Law:

Section:

Section 80MM of the Income-tax Act, 1961 - Deductions - In case of Indian company in respect of royalties, etc., received from any concern in India - Whether an agreement will qualify for approval if agreement is in connection with technical know-how and services are rendered by a person providing such technical know-how and there is an inter-connection and inter-relationship between services rendered and provision of such technical know-how - Held, yes FACTS The petitioner entered into an agreement with the purchaser, which, inter alia, provided that in addition to a paper plant, the petitioner would make available to the purchaser complete data, design, drawing and instructions in connection therewith and also assist by supervising and rendering services in connection with the installation of the four units. The consideration under the agreement was Rs. 8,50,000 which included an amount of Rs. 1,93,182. Exact narration of services in the agreement for which the fee amount of Rs, 1,93,182 was received was provided in paragraph 2 of the agreement, viz.,- "(e) Complete data, design, drawing and the instructions in connection with (a), (b ), ( c) and (d) above. (f) Supervision and services in connection with installation of the unit specified at (a), (b) , (c) and (d) above." The petitioner applied to the Board for the approval of the said agreement under section 80MM and by a letter the Board informed the petitioner that the agreement appeared to it to be for supply of goods and that the services mentioned in clause (f) of paragraph 2 of the agreement, even if technical, did not amount to imparting of technical know-how and the agreement appeared to be for rendering services without the provision of technical know-how. It was stated that the agreement was, thus, hit by clause (viii) of the guidelines contained in the Board's Circular No. 140, dated 6-7-1974. The petitioner proceeded to explain its claim. Eventually the Board accepted the claim partially. It held that the services referred to in clause (e) of paragraph 2 of the agreement had an element of provision of technical know-how but, the entire amount of Rs. 1,93,182 which included consideration for…

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