VIJAY. V MEGHANI, MUMBAI V. ACIT CIR 23(3), MUMBAI

ITA 5418/MUM/2011

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6800 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 1994-1995
• Appeal Filed On: 20-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: S E DASTUR; SHIR HARSH KOTHARI
• Keywords: Salary income; Services rendered outside India
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' B ' BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD , JUDICIAL MEMBER ITA NO S . 5418 & 5419 /MUM/ 2011 (ASSESSMENT YEAR S : 1994 - 95 & 1996 - 97 ) SHRI VIJAY V. MEGHANI FLAT NO. 1, 1ST FLOOR ATUR TERRACES , 19, CUFFE PARADE MUMBAI 400005 VS. ACIT, CIRCLE - 23(3) AAYAKAR BHAVAN M.K. ROAD MUMBAI 400020 PAN AAFPM4172N APPELLANT RESPONDENT APPELLANT BY: SHRI S.E. DASTUR & SHIR HARSH KOTHARI RESPONDENT BY: SHRI SUMAN KUMAR DATE OF HEARING: 03 .05.2018 DATE OF PRONOUNCEMENT: 29 . 05.2018 O R D E R PER R.C. SHARMA , AM THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) FOR A.Y. 1994 - 95 AND 1996 - 07, IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF INCOME TAX ACT (HEREINAFTER THE ACT). 2. THE ONLY GRIEVANCE OF THE ASSESSEE IN BOTH THESE ASSESSMENT YEARS PERTAINS TO DISALLOWANCE OF DEDUCTION UNDER SECTION 80 - O OF THE ACT. 3. THESE APPEALS WERE EARLIER HEARD BY THE TRIBUNAL WHEREIN VIDE ORDER DATED 20.08.14, THE DELAY I N FILING THE APPEALS WERE NOT CONDONED . ACCORDINGLY ON THE GROUND THE DELAY ITSELF THE APPEALS WERE DISMISSED. AGAINST THE ORDER OF THE TRIBUNAL DATED 20 TH AUGUST 2014 , T HE ASSESSEE APPROACHED TO THE HON'BLE HIGH COURT AND THE HON'BLE HIGH COURT, VIDE ORDE R DATED 19 TH SEPTEMBER, 2017 CONDONED THE DELAY AND THE MATTER WAS RESTORED BACK TO THE FILE OF THE TRIBUNAL FOR DECIDING ON MERIT S . NOW WE ARE AGAIN IN SEISIN OF THE MATTER. ITA NO S . 5418 & 5419 /MUM/ 2011 SHRI VIJAY V. MEGHANI 2 4. THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE, SHRI S.E. DASTUR, APPEARING ON BEHA LF OF THE ASSESSEE CONTENDED THAT SIMILAR CLAIM UNDER SECTION 80 - O WAS ALLOWED BY THE AO IN A.Y. 1992 - 93 AND 1995 - 96. HE INVITED OUR ATTENTION OF THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR A.Y.1993 - 94 IN ITA NO. 439 9 /MUM/1997 DATED 29.05.2006 WHEREIN THE ISSUE WITH REGARD TO CLAIM OF DEDUCTION UNDER SECTION 80 - O WAS RESTORED BACK TO THE FILE OF THE AO FOR DECIDING AFRESH. OUR ATTENTION WAS ALSO INVITED TO THE ORDER PASSED BY THE AO DATED 19.02.2009 GIVING EFFECT TO TH E ORDER PASSED B Y THE TRIBUNAL DATED 29.04.2006 . 5. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE TRIBUNAL DATED 29/05/2006 FOR THE A.Y.199 3 - 9 4 , WHEREIN THE MATTER WITH REGARD TO DISALLOWANCE OF DEDUCTION UNDER SECTION 80 - O OF THE ACT WAS RESTORED BACK TO THE FILE OF THE AO FOR ALLOWABILITY OF DEDUCTION UNDER SECTION 80 - O WHEREIN IT WAS STATED THAT THE AO SHALL EXAMINE THE ISSUE IN ACCORDANCE WITH THE PROVISIONS OF LAW AND SHALL RECORD A FINDING AS TO WHETHER THE ASSESSEE FULFILS ALL THE CONDITIONS OF SECT ION 80 - O. THE ASSESSEE SHALL BE FREE TO PRODUCE ANY EVIDENCE BEFORE THE AO TO SUBSTANTIATE ITS CLAIM. THE PRECISE OBSERVATION OF TRIBUNAL WAS AS UNDER: - THE REVENUE AUTHORITIES HAVE NOT EXAMINED THE CLAIM OF THE ASSESSEE ON MERITS. THERE IS NO FINDING AS TO WHETHER HE SALARY RECEIVED BY THE ASSESSEE IS IN CONSIDERATION OF TECHNICAL OR PROFESSIONAL SERVICES RENDERED OUTSIDE INDIA TO THE FOREIGN ENTERPRISES. THERE IS ALSO NO FINDING AS TO WHETHER THE SALARY HAS BEEN PAID TO THE ASSESSEE IN CONVERTIBLE FOREI GN EXCHANGE. THE CLAIM OF THE ASSESSEE HAS BEEN REJECTED ON THE SHORT GROUND THAT THE SALARY INCOME IS NOT ENTITLED TO DEDUCTION U/S.80 - 0. IN THE CASE OF A.S. MANI VS. CIT, 227 ITR 380, THE MR HAVE HELD THAT WHETHER THE ASSESSEE IS AN INDEPENDENT CONSULTAN T OR JUST AN EMPLOYEE IS NOT STRICTLY RELEVANT WHILE DECIDING THE ADMISSIBILITY OF DEDUCTION U/S.80 - 0. WE AGREE WITH THE VIEW TAKEN BY THE AAR THAT THE REVENUE AUTHORITIES SHOULD NOT BE CARRIED AWAY BY THE NOMENCLATURE OF THE PAYMENT RECEIVED AND THE CLAI M OF THE ASSESSEE MUST BE CONSIDERED ON MERITS. IT MAY BE THAT THE SALARY OR PART OF IT RECEIVED BY AN ASSESSEE MAY BE ATTRIBUTABLE TO THE SERVICES RENDERED BY SUCH ASSESSEE WHICH ARE COVERED U/S. 80 - 0. IN THIS CONNECTION, A REFERENCE MAY BE MADE TO THE DECISION OF .THE HON'BLE SUPREME COURT IN THE CASE OF CONTINENTAL CONSTRUCTION LTD. V. CIT, 195 ITR 81. IN THIS CASE, THE SUPREME COURT HAS EXPLAINED THE TERM 'ANY SIMILAR PAYMENT' OCCURRING IN SECTION 80 - 0. THE RELEVANT PART OF THE RATIO OF THIS CASE MAY BE REPRODUCED BELOW FROM THE HEAD - NOTE: ITA NO S . 5418 & 5419 /MUM/ 2011 SHRI VIJAY V. MEGHANI 3 'THE TRUE DUE TO THE INTERPRETATION OF THE EXPRESSION 'ANY SIMILAR PAYMENT' IN SECTION 80 - O LIES NOT IN THE PRECEDING THREE WORDS BUT REALLY IN THE SECOND PART OF THE SECTION. THE ESSENCE OF THE EXEMPTION LIES, NOT IN CONSIGNING THE RECEIPT TO ONE OF THESE PIGEON - HOLES BUT IN EXAMINING WHETHER THE RECEIPT IS A PAYMENT IN CONSIDERATION OF ONE OF THE TWO SITUATIONS ENVISAGED IN THE SECTION. TO ILLUSTRATE: WHERE THE ASSESSEE IS THE OWNER OF A PATENT OR INVENTION, HE MA Y GENERALLY PERMIT ANOTHER TO MAKE USES OF THE PATENT OR THE INVENTION IN CONSIDERATION OF A 'ROYALTY' PAYMENT. OR, AGAIN, WHERE THE ASSESSEE IS IN POSSESSION OF TECHNICAL KNOW - HOW, HE MAY BE PREPARED TO ALLOW ANOTHER TO MAKE USE THEREOF IN CONSIDERATI ON OF A 'FEE' TO THE ASSESSEE. HE MAY ALSO STIPULATE A CONSIDERATION IN THE FORM OF A COMMISSION BASED ON THE SALES OF THE PRODUCTS THE OTHER PARTY IS ABLE TO MANUFACTURE WITH THE AID OF SUCH INVENTION OR KNOW - HOW. AGAIN, AN ASSESSEE MAY HAVE ACHIEVED SOM E SPECIALITY AND HE MAY AGREE TO LEND HIS SERVICES TO SOME OTHER PERSON AND STIPULATE A CONSIDERATION THEREFORE WHICH MAY BE VARIOUSLY DESCRIBED. THE NATURE OF THE ASSET, RIGHT, INFORMATION OR SERVICES WHICH CAN BE BROUGHT UNDER THIS PROVISION MAY BE VARI ED AND THE CONSIDERATION STIPULATED FOR ALLOWING ANOTHER TO AVAIL OF THE ASSESSEE'S ASSET, KNOWLEDGE OR SERVICES CAN LIKEWISE ASSUME MULTIFARIOUS FORMS. THE WORD 'SIMILAR' CONNOTES THAT THE PAYMENT MADE TO THE ASSESSEE NEED NOT BE IN THE NATURE OF ROYALTY , COMMISSION OR FEES ONLY; IT COULD BE ANY PAYMENT OF LIKE NATURE, I.E. MADE IN CONSIDERATION OF THE USE OR SUPPLY OF SUCH AN ASST , KNOWLEDGE OR SERVICES IN THE SAME MANNER AS ROYALTY, FEES OR CONSIDERATION COULD BE. THEREFORE, ANY TYPE OF PAYMENT RECEIVED BY AN ASSESSEE WILL QUALIFY FOR DEDUCTION UNDER THE SECTION SO LONG O NLY AS IT IS A PAYMENT MADE IN CONS IDERA TION OF ONE OF THE TWO TYPES OF TRANSACTIONS REFERRED TO IN THE SECTION.' 46. FOLLOWING FROM THE DISCUSSION GIVEN ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE'S IS REQUIRED TO BE CONSIDERED ON MERITS HAVING REGARD TO THE VARIOUS REQUIREMENTS AND C ONDITIONS OF SECTION 80 - O. THIS ISSUE IS, THEREFORE, RESTORED BACK TO THE AO FOR FRESH CONSIDERATION AFTER ALLOWING ADEQUATE OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE. THE AO SHALL EXAMINE THE ISSUE IN ACCORDANCE WITH THE PROVISIONS OF LAW AND SHALL RECORD A FINDING AS TO WHETHER THE ASSESSEE FULFILS ALL THE CONDITIONS OF SECTION 80 - 0. THE ASSESSEE SHALL BE FREE TO PRODUCE ANY EVIDENCE BEFORE THE AO TO SUBSTANTIATE HIS CLAIM. GROUND NO. 10 IS ALLOWED FOR STATISTICAL PURPOSES. 6. WE OBSERVE THAT DURING THE YEARS UNDER CONSIDERATION ASSESSEES CLAIM OF DEDUCTION U/S.80 - O, SO DISALLOWED BY AO WAS CONFIRMED BY CIT(A) AFTER OBSERVING AS UNDER: - ITA NO S . 5418 & 5419 /MUM/ 2011 SHRI VIJAY V. MEGHANI 4 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS PUT FORTH BY THE LEARNED AR. THE DEDUCTION U/S 80 - 0 WOULD BE ADMISSIBLE IN RESPECT OF INCOME RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE IN CONSIDERATION OF 'TECHNICAL OR PROFESSIONAL SERVICES RENDERED OUTSIDE IND IA.' IN THE CASE* OF THE APPELLANT, HOWEVER, THE UNDISPUTED FACT IS THAT HE IS AN EMPLOYEE OF A FOREIGN BANK AND POSTED AS THE OFFICER - INCHARGE OF THEIR REPRESENTATIVE OFFICE IN INDIA AT MUMBAI. THE APPELLANT IS THUS RENDERING HIS SERVICES IN - INDIA BEING AN EMPLOYEE POSTED AT MUMBAI WHERE THE EMPLOYEE REPRESENTATIVE OFFICE IS SITUATED* T HE APPELLANT RECEIVES REGULAR SALARY AND ALLOWANCES BESIDES VARIOUS PERQUISITES LIKE HOUSING, FURNITURE, GAS, ELECTRICITY AND TELEPHONE ETC.. THE ENTIRE INCOME IS DECLARE D UNDER THE HEAD 'SALARIES' FOR WHICH THE BENEFIT OF STANDARD DEDUCTION IS ALSO CLAIMED AND ALLOWED. IN THESE CIRCUM STANCES IT CANNOT BE SAID EVEN WITHIN THE MEANING OF EXPLANATION (III) TO SECTION 60 - 0 THAT THE APPELLANT IS RENDERING SERVICES 'FROM INDIA BECAUSE IT IS EVIDENT THAT THE APPELLANT IS RE ND E RING HIS SERVICES TO THE AFORESAID FOREIGN BANK'S REPRESENTATIVE OFFICE SITUATED AT MUMBAI. IN THIS VIEW OF THE MATTER THE DEDUCTION DAMNED U/S 80 - 0 IS NOT ADMISSIBLE TO THE APPELLANT. CONSEQUENTLY THE DEDUCTION OF FT. 6,27,243 ALLOWED U/S 80 - 0 IN THE IMPUGNED ASSESSMENT ORDER HAS TO BE WITHDRAWN RESULTING IN ENHANCEMENT OF THE ASSESSED INCOME BY CORRESPONDING AMOUNT, THE AO IS DIRECTED TO REVISE THE ASSESSMENT A ND ISSUE DEMAND NOTICE ACCORDINGLY. 7. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR S UNDER CONSIDERATION ARE SAME AS DISCUSSED BY TRIBUNAL IN A.Y.1993 - 94, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE WE RESTORE THE MA TTER B ACK TO THE FILE OF THE AO, FOR DECIDING THE SAME IN TERMS OF DIRECTION GIVEN BY THE TRIBUNAL IN ITS ORDER DATED 29.05.2006. WE DIRECT ACCORDINGLY. 8. IN THE RESULT, BOTH THE APPEAL S FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH MAY, 2018 . SD/ - SD/ - ( RAVISH SOOD ) ( R.C. SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 29 TH MAY, 2018 ITA NO S . 5418 & 5419 /MUM/ 2011 SHRI VIJAY V. MEGHANI 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) - XIX , MUMBAI 4. THE CIT - XI , MUMBAI 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.