V.Rajagopal, Trichy V. DCIT, Trichy

ITA 2045/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9643 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 06-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: KEERTHIRAJAN
• Keywords: Salary income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBE R AND SHRI. G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NOS.2044 & 2045/MDS/2015 / ASSESSMENT YEARS : 2006-07 & 2007-2008. SHRI. V. RAJAGOPAL, 100, 4 TH CROSS, BHELPUR, THIRUVERAMBUR, TRICHY 620 013 . [PAN ADYPR 3188B ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE IV, TRICHY. ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : SHRI. KEERTHIRAJAN, C.A. $% ! ' # /RESPONDENT BY : SHRI. A.V.SREEKANTH, IRS, JCIT. & ' ' ( / DATE OF HEARING : 23-02-2016 ) ' ' ( / DATE OF PRONOUNCEMENT : 19-04-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THESE TWO APPEALS ARE FILED BY THE ASSESSEE A RE DIRECTED AGAINST ORDER OF COMMISSIONER OF INCOME-TAX (APPEA LS)-2, TIRUCHIRAPALLI, DT 06.05.2015 FOR THE ASSESSMENT YE AR 2006-07 PASSED U/S.143(3) R.W.S 263 OF THE ACT AND ASSESSMENT YEA R 2007-08 PASSED U/S.143(3) R.W.S. 147 AND 250 OF THE INCOME TAX ACT , 1961. SINCE THE ITA NOS.2044 &2045/MDS/15 :- 2 -: ISSUE IN THESE APPEALS ARE COMMON IN NATURE, THESE APPEAL S ARE CLUBBED, HEARD TOGETHER, AND DISPOSED OF BY THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE. WE TAKE UP ITA NO.2044/MDS/201 5 OF ASSESSMENT YEAR 2006-07 FOR ADJUDICATION. 2. THE ASSESSEE HAS RAISED ONLY ONE SUBSTANTIVE GROU ND THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE FINDINGS OF THE ASSESSING OFFICER ON DISALLOWANCE O F EXPENDITURE LAND AND PROFESSIONAL INCOME IS TREATED ON PAR WITH SAL ARY INCOME OF THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE, THE ASSESSEE IS A MANA GING DIRECTOR OF M/S.GEECO ENERCON (P) LTD, TRICHY AND FILED RETURN OF INCOME ON 25.04.2007 FOR THE ASSESSMENT YEAR 2006-0 7. THE ASSESSEE DISCLOSED GROSS SALARY FROM THE GEECO ENERCON (P) L TD B3,24,000/- AND SEPARATELY DISCLOSED PROFESSIONAL RECEIPTS OF B21, 66,939/- AND FORM 16 WAS ISSUED FOR SALARY INCOME AND FORM 16A WAS IS SUED FOR PROFESSIONAL INCOME. THE LD. ASSESSING OFFICER FOU ND THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF B13,05,119/- IN THE PRO FIT AND LOSS ACCOUNT AND NET PROFESSIONAL INCOME OFFERED TO TAX B8,61,82 0/-. THE RETURN OF INCOME WAS PROCESSED U/S.143(1) OF THE ACT AND AS P ER SCRUTINY NORMS NOTICE U/S.143(2) WAS ISSUED AND ASSESSING OFFICER CONSIDERED THE ITA NOS.2044 &2045/MDS/15 :- 3 -: INFORMATION AND THE SUBMISSIONS OF THE ASSESSEE AND COMPLETED ASSESSMENT U/S.143(3) OF THE ACT BY DISALLOWING 10% OF EXPENDITURE BEING B24,358/- DUE TO NON AVAILABILITY OF ANY SUP PORTING EVIDENCE. SUBSEQUENTLY, THE COMMISSIONER OF INCOME TAX-II, TR ICHY PASSED REVISION ORDER SEC.263 DATED 20.03.2013 IN C.NO.71 43(2)/CIT- II/TRY/2012-13 AND SET ASIDE THE ASSESSMENT U/S.143 (3) OF THE ACT DATED 02.12.2011. THE COMMISSIONER OF INCOME TAX O BSERVED THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, AS THE PROFESSIONAL RECEIPTS OF THE ASSES SEE B21,66,939/- HAS TO CONSIDERED AS SALARY INCOME. THE ASSESSEE IS DRAWING SALARY FROM THE COMPANY AS MANAGING DIRECTOR AND ALSO RECE IVED PROFESSIONAL INCOME. THE LD. COMMISSIONER OF INCOME TAX REFERRE D AND RELIED ON THE PROVISIONS OF SEC. 17(1)(IV) OF THE ACT. THE C OMMISSIONER OF INCOME TAX IS OF THE OPINION THAT PROFESSIONAL RECE IPTS ARE TO BE CONSIDERED AS SALARY INCOME AND THE ASSESSEE IS NO T ELIGIBLE TO CLAIM ANY EXPENDITURE AND SET ASIDE THE ORDER. IN COMPLI ANCE TO THE DIRECTIONS, THE ASSESSING OFFICER ISSUED NOTICE U/S .142(1) OF THE ACT AND CALLED FOR THE DETAILS. THE LD. AUTHORISED REP RESENTATIVE OF THE ASSESSEE APPEARED ON VARIOUS DATES AND SUBMITTED TH E DETAILS AND EXPLAINED THAT THE ASSESSEE IS MAINTAINING SEPARATE OFFICE FOR HIS PROFESSION AND INCURRING ESTABLISHMENT EXPENDITURE FOR RUNNING THE PROFESSIONAL OFFICE. FURTHER ASSESSEE IS ALSO A MA NAGING DIRECTOR OF ITA NOS.2044 &2045/MDS/15 :- 4 -: COMPANY AND RECEIVED SALARY INCOME OF B3,24,000/- . THE LD. ASSESSING OFFICER CONSIDERED THAT THE SUBMISSIONS OF LD. AUTHORISED REPRESENTATIVE BUT CONSOLIDATED THE PROFESSIONAL IN COME AS SALARY INCOME UNDER PROVISIONS OF SEC. 17(1)(IV) OF THE A CT AND DISALLOWED THE EXPENDITURE CLAIMED AND COMPLETED THE ASSESSME NT. THE ASSESSING OFFICER HAS DEPUTED INSPECTOR TO VERIFY T HE CLAIM OF THE ASSESSEE FOR PROFESSIONAL CONSULTANCY AND OBTAIN TH E REPORT OF THE INSPECTOR REFERRED AT PAGE 3 OF THE ORDER AS UNDER: - 'I HAVE VISITED THE OFFICE OF THE SHRI V. RAJAGOPAL IN 100, , IV CROSS STREET, BHELPUR, TIRUVERUMBUR, TRICHY-13 ON 28/11/2013 WHICH IS THE RESIDENCE OF THE ASSESSEE IN THE UPSTAIRS FIRST FLOOR, THE OFFICE IS SITUATED. THERE IS NO BOARD DISPLAYING AN OFFICE IN THAT BUILDING. SHRI. V. ROJAGOPAL IS NOT PRESENT AT THE TIME OF MY VISIT. THE ENQUIRY IS FOR VERIFYING THE CONSULTANCY F FEES RECEIVED' BY THE ASSESSEE FROM M/S GEECC ENNCON PVT LTD OF WHICH MR. RAJGAGOPAL IS THE MANAGING DIRECTOR. THE CONSULTANCY FEES WAS RECEIVED BY THE ASSESSEE FROM THE COMPANY FOR CONSULTANCY DONE FOR VARIOUS CUSTOMER CONCERNS OF M/S GEECO ENERCON PVT. LTD ; AT VARIOUS PLACES FOR WHICH THE ASSESSEE STATED TO HAVE RAISED INVOICE WITH M/S.GEECO ENERCON PVT. LTD. IT IS STATED THAT THE CONSULTANCY DONE BY THE ASSESSEE ON BEHALF OF THE COMPANY IS FOR PRODUCT DEVELOPMENT FAT ,ENERGY SAVINGS DEVISING METHODS FOR FUEL EFFICIENT SYSTEMS AND FOR MODIFICATION OF EXISTING MACHINERY FOR IMPROVING THE CONSERVATION O F POWER ETC. FOR BOILERS. IT IS STATED THAT THERE IS NO A GREEMENT OF TERMS BETWEEN THE COMPANY AND MR. RAJAGOPOL FOR THE CONSULTANCY WORK DONE BY HIM. DURING MY VISIT, IN THE OFFICE THREEEMPLOYEII5 WERE PRESENT. REGARDING, THOSE EMPLOYEES CLAIMED TO HAVE BEEN EMPLOYED IN THE OFFICE DUING THE FINANCIAL YE AR 2005-06, IT IS FOUND THAT THERE WERE EIGHT EMPLOYEES ONLY OS PER THE ACQUAINTANCE REGISTER AGAINST THE OSSESSEE'S CLAIM OF 10. IT IS STATED THAT NOBODY IS PRESENTLY __ EMPLOYED WITH THE OFFICE NOR THERE BEEN ANY RECORDS EVIDENCING THEIR IDENTITY' EDUCATIONAL QUALIFICATION, THEIR EMPLOYMENT ORDERS, NATURE OF JOB DONE, P.F RECORDS, ESI RECORDS AND PTOFESSIANC'L1 TAX RECORDS ITA NOS.2044 &2045/MDS/15 :- 5 -: EVIDENCING THEIR EMPLOYMENT PRODUCED. EXCEPT FOR AN ACQUAINTANCE REGISTER ( WITH NO DATE IN THE SIGNATURE FOR THE PERIOD FROM D1/04/2005 TO 31/3/2006, FOR SALARY PAYMENT FOR EIGHT PERSONS, VIZ, SHRI. S. HARIDAS, V. KUMAR, L. CHANDRASEKAR, R. SUKUMOR, P. SELVAM, P. SUBRAMANIAN, , B SUBBASH AND. R. BASKAR,. WHO THE ASSESSEE CLAIMED WERE NOT PRESENTLY EMPLOYED IN HIS OFFICE. NEITHER THE ASSESSEE FURNISHED ANY ADDRESS OF THOSE EMPLOYEES WHO WORKED DURING THE PERIOD 2005-06 NOR THEIR IDENTIFICATION DETAILS FURNISHED FOR VERIFICATION. SUBSEQUENTLY ON BEING DIRECTED ON 10/3/2014, I HOVE VERIFIED THE THREE EMPLOYEES PRESENTLY WORKING IN T HE OFFICE IN WRITING. SHRI R. RAJARAJAN; ON BEING ENQU IRED STATED THAT HE IS WORKING AS COMMERCIAL MANAGER FROM 2008 WITH SALARY OF RS.20,OOO/- PER MENSEM: THE' OTHER EMPLOYEE SHRJ C. JAISANKAR, A N M,COM., GRADUATE STATED THAT HE IS WORKING FROM 2008 SAID HE IS LOOKING AFTER ACCOUNTS AND IS. GETTING SALARY OF RS.15,OOO/- PER MONTH. SHR.N. VISWANOTHAN, DME STATED THAT HE IS WORKING FROM 2001, ., BUT HAS NOT GIVEN ANY DESIGNATION AND HAS NOT FURNISHED ANY APPOINTMENT ORDER FOR HIS EMPLOYMENT STATED IN HIS LETTER THAT H'E IS GETTING SALARY OF RS.8 , OOO/- P.M,. F URTHER, THE ASSESSEE HAS CONFIRMED THAT PRESENTLY THERE (ARE THREE EMPLOYEES ARE ONLY WORKING IN HIS OFFICE BY HIS LETTER DATED LL/3/20I4. FROM THIS' IT IS CLEAR THAT THIS CLAIM PERSONNEL EMPLOYMENT LACKS ANY CREDIBLE PROOF TO PROVE THE CLAIM. BUT, IT IS STATED THAT NONE OF THEM HAVE ANY PF, ESI ACCOUNT OR THEY HAVE ANY APPOINTMENT ORDER FOR THEIR EMPLOYMENT. FURTHER FOR THE SAID CONSULTANCY FOR PRODUCT DEVELOPMENT FOR ENERGY SAVINGS, DEVISING METHODS FOR FUEL EFFICIENT SYSTEMS AND FOR MODIFICA TION OF EXISTING MACHINERY FOR IMPROVING THE CONSERVATIO N OF POWER NE; FOR BOILERS AS CLAIMED BY THE ASSESSEE IN THE OFFICE, THERE IS NO MACHINERIES / TOOLS, GADGETRIES S FOR ANY TRIALS, TESTING ETC. THE ASSESSEE HAS NOT SHOWN ANY SEPARATE 8 CONNECTION FOR THE SAID CONSULTANCY OFFICE AND NOR CLAIMED ANY EA CHARGES IN P&L ACCOUNT ALSO. HENCE; IN THE ABSENCE OF CREDIBLE PROOF OF EVIDENCE FOR PERSONNEL'S EMPLOYMENT IS HIS OFFICE, THE CLAIM OF THE ASSESSEE IS NOT VERIFIABLE IN THE COURSE OF ASSESSMENT, AFTER REPORT OF INSPEC TOR WAS OBTAINED THE ASSESSEE FILED LETTER DT 28.12.2013 WITH THE CO PY OF MINUTES OF GEECO ENERCON PVT. LTD FOR SERVICES TO BE RENDERED BY THE ASSESSEE TO ITA NOS.2044 &2045/MDS/15 :- 6 -: THE COMPANY. THE SCOPE OF WORK ALLOCATED TO THE A SSESSEE TO OFFER CONSULTANCY IN DESIGNING AIR PRE-HEATERS, MODIFICAT ION TO THE EXISTING PRE-HEATERS, THE INSPECTION OF BOILERS AT VARIOUS S ITES AND GIVE ADVICE ON THE LATEST TECHNOLOGY FOR MANUFACTURE OF BOILER S. THE LD. ASSESSING OFFICER FOUND THAT THE INVOICES RAISED BY THE ASSES SEE FOR CONSULTANCY SERVICES CHARGES INCLUDES TRAVELLING EXPENSES, AC COMMODATION AND LOCAL CONVEYANCES. THE LD. ASSESSING OFFICER IS OF THE OPINION THAT THE INVOICES ARE PREPARED FOR SUPPORTING THE CLAIM OF T HE ASSESSEE AND CANNOT BE RELIED TO SUPPORT THE ACTUAL CONSULTANCY WORK. THE LD. ASSESSING OFFICER HAS OVERLOOKED THE CONTENTIONS OF THE ASSESSEE TO MAINTAIN CONFIDENTIALITY IN THE CONSULTANCY INVOLVI NG DESIGN & METHODS FOR BOILERS. THE EXPENDITURE DOES NOT BEAR THE DETA ILS OF BILLS RAISED WITH THE COMPANIES AND NO TDS DETAILS WERE FURNISHE D. THE ASSESSING OFFICER ASSUMED ARBITRARILY AS THE ASSESSEE IS A MANAGING DIRECTOR IS RECEIVING SALARY AND PROFESSIONAL INCOME AND TREATE D ENTIRE RECEIPTS AS SALARY INCOME AND PASSED THE ORDER. AGGRIEVED BY TH E ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE ARGUED ON THE GROUND S RAISED THAT ASSESSING OFFICER TREATED THE ENTIRE CONSULTANCY FE ES AS SALARY INCOME ITA NOS.2044 &2045/MDS/15 :- 7 -: WEREAS TDS WAS DEDUCTED BY THE COMPANY U/S.194J OF THE ACT AND FORM 16A WAS ISSUED. THE TERMS AND CONDITION AS PER MINUTES OF THE COMPANY IS ON PROFESSIONAL CONSULTANCY BASIS FOR RENDERING TECHNICAL SERVICES IN THE FIELD OF PRODUCT DEVELOPM ENT RELATED TO ENERGY SAVINGS, DEVISING METHODS FOR FUEL EFFICIENT SYSTEM , AND MODIFICATION OF EXISTING MACHINERY FOR IMPROVING THE CONSERVATION O F POWER AND IS PURELY ON ASSESSEES KNOWLEDGE AND EXPERIENCE. THE PRODUCT WORKING OF THE COMPANY IS BASED ON THE ADVICE OF THE ASSE SSEE EXPERTISE. FURTHER TECHNOLOGY HAS TO BE UPGRADED AND THERE IS ALSO A SEPARATE CONSULTANCY SETUP TO DEVELOP ENGINEERING AND DESIG N WITH UNIQUE NETWORKS WITH THE CONSULTANCY. THE KNOWLEDGE PROD UCT HAS CREATED A DEMAND IN THE EXPORT MARKET AND IMPROVED THE GLOBAL IMAGE OF THE COMPANY AND EXPOSURE TO INTERNATIONAL BUSINESS OPPO RTUNITIES. THE SALARY WAS PAID TO THE ASSESSEE AS MANAGING DIRECTO R ONLY FOR THE ADMINISTRATIVE WORKS. THE ASSESSING OFFICER CONTEN DED THAT ANY FEES, COMMISSION, PERQUISITE OR PROFIT RECEIVED IN ADDITI ON TO SALARY HAS TO BE CONSIDERED AS SALARY INCOME. THE ASSESSEE BEING A TECHNICAL PERSON IS IN RECEIPT OF DUAL INCOME UNDER INCOME FROM SALARY AND INCOME FROM PROFESSIONAL. THE LD. ASSESSING OFFICER CONSIDERED WORKING SYSTEM AND APPLICATION OF INTELLECTUAL GUIDANCE OF THE ASSESSE E TO INCREASE THE BUSINESS OPPORTUNITIES AND DEMAND FOR THE PRODUCT. THE MANAGING DIRECTOR IS APPOINTED AS PER THE PROVISIONS OF COM PANIES ACT AND ITA NOS.2044 &2045/MDS/15 :- 8 -: SALARY IS DETERMINED BASED ON THE MANAGERIAL REMUNE RATION PROVIDED UNDER THE LAW. THE ASSESSEE HAS TWO DIFFERENT ROL ES AS ADMINISTRATOR AND CONSULTANT. IN THE APPELLATE PROCEEDING, THE LD. AUTHORISED REPRESENTATIVE SUBSTANTIATED HIS ARGUMENTS WITH THE DECISIONS AND OBJECTED TO CONSIDERATION OF PROFESSIONAL RECEIPTS AS SALARY INCOME AND PROFESSIONAL EXPENDITURE WAS NOT ALLOWED B Y THE AS SESSING OFFICER. THE LD. AUTHORISED REPRESENTATIVE RELIED ON THE DEC ISION OF P. RAMAJEYAM VS. CIT (2004) 186 CTR MAD 477 . BUT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DISTINGUISHED THE DECISION BASED ON CONTRACT OF SERVICE OR CONTRACT FOR SERVI CE AND RELIED ON THE DECISIONS OF APEX COURT. IN THE ASSESSMENT PROCEE DINGS, THE ASSESSEE COULD NOT ESTABLISH THE CONSULTANCY SERVIC ES RENDERED SEPARATELY AND NO EVIDENCE WAS PRODUCED TO SUBSTANT IATE THE CLAIM OF EXPENDITURE. THE LD. COMMISSIONER OF INCOME TAX (A PPEALS) CONCURRED AND CONFIRMED THE ORDER OF ASSESSING OFFI CER AND DISMISSED THE ASSESSEE APPEAL. AGGRIEVED BY THE COMMISSIONE R OF INCOME TAX (APPEALS) ORDER, THE ASSESSEE ASSAILED AN APPEAL B EFORE TRIBUNAL. 5. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE REITER ATED THE SUBMISSIONS OF ASSESSMENT AND APPELLATE PROCEEDINGS AND THE PROVISIONS OF LAW AND JUDICIAL DECISIONS. THE FACT S BEING THE ASSESSEE IS A MANAGING DIRECTOR IN M/S. GEECO ENERCON (P)LTD AND ALSO ITA NOS.2044 &2045/MDS/15 :- 9 -: RENDERING CONSULTANCY SERVICES AND THE SALARY IS PA ID ONLY FOR ADMINISTRATIVE WORK. THE ASSESSEE DISCLOSED CONSUL TANCY CHARGES IN PROFIT AND LOSS ACCOUNT AND CLAIMED DEDUCTION OF EX PENDITURE INCURRED FOR TRAVELLING AND OTHER ESTABLISHMENT EXPENSES. T HE ASSESSEE IS A HIGHLY QUALIFIED ENGINEER BY PROFESSION AND WORKED IN NATIONAL AND INTERNATIONAL ORGANIZATIONS FURTHER DELIVERED LECTU RERS ON BOILERS AND PLANT IN INDIA AND FOREIGN COUNTRIES AND SPECIALIZ ED IN SELECTION OF SUITABLE AIR PRE-HEATER OR MODIFICATION OF THE EXIS TING EQUIPMENT. THE LD. AUTHORISED REPRESENTATIVE ARGUED THAT PF AND ES I WAS NOT DEDUCTED AS THE STRENGTH OF WORKS ARE MUCH BELOW TH E LIMIT. THE CONTENTION OF THE ASSESSING OFFICER THAT THE ASSESS EE HAS NOT PAID ELECTRICITY CHARGES BUT IT WAS EXPLAINED THAT ASSES SEE RENDER SERVICES IN OUTSTATION PROJECTS AND THEREFORE ELECTRICITY EX PENSES OF OFFICE ARE MEAGER. THE ASSESSEE RECEIVES PROFESSIONAL INCOM E ONLY FROM ABOVE COMPANY AND DUE TO CONSULTANCY SERVICES AND OPINIO NS, THE COMPANY IS GETTING ORDERS GLOBALLY WHICH IS MORE THAN 60 CR ORES AND EXPORT TURNOVER SUBSTANTIALLY INCREASED. THE LD. AUTHORISE D REPRESENTATIVE RELIED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF P. RAMAJAYAM (SUPRA) WERE THE LORDSHIP HAS CONSIDERED THE SALARY RECEIVED HAS TO BE TREATED AS INCOME FROM SALARY AN D COMMISSION FOR SERVICES IS OFFERED AS INCOME FROM BUSINESS OR PROF ESSION. THE ASSESSEE WAS APPOINTED FOR ADMINISTRATIVE WORK AND AS CONSULTANT FOR ITA NOS.2044 &2045/MDS/15 :- 10 -: EXPERTISE OPINION ON BOILERS WHICH INCREASED THE PR OGRESS OF THE BUSINESS AND PLEADED FOR ALLOWING THE APPEAL. 6. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND VEHEMENTLY OPPO SED TO THE GROUND AND PRAYED FOR DISMISSAL THE APPEAL. 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORD AND JUDICIAL DECISIONS CITED. THE LD. AUTHOR ISED REPRESENTATIVE CONTENTION THAT THE ASSESSEE HAS BEEN APPOINTED AS MANAGING DIRECTOR TO LOOK AFTER ADMINISTRATIVE WORK AND SALARY IS PAY ABLE FOR SUCH COMPANY WORKS AND AT THE SAME TIME AS PER THE DECI SION OF BOARD OF DIRECTORS, THE ASSESSEE WAS APPOINTED AS CONSULTANT AS HE WAS QUALIFIED AND WORKED AT NATIONAL AND INTERNATIONAL UNITS SIMILAR TO THE BUSINESS OF THE ASSESSEE COMPANY. THE ASSESSEE IS ELIGIBLE TO RECEIVE CONSULTANCY FEES AND CLAIM EXPENDITURE. THE NATUR E OF EXPENDITURE BEING TRAVELLING, LODGING, CONVEYANCE INCURRED AT V ARIOUS PLACES OF THERMAL POWER STATION, REFINERY AND SUCH EXPENDITUR E WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF PROFESSIO N AND DUE TO EXPERTISE OPINION OF THE ASSESSEE, THE COMPANY COU LD FETCH EXPORT ORDERS AND IMPROVED THE BRAND IMAGE WHICH IS NOT D ISPUTED BY THE ASSESSING OFFICER. THE LD. ASSESSING OFFICER RELIE D ON REPORT OF THE ITA NOS.2044 &2045/MDS/15 :- 11 -: INSPECTOR THAT ASSESSEE DOES NOT MAKE PAYMENTS OF ESI & PF ON BEHALF OF EMPLOYEES. THE ASSESSEE BEING PROFESSIONA L AND EMPLOYEES ARE BELOW THE LIMIT FOR APPLICABILITY OF ESI AND PF PROVISIONS. THE ASSESSEE MOST OF TIME IS OUT STATIONS AND ELECTRIC ITY BILLS ARE MEAGRE AND CLAIMED IN HIS PERSONAL ACCOUNT. AT THE TIME O F HEARING LD. COUNSEL DREW OUR ATTENTION TO THE STATEMENT OF SALA RY AND PROFESSIONAL INCOME RECEIVED FOR ASSESSMENT YEAR 2006-07 AND 200 7-08 EXPLAINING WITH COMPARABLE TURNOVER OF THE COMPANY AND EXPORT TURNOVER. THE ASSESSEE IS RENDERING SERVICE FOR PAST SEVERAL YEAR S AND CONNECTED WITH THE COMPANY AND DUE TO HIS EFFICIENT ADVICE TH E COMPANY COULD ABLE TO INCREASE ITS TURNOVERS. WE FOUND AS PER THE PROVISIONS OF SECTION 17 OF THE ACT WHICH INCLUDES CERTAIN ITEMS OF RECEIPTS AS SALARY BUT IN ORDER THAT A PARTICULAR RECEIPT IS TREATED A S SALARY, IT IS FUNDAMENTAL REQUISITE THAT EMPLOYEE AND EMPLOYER AR E RELATED BY AGREEMENT AND ANY INCOME DERIVES FROM CONNECTION I S TREATED AS SALARY. BUT IN RECEIPT OF PROFESSIONAL INCOME OF B 21,66,939/-, THE ASSESSEE IS A CONSULTANT TO THE COMPANY AS PER THE MINUTES OF BOARD OF DIRECTORS AND FORM NO.16A WAS ISSUED ON SUCH TE RMS AND CONDITIONS AGREED BETWEEN THEM. THEREFORE, WE ARE OF THE OPINION THAT THE ASSESSEE HAS PROVIDED EXPERTISE IN PRODUCT MANAGEMENT OF THE BUSINESS DUE TO NATIONAL AND INTERNATIONAL EXPE RIENCE IN THE FIELD OF BOILERS AND HAS RIGHTLY OFFERED THE INCOME UNDER TH E PROFESSION AND ITA NOS.2044 &2045/MDS/15 :- 12 -: CLAIMED ESTABLISHMENT EXPENDITURE. THEREFORE, WE D IRECT THE ASSESSING OFFICER TO EXCLUDE THE PROFESSIONAL INCOME CLUBBED IN SALARY INCOME AND WE ALLOW THE APPEAL OF THE ASSESSEE. 8. TO SUM UP, THE APPEALS OF THE ASSESSEE IN ITA NO.20 44/ & 2045/MDS/2015 FOR ASSESSMENT YEARS 2006-07 AND 200 7-08 ARE ALLOWED. ORDER PRONOUNCED ON TUESDAY, THE 19 TH DAY OF APRIL, 2016 AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) # $% / ACCOUNTANT MEMBER ( & . ' ( ) (G. PAVAN KUMAR) ) $% / JUDICIAL MEMBER *& / CHENNAI + / DATED:19TH APRIL, 2016. KV , ' $'./ 0/' / COPY TO: 1 . ! / APPELLANT 2. $% ! / RESPONDENT 3. 1' () / CIT(A) 4. 1' / CIT 5. /4 5 $'6 / DR 6. 5 7 8 & / GF