JUDGMENT

Paripoornan, J.-The petitioner in Writ Petition No. 3086 of 1987 in the High Court of Delhi, has filed this appeal against the judgment of the High Court dated 29.10.1987. The short matter that arises for consideration in this appeal is the interpretation to be placed on Section 80-O of the Income-tax Act, 1961. Appellant is a private Company. It is engaged in the brokerage business as reinsurance-brokers. It receives a commission @ 3 to 6 per cent, relating to maritime and other insurance. The Respondent is the Central Board of Direct Taxes, Government of India, New Delhi. In respect of insurance risk covered by Indian or foreign insurance companies, appellant arranges for the reinsurance of a portion of risk with various reinsurance companies either directly or through foreign brokers. In return for the above services, the appellant company receives a percentage of the premium received by the foreign companies as its share of brokerage. For a period of 19 months from 1.3.1980, Oil and Natural Gas Commission insured all their offshore oil and gas exploration and production operation with the United India Insurance Company, Madras. In respect of this insurance risk, the appellant contacted Messrs Sedgwick Offshore Resources Ltd., London who are brokers in London for placement of reinsurance business. The appellant furnished all the details about the risk involved, the premium payable, the period of coverage and the portion of risk which is sought to be reinsured. The said London brokers contacted various underwriters and after getting confirmation about the portion of the risk the foreign reinsurers were prepared to undertake, informed the appellant about such reinsurance coverage. Thereafter, the Indian Ceding Company handed over the total premium to be paid by it to the foreign reinsurance company, to the appellant for onward transmission. When this amount was given to the appellant, the appellant approached the Reserve Bank of India with a statement showing the amount of foreign currency payable as reinsurance premium to the foreign parties after deducting the amount of brokerage due to the appellant. This balance amount after deducting the brokerage, was remitted to the London brokers with the permission of the Reserve Bank of India. According to the appellant, the amount of commission retained by it was a receipt of convertible foreign exchange without a corresponding foreign remittance within the meaning of Section 9 of the Foreign Exchange Regulation Act. It is evident that the appellant company by an agreement with the foreign company, with the approval of the Reserve Bank of India remits premium received to the foreign insurance company on behalf of the Indian insurance company and while doing so, it deducts in terms of foreign exchange fee payable to it while making remittances themselves. The Indian insurers make payment in rupees to the appellant for the amount of reinsurance premium to be remitted to the foreign company, furnishing all particulars with an advice to the appellant to approach the Reserve Bank of India for necessary permission to remit in US Dollars the reinsurance premium abroad. Thereafter, the appellant writes to the Reserve Bank of India enclosing the remittance application in Form "A-2" as prescribed by the Exchange Control Manual together with the statement and Auditor s Certificate. These can be seen from Annexure-A. A statement is also attached thereto, which shows that the gross amount of the reinsurance premium to be remitted in US Dollars, under the heading "Balance of Account" and the amount of brokerage also is mentioned in US Dollars, earned by the appellant on the reinsurance premium to be so remitted under the heading "Brokerage". While in the normal course, the entire premium should be remitted abroad to the foreign parties and then the foreign reinsurers would remit the commission back to the appellant, who supplied the information, under the procedure adopted and approved b