Shri Sudhakar C.Sahasrabudhe, Gandhinagar V. The ACIT.,GNR Circle, Gandhinagar

ITA 350/AHD/2010

• Counselvise Citation: 35020514 RSA 2010
• Duration Of Justice: 3 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 04-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K VHRA
• Assessee Lawyers: URVSHI SODHAN
• Keywords: Salary income; Advance ruling
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND SHRI A. MOHAN ALAN KAMONY, AM) ITA NO.350/AHD/2010 A. Y.: 2006-07 SUDHAKAR C. SAHASRABUDHE, PLOT NO.138, SECTOR -8, GANDHINAGAR (GUJARAT) P. A. NO. AAGPS 5912D VS THE A. C. I. T., GANDHINAGAR CIRCLE, GANDHINAGAR (APPELLANT) (RESPONDENT) APPELLANT BY SMT. URVSHI SODHAN, AR RESPONDENT BY SHRI R. K. VHRA, SR. DR DATE OF HEARING: 11-07-2013 DATE OF PRONOUNCEMENT: 14-08-2013 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL OF THE ASSESSEE IS PREFERRED AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), GANDHINAGAR IN APPEAL NO. CIT(A)GNR/168/2008-09 DATED 13-11-200 9, FOR THE ASSESSMENT YEAR 2006-07, PASSED U/S 250 READ WITH S ECTION 143(3) OF THE INCOME TAX ACT,1961. 2. THE ASSESSEE HAS RAISED THREE GROUNDS WHEREIN GR OUNDS NO. 3 IS GENERAL IN NATURE AND DOES NOT SURVIVE FOR ADJUD ICATION. THE SURVIVING GROUNDS NO.1 AND 2 ARE REPRODUCED HEREIN UNDER:- 1 THE LD. ASSESSING OFFICER AND ALSO HON. CIT(APPEA LS) HAVE ERRED IN TREATING THE INCOME FROM RETAINER SHIP FEES AS INCOM E FROM SALARY AND NOT INCOME FROM PROFESSION. 2. YOUR APPELLANT FURTHER SUBMITS THAT BOTH THE LOW ER AUTHORITIES HAVE FAILED TO APPRECIATE THE FACTS OF THE CASE AND THEREBY LD. ASSESSING OFFICER MADE THE DISALLOWANCE OF EXPENSES OF RS.1,51,076/- AS CLA IMED AGAINST THE ITA NO.350/AHD/2010 (AY 2006-07) SUDHAKAR C. SAHASRABUDHE VS ACIT, GANDHINAGAR 2 PROFESSIONAL FEES AND THE HON. CIT(APPEALS) HAS FUR THER FAILED BY CONFIRMING THE SAME DISALLOWANCE. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A N INDIVIDUAL ENGAGED AS DIRECTOR IN DHIRUBHAI AMBANI INSTITUTE O F INFORMATION & COMMUNICATION TECHNOLOGY (DA- IICT) FILED HIS RETUR N OF INCOME ON 19-10-2006 FOR THE ASSESSMENT YEAR 2006-07 DECLARIN G INCOME OF RS.40,14,438/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS FINALIZED U/S 143(3) OF THE ACT ON 12 TH DECEMBER, 2008, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 41,79,110/, WHEREIN THE LEARNED AO MADE ADDITION OF RS.1,64,669 /- BY DISALLOWING ASSESSEES CLAIM FOR EXPENSES. ON PERUS AL OF THE RETURN OF INCOME, THE LEARNED AO OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS EARNING SALARY INCOM E FROM GTL LTD., MUMBAI, PENSION FROM IIT, MUMBAI AND TDS CERT IFICATE WAS ALSO ATTACHED WITH THE RETURN OF INCOME. THE ASSESSEE AL SO RECEIVED RETAINERSHIP FEE OF RS.18,26,250/- FROM DHIRUBHAI A MBANI INSTITUTE OF INFORMATION & COMMUNICATION TECHNOLOGY (DA- IICT) A ND CLAIMED EXPENSES OF RS.1,64,669/-. ON PERUSAL OF TDS CERTIF ICATE ISSUED BY DA IICT, THE LEARNED AO OBSERVED THAT THE ASSESSEE HAD RECEIVED RS.1,50,000/- PER MONTH AND TAX WAS DEDUCTED AT SOU RCE @ RS.8,451/- PER MONTH. THE LEARNED AO CONSIDERING TH E FUNCTIONS AND RESPONSIBILITY OF THE ASSESSEE AS A DIRECTOR, TREAT ED THE AMOUNT OF RS.18,26,250/- AS SALARY INCOME. ON APPEAL BEFORE T HE LEARNED CIT(A), THE LEARNED CIT(A) CONFIRMED THE ORDER OF T HE LEARNED AO BY OBSERVING AS UNDER IN PARA 9 AND 10 OF HIS ORDER:- 9. ..MOST OF THE TIME HE HAS BEEN TEACHING IN I. I. T. BOMBAY. WORKING AS A DIRECTOR OF DIICT IS A STATUTORY APPOI NTMENT AS THE A. ITA NO.350/AHD/2010 (AY 2006-07) SUDHAKAR C. SAHASRABUDHE VS ACIT, GANDHINAGAR 3 O. HAS BROUGHT OUT SO CLEARLY, BUT IS CLEARLY A CON TINUATION OF HIS ACADEMIC CAREER. APPARENTLY HE WAS LIKE ANY OTHER T EACHER AND HENCE TO THAT EXTENT THE MONIES RECEIVED BY HIM FRO M THE DIICT NEED TO BE TREATED AS HIS SALARY INCOME. 10. IN VIEW OF THIS DECISION, WHILE THE ASSESSING O FFICERS ACTION OF DISALLOWING OF EXPENSES IS CORRECT IN PRINCIPLE BUT THE AUTHORISED REPRESENTATIVE HAS RAISED CERTAIN ISSUES OF ARITHME TICAL INACCURACIES E.G. THE PART OF PETROL EXPENSES HAVING ALREADY BEE N INCLUDED IN THE RETURN OF INCOME. THE ASSESSING OFFICER MAY VERIFY THE ASPECT AT THE TIME OF APPEAL AFFECT AND ENSURE THAT ONLY THE RECE IPT FROM DIICT GET ADDED AS SALARY INCOME; ALL CLAIMS OF EXPENSES AGAI NST THAT SHALL GET DISALLOWED. THE ASSESSING OFFICER TO REWORK INC OME ACCORDINGLY. 3.1 THEREAFTER, THE ASSESSEE FILED MISC. APPLICATIO N BEFORE THE LEARNED AO FOR DELETING THE ADDITION OF RS.1,64,669 /- BY TREATING THE EXPENDITURE AS DEDUCTABLE EXPENDITURE SINCE THE ASS ESSEE WAS RECEIVING INCOME UNDER THE HEAD BUSINESS AND PROFE SSION. HOWEVER, THE LEARNED AO VIDE HIS ORDER PASSED US/ 1 54 OF THE ACT DATED 22-01-2009 DETERMINED THE INCOME OF THE ASSES SEE AT RS.41,65,517/- BY ONLY ALLOWING THE ASSESSEES CLAI M OF MISC. EXPENSES OF RS.13,593/- SINCE IT WAS ADDED TWICE, B UT SUSTAINED THE DISALLOWANCE OF RS.1,51,076/- FOR THE SAME REASON A S HELD IN THE ASSESSMENT ORDER. 4. AGGRIEVED BY THE ABOVE, THE ASSESSEE IS NOW IN A PPEAL BEFORE US. 5. BEFORE US, THE LEARNED AR REITERATED THE SUBMISS IONS MADE BEFORE THE AUTHORITIES BELOW AND RELIED ON THE DECI SION OF THE AUTHORITY FOR ADVANCE RULINGS (INCOME TAX) NEW DELH I IN THE CASE OF MAX MUELLER BHAVAN VS DIRECTOR OF INCOME-TAX (INTER NATIONAL TAXATION) IN A. A. R. NO.597 OF 2002 DATED 31-05-20 04 WHILE AS THE ITA NO.350/AHD/2010 (AY 2006-07) SUDHAKAR C. SAHASRABUDHE VS ACIT, GANDHINAGAR 4 LEARNED DR RELIED ON THE DECISION OF RAM PRASHAD VS CIT, NEW DELHI [ORDER DATED 24-08-1972] REPORTED IN 86 ITR 122. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE MATERIALS ON RECORD. ON EXAMINING THE LETTER OF APPOINTMENT OF THE ASSESSEE ISSUED BY RELIANCE INDUSTRIES LTD., WE FIN D THAT THE ASSESSEE HAS BEEN APPOINTED AS DIRECTOR OF DA IIC T UNDER CERTAIN TERMS & CONDITIONS. FURTHER, IT IS CATEGORICALLY ME NTIONED IN THE LETTER THAT THE ASSESSEE IS APPOINTED ON RETAINER BASIS FO R A PERIOD OF THREE YEARS EFFECTIVE FROM THE DATE OF HIS JOINING. THE T AX DEDUCTED AT SOURCE CERTIFICATE ISSUED BY DA IICT STATES THAT THE NATURE OF PAYMENT IS PROFESSIONAL FEES. FROM THE FACTS OF T HE CASE, WE FIND THAT THERE ARE NO MATERIALS ON RECORD TO SUGGEST TH AT, THERE EXISTS EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE ASSESS EE AND DA IICT, OTHER THAN CERTAIN TERMS IN THE APPOINTMENT L ETTER WHICH HAS SOME TRACE OF IT. HOWEVER, THE APPOINTMENT LETTER H AS SPECIFIED THAT THE ASSESSEE IS APPOINTED AS RETAINER ONLY FOR A PE RIOD OF THREE YEARS FROM THE DATE OF HIS JOINING. THIS ESTABLISHES THAT THE ASSESSEE IS NOT AN EMPLOYEE OF DA IICT, BUT PERFORMED HIS DUTY ON LY AS A DIRECTOR TO RENDER TECHNICAL SERVICES AS AND WHEN ASSIGNED. THEREFORE, THE FEES RECEIVED BY THE ASSESSEE ON RETAINERSHIP CANNO T BE CONSIDERED AS INCOME FROM SALARY BUT HAS TO BE TAXED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AND, THEREFORE, THE AS SESSEE IS ENTITLED TO CLAIM THE EXPENDITURE OF RS.1,64,669/- AS DEDUCT ION FROM HIS PROFESSIONAL INCOME, IF THE SAME HAS BEEN INCURRED FOR THE PURPOSE OF EARNING THE RETAINERSHIP FEES RECEIVED FROM DA II CT. ACCORDINGLY, THE LEARNED AO IS HEREBY DIRECTED TO VERIFY THE EXP ENDITURE INCURRED ITA NO.350/AHD/2010 (AY 2006-07) SUDHAKAR C. SAHASRABUDHE VS ACIT, GANDHINAGAR 5 BY THE ASSESSEE AND IF, THE SAME IS INCURRED FOR TH E PURPOSE OF EARNING THE RETAINERSHIP FEE RECEIVED FROM DA IIC T, THE ADDITION MADE, SHALL BE DELETED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 14-08-2013 SD/- SD/- (D. K.TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANTA LAKSHMIKANTA LAKSHMIKANTA LAKSHMIKANTA DEKA/ DEKA/ DEKA/ DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASSTT. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 12-07-2013/02-08-13 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 15-07-2013/02-08-13 OTHER MEMBER : 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DISPATCH OF THE ORDER: