Judgment

RANGANATHAN, J.:- This is an appeal preferred by M/ s. Continental Construction Ltd. (hereinafter called the assessee) from the judgment of the Delhi High Court in ITR 110 to 11 2 of 1987: (reported in 1990-185 ITR 178) : (1990 Tax LR 729) answering, against the assessee, the following questions of law referred to under S. 256 of the Income-tax Act, 1961 (the Act):

1. "Whether on the facts and in the circumstances of the case the Tribunal is right in holding that the income arising from the activities pursuant to the seven agreement with foreign Governments/enterprises, etc. are governed by the provisions of S. 80-HHB of the Income-tax Act, 1961 and not of Section 80-O of that Act?"

2. "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that notwithstanding the approvals granted by the Board to the seven agreements for the purpose of S. 80-O, for the purpose of assessment for assessment year 1983-84, the income arising from these contracts have to be brought under S. 80-HHB of the Income-tax Act, 1961?"

3. "Whether on the facts of the case, the Tribunal is right in holding that the income from the entire activities under the seven agreements cannot be bifurcated and is Wholly covered under Section 80-HHB of the Income-tax Act, 1961?"

4. "Whether on the facts and in the circumstances of the case, the. Tribunal is right in holding that the assessee company is not an industrial company as defined in the Finance Act, 1982?"

The first two Income-tax References were made to the High Court at the instance of the assessee which was dissatisfied with the decision of the Income-tax Appellate Tribunal on these questions; there were two references because the above questions arose out of two cross-appeals before the Tribunal _ one by the assessee and the other by the Department. This appeal by the assessee, CA. 3458 of 1990 is disposed by the present judgment.

2. The third reference (ITR 112/87) was made by the Tribunal at the instance of the Department on a totally different question which related to the interpretation of Ss. 40(c) and 40A(5) of the Act. The High Court answered all the three references in favour of the assessee and the aggrieved Commissioner of Income-tax (C.I.T.) has preferred an appeal to this Court from that part of the judgment being C.A. 3458-A of 1990. But that question has no connection with the other four question set out earlier. We have, therefore, delinked the appeal by the C.I.T. for -separate hearing. Also, of the four questions posed above in the assessees appeal, counsel for appellant has stated that he is not pressing question No. 4 before us. We, therefore, do not express any opinion on it and merely dismiss the appeal in so far as this question is concerned. In the result, we confine this judgment to the assessees appeal and to the first three of the four questions set gut above.

3. The questions arise out of the assessees assessment to income-tax for the assessment year 1983-84 (the calendar year 1982 being the relevant previous year). S. 80-O of the Act, under which the assessee claimed deductions, provides for a deduction, in computing the total income, in respect of royalties etc. from certain foreign enterprises. This topic was originally dealt with by S. 850. S. 80-O was substituted in its place w.e.f. April 1, 1968. The section has since undergone amendments from time to time. As on 1-4-83, the provision, in so far as is relevant for our purposes, was in the following terms:

S.80-O: Deduction in respect of royalties, etc. from certain foreign enterprises.-

"Where the gross total income of an assessee, being an Indian Company, includes any income by way of royalty, commission, fees or any similar payment received by the assessee from the Government of a foreign State or a foreign enterprise in consideration for the use outside India of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning indu