Dr Damodar Rout, Chennai V. DCIT, Trivandrum

MA 6/COCH/2021

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7581 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 10 month(s) 13 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-04-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 16-06-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Salary income; Set aside
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri Sanjay Arora, Accountant Member and Ms. Kavitha Rajagopal, Judicial Member MA No.06/Coch/2021 : Asst.Year 2004-2005 (arising out of ITA No.489/Coch/2010) Dr. Damodar Rout Plot No.1264, 4 th Street Jayalakshmi Nagar, Kuttupakkam Chennai – 600 056. [PAN : ACKPR9917K] vs. The Assistant Commissioner of Income-tax, Circle 1(2) Trivandrum. (Applicant) (Respondent) Applicant by: Sri. Raja Kannan, Advocate Respondent by: Smt. J.M. Jamuna Devi, Sr. DR Date of Hearing: 09.02.2024 Date of Pronouncement: 30.04.2024 O R D E R Per: Sanjay Arora, AM This is a Miscellaneous Application by the Assessee in respect of the Order under section 254(1) of the Income-tax Act, 1961 (the Act) dated 15.10.2019 by the Tribunal, allowing for statistical purposes the assessee’s appeal contesting the revision u/s. 263 dated 24.03.2009 by the competent authority in respect of his assessment under the Act for assessment year (AY) 2004-2005. 2. The instant appeal, filed on 17.06.2020, i.e., beyond the time limit specified u/s.254(2), was found in time in view of the order in suo moto writ petition No. WP (Civil) 3/2020, dated 10/3/2022 by the Hon’ble Apex Court, and was accordingly heard on merits. MA No. 06/Coch/2021 (AY 2004-2005) Dr.Damodar Rout v. Asst. CIT 2 | P a g e 3. The background facts, in brief, are that the assessee, a neurosurgeon, superannuated from Sri Ramachandra Medical College and Research Institution (the Institute), deemed as a University, on 28.02.2002. He was reappointed from the following day by the Trust managing the Institute at a fixed salary, with no incidental benefits, viz., PF, DA, etc. For the relevant year, i.e., f.y. 2003-2004, he returned, apart from salary income (Rs.2,93,200), income from other sources (Rs. 2,21,383), and professional income (Rs.8,02,978), i.e., against a gross receipt of Rs.16.97 lakhs, claiming expenditure for the balance Rs.8,94,486 (Rs.16,97,464 – 8,02,978). The professional income was by way of a Consultant, conducting operations at the neurosurgery department, as well as rendering services to other units of the Hospital. The salary income was by way of professor at the College. The Assessing Officer (AO) found an absence of employee-employer relationship and, accordingly, assessed the salary income as professional income, disallowing standard deduction claimed there-against (rs. 30,000). The ld. Commissioner of Income-tax, Trivandrum (CIT) was in the revisionary proceedings of the view that the employee-employer relationship being admitted, it is, on the contrary, the professional income that ought to have been assessed as salary income, disallowing expenditure, claimed at Rs.8,94,487. He, accordingly, directed a redo of the assessment for doing so, disallowing the said expenditure. In appeal there-against, the Tribunal found that the income returned as salary was for teaching, and that as professional income by way of consultancy. It, accordingly, found nothing amiss in two persons having a twin relationship, i.e., both as employee-employer, as well as, at the same time, the former acting in the capacity of a consultant to the latter. As long as the professional income is not traceable to the obligations of the assessee under the employment contract, income, rather, could not be assessed as salary income. It accordingly held as under:- “8. In the instant case, on perusal of the letter of reappointment, Form No.16 and Form No.16A, it is clear that the assessee apart from earning salary income was also doing consultancy in the hospital for which there is no employee- employer relationship and the amount received for such consultancy was assessable as income from profession. The CIT in the impugned order had MA No. 06/Coch/2021 (AY 2004-2005) Dr.Damodar Rout v. Asst. CIT 3 | P a g e directed the AO to redo the assessment by disallowing the expenses of Rs.8,94,487 claimed out of the professional income. The AO shall examine the allowability of the said expenses under the head `income from profession’. Therefore, we set aside the findings of the CIT in the impugned order passed u/s. 263 of the I.T. Act. We direct the AO to reexamine the claim of deduction of Rs.8,94,487 whether it is allowable as a deduction under the head `income from business or profession’. For the above said purposes, the issue is restored to the Assessing Officer. It is ordered accordingly.” 4. The assessee has now moved a rectification petition, assailing the said direction by the Tribunal on the ground that the allowance of expenditure had attained finality. The ld. CIT had directed disallowance of expenditure in consequence to his direction that the relevant income is assessable as salary income. Once, therefore, the Tribunal found professional receipt as liable to be assessed separately, allowance of expenditure would follow in consequence inasmuch as the same had, in the absence of any adverse finding by the AO, attained finality. 5. We have heard the parties, and perused the material on record. 5.1 The assessee’s pleadings, made before us by Sri. Raja Kannan, Advocate, apparently appealing, are seriously flawed. The direction by the ld. CIT in the concluding para of his order, as a reading of his order shows, is preceded by a finding as to the AO having mechanically accepted the assessee’s return, i.e., without proper verification and findings, and which finding remains undisturbed in further appeal. He could have, accordingly, restored the matter back to the file of the AO for passing an order after due verification and issue of findings upon hearing the assessee. He, however, finding the employee-employer relationship as admitted, was of the firm view that therefore the nature of the income arising to the assessee from the Institute is necessarily salary and, accordingly, directed him to assess it as such, disallowing the entire claimed expenditure of Rs.8.94 lakhs. The Tribunal, in appeal, did not agree with the ld. CIT, as indeed with the AO, i.e., the Revenue Authorities, that there could be only one relationship between two persons, ascribing the entire income flowing to the assessee from the Institute as either professional income (AO) or as MA No. 06/Coch/2021 (AY 2004-2005) Dr.Damodar Rout v. Asst. CIT 4 | P a g e salary (CIT). Inasmuch as it is not bound by either the AO or the ld. CIT, it is perfectly permissible for the Tribunal to do so. In it’s considered opinion, as afore- noted, the assessee could have simultaneously a twin relationship with the payer- Trust. Income, nevertheless, would have to be computed in accordance with the relevant provisions of law. This sums-up it’s decision. 5.2 Continuing further, it is thus wholly incorrect to say that the assessment of the professional receipt of Rs.16.97 lakh had attained finality at Rs.8.03 lakhs on the same being found by the Tribunal as rightly returned under u/s. 28. The ld. CIT not finding anything amiss in the assessment of salary income as returned, it is only the professional income, returned at Rs.8.03 lakhs, which was the subject matter of revision. It being undisputed that both incomes are chargeable to tax, the prejudice to the Revenue, making the assessment as liable to revision, arises only on account of the difference in the quantum of income on it being computed under either head of income. This income, it may be appreciated, is not Rs.8.03 lakh, as the assessee assumes, but Rs.16.97 lakh, i.e., the receipt as reflected in Form 16A, the nature of which as consultancy is the basis of its assessment as professional income, as referred to by the Tribunal (para 7), and against which the assessee had claimed expenditure at Rs.8.94 lakh. While the AO considers the claimed expenditure as deductible, the ld. CIT regards the entire of it as inadmissible. The Tribunal, upholding the assessee’s stand of the receipt of Rs.16.97 lakh as being liable to be assessed as professional income, restores the aspect of determination thereof back to the AO. Much less mistaken, the Tribunal was duty bound to do so. As explained in CIT v. Walchand & Co. (P.) Ltd. [1967] 65 ITR 381 (SC), the Tribunal is to deal with and determine the questions which arise out of the subject-matter of the appeal in the light of the evidence, and consistently with the justice of the case. There has surely been a part- acceptance of the assessee’s stand. One may perhaps argue that it may be more appropriate to say that, in result, the assessee’s appeal stands partly allowed. That, again, may not be a correct picture as it is difficult to predict the extent to which the MA No. 06/Coch/2021 (AY 2004-2005) Dr.Damodar Rout v. Asst. CIT 5 | P a g e amount claimed may be found admissible as expenditure, which could extend to the entire sum claimed. We, accordingly, find no reason for any interference. 5.3 We decide accordingly. 6. In the result, the assessee’s miscellaneous application is dismissed. Order pronounced on April 30, 2024 under Rule 34 of The Income Tax (Appellate Tribunal) Rules, 1963 Sd/- Sd/- (Kavitha Rajagopal) Judicial Member (Sanjay Arora) Accountant Member Cochin, Dated: April 30, 2024 Devdas G* Copy to: 1. The Applicant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File By Order Assistant Registrar ITAT, Cochin