Commissioner Of Income-Tax,Chennai-X v. G.ramasamy

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 02.07.2007 Coram : THE HONOURABLE MR.JUSTICE P.D.DINAKARANANDTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.198 of 2004 Commissioner of Income-tax,Chennai-X. ..Appellant Vs. G.Ramasamy ..Respondent Appeal under Section 260A of the Income-tax Act, 1961 against theorder of the Income Tax Appellate Tribunal, Chennai Bench 'C', Chennai inI.T.A. No.831/Mds/2001 dated 25.08.2003 for the assessment year 1998-99order dated 28.03.2001 From the Commissioner of Income Tax Appeal inITA.No.238/00-01andAssessmentorderdated29/12/2000inPA.No./GIR.No.780-R from the Deputy Commissioner of Income Tax, CompanyCircle - I (NR) Chennai - 34. For Appellant :Mr.N.Muralikumaran, Sr.Standing Counsel forIncome-tax Department For Respondent : Mr.J.Balachander forMr.S.SridharJUDGMENT (Judgment of the Court was delivered by P.P.S.Janarthana Raja, J.) This appeal is filed under Section 260A of the Income Tax Act, 1961by the Revenue, against the order of the Income Tax Appellate Tribunal,Chennai Bench 'C', Chennai in I.T.A. No.831/Mds/2001 dated 25.08.2003. On21.06.2004, this Court admitted the appeal and formulated the followingsubstantial questions of law:- "1. Whether on the facts and in the circumstances ofthe case, the Income Tax Appellate Tribunal was rightin holding that the assessee was eligible for deductionunder Section 80-O for the assessment year 1998-99,when the payment received from the foreign company was https://hcservices.ecourts.gov.in/hcservices/ not in consideration for the use outside India of anypatent, invention design or trademark? 2. Whether on the facts and in the circumstances of thecase that the Income Tax Appellate Tribunal was rightin holding that the income has been assessed under thehead "salary" ignoring the fact that the Commissionerof Income Tax (Appeals) has directed that the incomeshould be assessed under the head "profits and gains ofbusiness or profession" and such assessment under thehead "salaries" is not a hurdle in the grant ofdeduction under Section 80-O of the Act?" 2.The facts leading to the above substantial questions of law areas under: The assessee is an individual. The relevant assessment year is 1998-99 and the corresponding accounting year ended on 31.03.1998. Theassessee filed Return of income on 31.12.1998 admitting income ofRs.1,64,100/-. Later, the case was taken up for scrutiny and notice wasissued under Section 143(2) of the Income-tax Act ("Act" in short). TheAssessing Officer completed the assessment under Section 143(3) of the Actdetermining the total income at Rs.10,23,620/-. While completing theassessment, the Assessing Officer disallowed the claim of the assesseeunder Section 80-O of the Act. Aggrieved by the order, the assessee filedan appeal to the Commissioner of Income-tax (Appeals). The C.I.T.(A)dismissed the appeal. The assessee raised an alternative plea before theC.I.T.(A) for deduction under Section 80RR of the Act and the same wasalso dismissed by the C.I.T.(A). Aggrieved, the assessee filed an appealto the Income-tax Appellate Tribunal ("Tribunal" in short). The Tribunalallowed the claim of the assessee under Section 80-O of the Act. Hencethe alternative plea made by the assessee with regard to deduction underSection 80RR was not considered on the ground that the assessee hadsucceeded in the main claim under Section 80-O of the Act. 3.Learned Senior Standing Counsel appearing for the Revenuesubmitted that the Tribunal was wrong in granting deduction under Section80-O of the Act ignoring the amendment made to Section 80-O by the FinanceAct, 1997 with effect from 01.04.1998. As per the amended provision, theassessee is not entitled to relief. The assessee is only a Consultant inthe Manpower Management and hence he is not entitled to deduction underSection 80-O of the Act. 3.Learned Senior Standing Counsel appearing for the Revenuesubmitted that the Tribunal was wrong in granting deduction under Section80-O of the Act ignoring the amendment made to Section 80-O by the FinanceAct, 1997 with effect from 01.04.1998. As per the amended provision, theassessee is not entitled to relief. The assessee is only a Consultant inthe Manpower Management and hence he is not entitled to deduction underSection 80-O of the Act. 4.Learned counsel appearing for the assessee fairly stated that asper the amended Act, with effect from 01.04.1998, the assessee is notentitled to relief under Section 80-O of the Act. The counsel furthersubmitted that the assessee had raised an alternative plea before theTribunal that he is entitled to relief under Section 80RR of the Act, andrequested the Court to remand the matter to the Tribunal to consider thesame. https://hcservices.ecourts.gov.in/hcservices/ 5.Heard the counsel. In view of the amendment made to Section 80-O of the Act by the Finance Act, 1997 with effect from 01.04.1998, theassessee is entitled to deduction only in respect of the income receivedby him from the Government of a foreign State or foreign enterprise inconsideration for the use outside India of any patent, invention, designor registered trade mark. This amendment was not at all considered by theTribunal and the counsel appearing for the assessee fairly stated that inview of the amendment, the assessee is not entitled to relief underSection 80-O of the Act. In view of the same, we answer the questions infavour of the Revenue and against the assessee. Accordingly, the tax caseis allowed. No costs. 6.In respect of the alternative submission made by the assesseefor deduction under Section 80RR of the Act, the Tribunal has notconsidered in view of the grant of relief to the assessee, under Section80-O of the Act. In view of answering the questions, that the assessee isnot entitled to relief under Section 80-O of the Act, we direct theTribunal to consider the alternative plea as to whether the assessee isentitled to relief under Section 80RR of the Act or not, and pass ordersin accordance with law, after giving opportunity to the assessee. Sd/Asst.Registrar /true copy/ kmTo Sub Asst.Registrar 1. The Assistant Registrar, Income-tax Appellate Tribunal, Chennai Bench "C", Chennai. Income-tax Appellate Tribunal, Chennai Bench "C", Chennai. 2. The Commissioner of Income-tax (Appeals)-V, Chennai-34. 3. The Deputy Commissioner of Income-tax, Company Circle I(NR), Chennai-34. Company Circle I(NR), Chennai-34. 5. The Commissioner of Income Tax, Chennai. 1 cc To Mr.N.Muralikumaran, Advocate, SR.39713. SSV(CO)RVL 13.07.2007 T.C.(A) No.198 of 2004 https://hcservices.ecourts.gov.in/hcservices/