of blueprints for manufacturing dies. However, the appellant failed to provide any documentary proof of these blueprints.”

The Court also noted that:

  • The appellant did not furnish copies of the blueprints to the Assessing Officer, the Appellate Authority, or the Tribunal.
  • Section 80-O requires documentary proof to substantiate the claim of technical expertise, which was absent in this case.
  • The appellant’s agreement with Sumitomo explicitly linked payments to business success rather than purely technical services.

Final Judgment

The Supreme Court concluded:

“In the present facts and circumstances of the case, the services of the appellant, rendered to a foreign company, are not technical services within the meaning of Section 80-O. The appellant failed to prove that he rendered technical services to Sumitomo Corporation and did not furnish relevant documents to substantiate his claim.”

The Court upheld the High Court’s judgment and dismissed the appeal.

Implications of the Judgment

  • This ruling clarifies the conditions under which tax deductions under Section 80-O can be claimed.
  • It underscores the necessity of producing documentary evidence when claiming deductions for technical services.
  • The judgment reinforces that business facilitation services do not qualify as technical or professional services under the Income Tax Act.
  • Taxpayers must ensure compliance with statutory requirements before claiming deductions on foreign exchange earnings.

The ruling serves as a precedent for tax disputes related to deductions on foreign income and highlights the importance of detailed documentation in tax claims.


Petitioner Name: B.L. Passi.
Respondent Name: Commissioner of Income Tax, Delhi.
Judgment By: Justice R.K. Agrawal, Justice Abhay Manohar Sapre.
Place Of Incident: Delhi.
Judgment Date: 24-04-2018.

Don’t miss out on the full details! Download the complete judgment in PDF format below and gain valuable insights instantly!

Download Judgment: B.L. Passi vs Commissioner of Inco Supreme Court of India Judgment Dated 24-04-2018.pdf

Direct Downlaod Judgment: Direct downlaod this Judgment

See all petitions in Income Tax Disputes
See all petitions in Tax Refund Disputes
See all petitions in Judgment by R K Agrawal
See all petitions in Judgment by Abhay Manohar Sapre
See all petitions in dismissed
See all petitions in supreme court of India judgments April 2018
See all petitions in 2018 judgments

See all posts in Taxation and Financial Cases Category
See all allowed petitions in Taxation and Financial Cases Category
See all Dismissed petitions in Taxation and Financial Cases Category
See all partially allowed petitions in Taxation and Financial Cases Category

Similar Posts