JUDGMENT

DUTT, J.:— This appeal by special leave is directed against the judgment of the Division Bench of the Bombay High Court* dismissing the appeal preferred by the appellants against the judgment of a single Judge of the High Court dismissing the writ petition of the petitioners whereby they challenged the order dated January 5, 1982 of the respondent No. 1, the Central Board of Direct Taxes, rejecting the, application of the appellant- company under S. 80-O of the Income-tax, Act, 1961, hereinafter referred to as the Act.

* Reported in 1987 Tax LR 1334 (Bom).

2. By two agreements, one dated April 5, 1980 and the other dated August 14, 1980, entered into between the appellant-Company and Toyo Engineering India Ltd (for short Toyo lndia) the appellant-Company agreed to render technical services in respect of Iraqi Storage Terminal Project Installations in consideration of payment to it by way of fees payable under the said agreements. In the said agreement dated April 5, 1980, it is stated inter alia that Toyo India has been engaged by Toyo Engineering Corporation (for short TEC), a company organised and existing under the laws of Japan having its registered office at Tokyo, Japan for the project of Storage Terminal of State Organisation for Oil Project, a public organisation organised and existing under the laws of Iraq. Toyo India has in its turn engaged the appellant-Company to perform certain construction and related services by the appellant-Company of the project work as set out in the said agreement.

3. The appellant-Company by its letter dated Oct. 23. 1980 requested the respondent No. 1, the Central Board of Direct Taxes, for the approval of the said agreements under S. 80-O of the Act. The respondent No. I after giving the appellants a hearing, by its order dated Jan. 5, 1982, refused to approve the said agreement for purposes of S. 80-O of the Act inasmuch as in the view of the respondent No. 1, the essential conditions laid down in S. 80-O were not satisfied. The respondent No. 1 in its said order pointed out inter alla that according to the said agreements the contract price was received by the appellant-company from Toyo India, an Indian Company. In other words, income by way of royalty, commission, fees, etc. had not been received by the appeflant-Company from the Government of a foreign State or a foreign enterprise, and that the agreements had been entered into by the appellant-Company with Toyo India, an Indian Company, and not with a foreign State or a foreign enterprise. Further, it was stated by the respondent No. 1 that as there was no private of contract between the appellant-Company and the foreign enterprise, it could not be said that the income had been received by the appellant-Company in consideration of the use outside India of patents, inventions, etc made available or provided or agreed to be made available or provided to a Government of foreign State or to foreign enterprise or in consideration of technical services rendered or agreed to be rendered outside India to such Government or enterprise by the appellant- Company.

4. Being aggrieved by the said order dated Jan. 5, 1982 of the respondent No. I refusing to approve the said two agreements, the appellants filed a writ petition before the Bombay High Court challenging the said order. A learned single Judge of the Bombay High Court by his judgment dated June 23, 1986* dismissed the writ petition on the ground inter alia that the payment was not received by the appellant-Company from the Government of a foreign State or a foreign enterprise and, as such, it was not entitled to any relief under S. 80-O of the Act.

* Reported in (1986) 28 Taxman 290 (Bom).

5. On appeal by the appellants against the judgment of the learned single Judge, the Division Bench of the High Court held that in order to attract the provision of S. 80-O, the payment. must be received by an Indian Company from the Government of a foreign State or a foreign enterprise, "and tha