The company had challenged the orders of the Income-tax tribunal which had disallowed previously allowed deduction claim of 50 per cent, on total foreign earnings
Recently the Bombay High Court in an order has held that a company or individual who renders services to a foreign company, in India and receives remuneration in foreign exchange, from the company, would be able to claim a deduction in Income Tax.
A division bench of Justice M S Sanklech and Justice Sandeep K Shinde, while turning down the appeal filed by Indian Company, SGS India Private Limited, which offers technical services in import and export of goods, said "Section 80-O of the act very clearly restricts the benefit of deduction, only to the extent technical services which are rendered from India. The present appellant undisputedly provided services such as supervising, loading/ unloading/storage rendered in India and not outside and/or from India. Therefore, would not qualify for deduction under Section 80-O of the Act. This, even if, it forms a part of the consolidated report furnished to the foreign party."
The company had challenged the orders of the Income-tax tribunal which had disallowed previously allowed deduction claim of 50 per cent, on total foreign earnings, for the assessment years, 1992 to 1998, claiming that it was arbitrary and there has been no change is the trade agreement between the two companies.
Advocate Suresh Kumar appearing for the revenue department argued that there has been an amendment in the provision, following which the deduction allowed on foreign exchange amount for services rendered from India has been lowered. He relied on a Delhi High Court order, to explain different services rendered by an advocate to a foreign client. He said, "If the advocate gives an opinion to a foreign client and receives remuneration, then it is liable for deduction, but if he argued the case for a foreign client in an India court, then he would not be liable to claim a deduction on the remuneration received."
The bench after going through the necessary provisions of law held that "We find that loading and storage of goods for services which may require special expertize would not necessarily be in the nature of technical services." Thus, this doesn't allow the company to claim deductions on the services rendered in India..
THE RULE
As per the Indian tax laws, the salary earned from a foreign organisation by a person for services rendered in India is liable to tax irrespective of his/her residential status and place of receipt of the salary
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