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

We have carefully gone through the order of the Tribunal dated 29/05/2006 for the A.Y.1993-94, 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 Section 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 foreign 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 consultant 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 claim 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:

"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 may 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 consideration 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 some 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 varied 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 only as it is a payment made in consideration of one of the two types of transactions referred to in the section."

4 & 5419/Mum/2011 Shri Vijay V. Meghani “ 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 India." 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* The appellant receives regular salary and allowances besides various perquisites like housing, furniture, gas, electricity and telephone etc.. The entire income is declared under the head "salaries" for which the benefit of standard deduction is also claimed and allowed. In these circumstances 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 rendering 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 and issue demand notice accordingly.”

Order pronounced in the open court on 29th May, 2018.