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Income Tax Appellate Tribunal, F Bench, Mumbai
Before: Shri Jason P. Boaz & Shri Sandeep Gosain Shri Vijay V. Meghani
This appeal by the assessee is said to arise out of the order of the CIT(A)-30, Mumbai dated 19.02.2004 dismissing the assessee’s appeal for A.Y. 1997-08.
The facts of the case, briefly, are as under: - 2.1 The assessee, an individual, filed his return of income for A.Y. 1997- 98 on 30.06.1997 declaring income of `34,46,960/-; comprising of salary of `23,75,048/- received from foreign bank, viz., BHF Bank; income from other sources of `25,46,024/- and loss from house property. Deduction of `11,12,870/- was claimed under section 80-O of the Income Tax Act, 1961 (in short, 'the Act') from the gross total income in respect of salary received in convertible foreign exchange from BHF Bank, Frankfurt. The return was processed under section 143(1)(a) of the Act. Subsequently, proceedings under section 147 of the Act were initiated and after recording reasons to believe that income of the assessee liable to tax had escaped assessment on account of incorrect claim of deduction under section 800 of the Act, Shri Vijay V. Meghani the Assessing Officer (AO) issued notice under section 148 of the Act dated 20.03.2002 to the assessee. In response thereto, the assessee submitted that the original return of income of A.Y. 1997-98 filed on 30.06.1997 be treated as filed in response to the notice issued under section 148 of the Act. The assessment was concluded under section 143(3) r.w.s. 147 of the Act vide order dated 03.12.2002; wherein the income of the assessee was determined at Rs.45,69,830/-, in view of the AO disallowing the assessee’s claim for deduction under section 80-O of the Act amounting to `11,12,870/-. 2.2 Aggrieved by the order of assessment for A.Y. 1997-98 dated 03.12.2012, the assessee preferred an appeal before the CIT(A) on 14.02.2003 raising the following grounds, challenging the disallowance of the assessee’s claim for deduction of `11,12,870/- under section 88-O of the Act: “GROUND NO. 1:- On the facts and circumstances of the case the A.O. erred in disallowing claim made by the assessee u/s 80-O amounting to Rs.11,121,870/-. The A.O. failed to understand that the assessee fulfils all the conditions and prerequisites as mentioned in the Income Tax Act, 1961. The deduction u/s 80-C therefore, be allowed to the assessee. GROUND NO. 2: - The A.O. further erred in not giving proper reasons for disallowing assessee’s claim u/s 80-O. The order passed by the A.O. therefore be treated as bad in law and deserves to be quashed.” 3.1 According to the Sr. Counsel for the assessee, the assessee till date has not received a copy of the impugned order passed by the learned CIT(A) dated 19.02.2004 dismissing his appeal for A.Y. 1997-98 on the merits of issues raised. In this regard, an affidavit dated 08.10.2013 has been filed by the Chartered Accountant/Tax Consultant of the assessee, one Shri Chandrasekhar, Partner, M/s. Rajesh Rajeev & Associates, Chartered Accountants’, submitting that the address for communication in the appeal filed before the learned CIT(A) was his office address, viz. At 2nd Floor, Nanik Motwani Marg, Fort, Mumbai 400023 and though he was collecting postal deliveries from that office even after vacating the same, he had not received any order from the learned CIT(A) in respect of A.Y. 1997-98.
Shri Vijay V. Meghani 3.2 The Senior Counsel submits that enquiries by the assessee in respect of the order of the learned CIT(A) for A.Y. 1997-98 on the assessee’s appeal, both with the office of the learned CIT(A) and AO, did not result in the assessee getting to know the status of the appeal. The assessee evoked a response from the office of the CIT(A)-30, Mumbai vide letter dated 14.06.2013 (received on 15.06.2013), in response to his application under the Right to Information Act, 2005, that his appeal for A.Y. 1997-98 was dismissed vide order dated 19.02.2004. A copy of the Register of Appeals in the learned CIT(A)’s office was enclosed to confirm that the assessee’s appeal for A.Y. 1997-98 was dismissed. The assessee was also informed by this letter that the records of relevant appeal proceedings is not available in the office of the CIT(A)-30, Mumbai. 3.3 According to the Senior Counsel, in these peculiar circumstances of the case as laid out above the assessee, inspite of having not been served with a copy of the appellate order dated 19.02.2004 in his case for A.Y. 1997-98 proceeded to file an appeal for this year before the Tribunal on 14.08.2013. It is contended that if the date of receipt of communication of the learned CIT(A)’s letter, i.e. on 15.06.2013 informing of the dismissal of appeal for A.Y. 1997-98 is taken to be the date of service of the order of the learned CIT(A) for A.Y. 1997-98, then the instant appeal is filed within the statutory period of 60 days. 3.4 It is further submitted that, without prejudice to the above, if the date of the CIT(A)’s order i.e. 19.02.2004, is to be taken as the date of receipt of the order, then the assessee prays that, in the peculiar facts and circumstances of the case, the delay of 3404 days in filing the appeal for A.Y. 1997-98 before the Tribunal may be condoned and the issue be decided on merits. In this regard, also filed is a petition for condonation of the delay in filing the appeal alongwith an affidavit sworn to by the assessee. 3.5 Both the learned D.R. for Revenue and the AO were present before the Bench and submitted that the order of the CIT(A) dated 19.02.2004 dismissing the assessee’s appeal for A.Y. 1997-98 was not traceable.
Shri Vijay V. Meghani 3.6 We have heard both parties in respect of the assessee’s petition for condonation of delay in filing this appeal for A.Y. 1997-98 before the Tribunal; though primarily it is strongly contended by the assessee that he was informed of the dismissal of his appeal vide order dated 19.02.2004, only on 15.06.2013 and therefore having filed this appeal on 14.08.2016, there is no delay as it is within the statutory period of 60 days. Having considered the submissions put forth, we are of the opinion that in the peculiar facts and circumstances of the case, as laid out above, the assessee has filed this appeal on 14.08.2013; which is within the statutory period of 60 days from the date of being informed that his appeal was dismissed, i.e. 15.06.2013. Even otherwise, in the interest of equity, fair play and justice and taking into account the peculiar facts and circumstances of this particular case, we are of the view that even if the delay in filing the appeal is to be construed as 3404 days, the assessee had good, sufficient and reasonable cause for filing the appeal for A.Y. 1997-98 belatedly. We, therefore, condone the delay, if any, in filing the appeal in this case, as in our not doing so the assessee would be put to great hardship and difficulty as this would result in loss of effective remedy in getting its grievances disposed off on merits. We hold and direct accordingly. 3.7 After hearing the parties, the question before us in the peculiar facts and circumstances of this case is whether the assessee’s appeal can be admitted for adjudication in the absence of the original/certified copy of the order of the CIT(A) dated 19.02.2004 for A.Y. 1997-98. In this context, it is observed that the learned CIT(A) has certainly dismissed the assessee’s appeal vide order dated 19.02.2004, as per information rendered to the assessee through the Department’s reply dated 14.06.2013 in response to the RTI query raised by him in this regard. As per the provisions of section 253 of the Act, any assessee aggrieved by the order of CIT(A) is competent to file an appeal before the Tribunal within 60 days of the date on which the order sought to be appealed against is communicated to the assessee. Though Rule 9(1) of the I.T. Rules, 1962 (in short ‘the Rules’) mandates requirement of the original or certified copy of Shri Vijay V. Meghani order appealed against to be filed as part of the memorandum of appeal, Rule 9(3) of the Rules empowers the Tribunal, in its discretion, to accept a memorandum of appeal which is not accompanied by all or any of the documents referred to in Rule 9(1) of the Rules. In our considered view, in the peculiar facts and circumstances of the case on hand, we invoke the provisions of section 253 r.w. Rule 9(3) and the assessee’s appeal is held to be maintainable and is therefore admitted for consideration and adjudication on merits.
In this appeal before the Tribunal, the assessee has raised the following grounds: - “
1. NATURAL JUSTICE The order passed by Learned Commissioner of Income - tax (Appeals) - :XXVII ["Ld. CIT (A)"] is bad in law, in as much as the same is passed in violation of the principle of natural justice as no proper, effective and reasonable opportunity given to the Appellant. WITHOUT PREJUDICE TO THE ABOVE
2. REASSESSMENT WITHOUT JURISDICTION It is submitted that in the facts and the circumstances of the case, and in law, the reassessment framed u/s. 143 (3) r.w.s. 147 is bad, illegal and void as the necessary condition for initiating as well as completing the reassessment proceeding were not fulfilled. WITHOUT FURTHER PREJUDICE TO THE ABOVE
3. DISALLOWANCE OF DEDUCTION U IS 80 - 0 3 It is submitted that in the facts and the circumstances of the case, and in law, the disallowance of the claim of deduction of Rs.11,12,8701- u/s. 80 – 0 of the Act was not called for.
4. LIBERTY: 4.1 The Appellant craves leave to add, alter, delete or modify all or any the above grounds at the time of hearing.”
5. Grounds No. 1 & 2: - 5.1 At the outset itself, the learned senior counsel for the assessee fairly submitted that the grounds raised at Sr. No. 1 and 2 cannot be supported and are liable to be dismissed, as it can be seen that the same have not been raised in the grounds raised in the appeal filed by the assessee before Shri Vijay V. Meghani the CIT(A) as extracted at para 2.2 of this order (supra). We, therefore, dismiss ground 1 and 2 of the assessee’s appeal.
6. Ground No. 4 (4.1): - being general in nature no adjudication is called for thereon.
7. Ground No. 3 – Deduction under section 80-O of the Act 7.1 A perusal of the grounds 1 & 2 raised by the assessee before the learned CIT(A) against the order of assessment for A.Y. 1997-98 (at para 2.2 of this order) and this ground No. 3 raised in this appeal (supra at para 4 of this order), in our view, go to show that the only issue for consideration and adjudication before us is the denial of the assessee’s claim for deduction under section 80-O of the Act amounting to `11,12,870/- by both the authorities below; since the assessee’s appeal on this sole issue was dismissed by the CIT(A)’s order dated 19.02.2004. 7.2 On the merits of the assessee’s claim for bring allowed deduction under section 80-O of the Act for A.Y. 1997-98, the learned senior counsel for the assessee brought to the notice of the Bench that this issue stand covered by the decision of the Coordinate Bench of this Tribunal in the assessee’s own case for A.Y. 1993-94 in dated 29.05.2006; wherein the Coordinate Bench after considering the assessee’s claim for deduction under section 80-O of the Act, restored the matter back to the file of the AO for fresh consideration. The learned Senior Counsel further submitted a copy of the AO’s order dated 19.02.2009 giving effect to the Tribunal’s order in ITA No. 4399/Mum/1997 for A.Y. 1993-94 wherein the assessee’s claim for deduction under section 80-O of the Act was allowed. 7.3.1 We have heard both the learned D.R. for Revenue and the Senior Counsel for the assessee and perused and carefully considered the material on record; including the judicial pronouncements cited. We find that the issue of the assessee’s claim for deduction under section 80-O of the Act was also up for consideration before a Coordinate Bench of this Tribunal in the assessee’s case for A.Y. 1993-94. In their decision in ITA No. 4339/Mum/1997 dated 29.05.2006, the Coordinate Bench restored Shri Vijay V. Meghani the issue of the assessee’s claim for deduction under section 80-O of the Act to the file of the AO for consideration on merits holding as under at paras 39 to 46 as under: - “39. Ground No. 10 reads as under: “On the facts and in the circumstances of the case, the learned CIT(A) was not justified in upholding the view of the Assessing Officer that your appellant was not entitled to a deduction of Rs.5,71,250/- under the provisions of section 80-O of the Income-tax Act, 1961.”
The facts with regard to this issue are that for the first time in respect of the present assessment year the assessee claimed deduction u/s/80-O in respect of the salary income received from BHF Bank in Convertible Foreign Exchange. The AO called upon the assessee to justify this claim and it was stated before him that the assessee was the Chief Representative of the Liaison office in India of BHF Bank, Germany. Under the Reserve Bank of India approval, the office and the representative of BHF Bank in India cannot carry on any business or provide any services in India, nor can earn any remuneration in India in any form whatsoever. It was pointed out that the Indian Office can operate solely for the purpose of assisting the head office and its branches overseas. It was claimed that the Chief Representative through the Liaison office sends necessary information and feed back to the Head office and other overseas branches of BHF Bank for their use outside India. It was also pointed out before us that the benefit of section 80-0 has been extended to an individual who is resident in India with effect from the assessment year 1992-93. The Assessing Officer rejected the claim on the ground that the assessee was only an employee and was receiving salary which is not covered under section 80-0.
The learned CIT(A) concurred with the view of the Assessing Officer with the following short discussion at para 19 of his order: "The A.O. has discussed the reasons for doing so in detail in his assessment order. I have gone through them very carefully and I do not find any reasons for not concurring with him. This ground is also dismissed. Further, it is not the appellant who is rendering professional services in India in his personal capacity. It is only the employer bank who is rendering such services".
From the above, it appears that the assessee's claim was rejected on the basis that salary income earned by an employee from the employer would not qualify for deduction u/s.80-0.
The learned counsel appearing on behalf of the assessee contended before us that the assessee's claim has been rejected by the revenue authorities solely on the basis that the salary income earned by the assessee is in his capacity as an employee and therefore, the same is outside the purview of section 80-0. The learned counsel for the assessee contended that section 80-0 does not exclude salary income and if all other conditions of section 80-0 are fulfilled the assessee would be entitled to deduction under that section. The Shri Vijay V. Meghani learned counsel for the assessee has relied on the order of Authority for Advance Rulings (AAR) in the case of A.S. Mani vs. CIT, 227 ITR 380. The learned counsel for the assessee invited our attention to the following observations made by the AAR at page 386 of the report: "The authority is of the opinion that the applicant is entitled to the exemption claimed, on the assumption that the services are rendered by him to Mabanaft outside India. The section confers exemption in two situations: (a) the remuneration is paid by the foreign enterprise in consideration for its use outside India of the industrial or commercial information provided by the applicant; or (b) the payment is received in consideration of technical or professional services rendered outside India. The applicant does not claim that situation (e) prevails in the present case. The only question is whether situation (b) does. The controversy whether the applicant is an independent consultant, or just an employee of Mabanaft is not strictly relevant as the section only talks of services rendered or information provided by a person to a foreign enterprise. It may have some relevance If the applicant wants to claim (and he seems to from the arguments addressed and cases cited by him) that he is rendering "professional" services. But the Authority is of the view that it is unnecessary to go into the question whether the applicant can be said to carry on a profession, as the services rendered by the applicant can be clearly described as "technical services." The learned counsel for the assessee argued that the assessee has rendered such services which are covered under section 80-0 and therefore, the assessee is entitled to deduction u/s.80-0 in respect of salary income.
The learned Departmental Representative forcefully supported the orders of the revenue authorities and contended that section 80-0 does not visualize deduction on salary income. It is pointed out that deduction is admissible on income by way of royalty, commission, fees or any similar payments received by the assessee, if all the conditions of section 80-0 are fulfilled. It is argued that the salary income cannot be said to be in the nature of any similar, payment as royalty, commission or fees.
We have given a careful consideration to the rival submissions and have gone through the facts as also the relevant provisions of law in this regard. Section 80-0 as applicable to the assessment year under appeal, reads as under: “Where the gross total income of an assessee, being an India Company or a person other than a company who is resident in India includes any income by way of royalty, commission, fees or any similar payment received by assessee from the Government of a foreign State or a foreign enterprise in consideration for the use outside India or any patent, invention, mode, design, secret formula or process, or similar property right, or information concerning industrial commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to such Government or enterprise by the assessee, or in consideration of Shri Vijay V. Meghani technical or professional services rendered or agree to be rendered outside India to such Government or enterprise by the assessee and such income is received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction of an amount equal to fifty per cent of the income so received in, or brought into India in computing the total income of the assessee .... Explanation - for the purposes of this section, (i) ..... (ii) ..... (iii) services rendered or agreed to be rendered outside India shall include services rendered from India but shall not include services rendered in India." The Revenue authorities have not examined the claim of the assessee on merits. There is no finding as to whether the 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-O. In the case of A.S. Mani vs. CIT, 227 ITR 380, the AAR 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- O. 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-O. 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 clue to the interpretation of the expression ''any similar payment" in section 80-0 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 Shri Vijay V. Meghani 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 asset, 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."
Following from the discussion given above, we are of the view that the assessee's claim is required to be considered on merits having regard to the various requirements and conditions of section 80-0. This issue is, therefore, restored back to the AO for fresh consideration after allowing adequate opportunity of being 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.” 7.3.2 We also observe that the AO in his order dated 19.02.2009 giving effect to the order of the Coordinate Bench of this Tribunal in dated 29.04.2006 for A.Y. 1993-94 (supra) has allowed the assessee’s claim for deduction under section 80-O of the Act. Following the decision of the Coordinate Bench in the assessee’s own case for A.Y. 1993-94 (supra), we are of the view that for this A.Y. 1997-98 the assessee’s claim for deduction under section 80-O of the Act is required to be considered on merits having regard to the various requirements and conditions of section 80-O. We, therefore, set aside the findings of the authorities below and restore this issue to the file of the AO for fresh consideration in accordance with the provisions of law after affording the assessee adequate opportunity of being heard and to file details/submissions required in the matter, taking guidance from the directions in the order of the Coordinate Bench for A.Y. 1993-94 (supra) and the AO’s order dated 19.02.2009 giving effect thereto. Consequently ground No. 3 is treated as allowed for statistical purposes.