Commissioner of Income Tax vs G. Ramasamy

P.P.S. Janarthana Raja, J.—This appeal is filed u/s 260A of the Income Tax Act, 1961 by the revenue against the order of the Income Tax

Appellate Tribunal, Chennai Bench ""C"", Chennai in I. T. A. No. 831/Mds/2001, dated 25-9-2003. On 21-6-2004, this Court admitted the

appeal and formulated the following substantial questions of law:

Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the assessee was eligible

for deduction u/s 80-O for the assessment year 1998-99, when the payment received from the foreign company was not in consideration for the

use outside India of any patent, invention, design or trade mark ?

Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the income has been

assessed under the head ''Salary'' ignoring the fact that the Commissioner (Appeals) has directed that the income should be assessed under the

head ''Profits and gains of business or profession'' and such assessment under the head ''Salaries'' is not a hurdle in the grant of deduction u/s 80 -

O of the Act ?

The facts leading to the above substantial questions of law are as under:

The assessee is an individual. The relevant assessment year is 1998-99 and the corresponding accounting year ended on 31-3-1998. The

assessee filed the return of income on 31-12-1998, admitting the income of Rs. 1,64,100. Later, the case was taken up for scrutiny and notice

was issued u/s 143(2) of the Income Tax Act (""the Act"" hereinafter referred to as). The assessing officer completed the assessment u/s 143(3) of

the Act determining the total income at Rs. 10,23,620. While completing the assessment, the assessing officer disallowed the claim of the assessee

u/s 80-O of the Act. Aggrieved by the order, the assessee filed an appeal to the Commissioner (Appeals). The Commissioner (Appeals) dismissed

the appeal. The assessee raised an alternative plea before the Commissioner (Appeals) for deduction u/s 80RR of the Act and the same was also

dismissed by the Commissioner (Appeals). Aggrieved, the assessee filed an appeal to the Income Tax Appellate Tribunal (""the Tribunal"" in short).

The Tribunal allowed the claim of the assessee u/s 80-O of the Act. Hence the alternative plea made by the assessee with regard to deduction u/s

80RR was not considered on the ground that the assessee had succeeded in the main claim u/s 80-O of the Act.

Learned senior standing counsel appearing for the revenue submitted that the Tribunal was wrong in granting deduction u/s 80 -O of the Act

ignoring the amendment made to Section 80-O by the Finance Act, 1997 with effect from 1-4-1998. As per the amended provision, the assessee

is not entitled to relief. The assessee is only a consultant in the Manpower Management and hence he is not entitled to deduction u/s 80-O of the

Act.

Learned Counsel appearing for the assessee fairly stated that as per the 5 amended Act, with effect from April 1, 1998, the assessee is not

entitled to relief u/s 80-O of the Act. Counsel further submitted that the assessee had raised an alternative plea before the Tribunal that he is

entitled to relief u/s 80RR of the Act, and requested the court to remand the matter to the Tribunal to consider the same.

Heard counsel. In view of the amendment made to Section 80-O by the Finance Act, 1997 with effect from April 1, 1998, the assessee is

entitled to deduction only in respect of the income received by him from the Government of a foreign State or foreign enterprise in consideration for

the use outside India of any patent, invention, design or registered trade mark. This amendment was not at all considered by the Tribunal and

counsel appearing for the assessee fairly stated that in view of the amendment, the assessee is not entitled to relief u/s 80-O of the Act. In view of

the same, we answer the questions in favour of the revenue and against the assessee. Accordingly, the tax case is allowed. No costs.

In respect of the alternative submission made by the assessee for deduction u/s 80RR of the Act, the Tribunal has not considered in view of the

grant of relief to the assessee u/s 80-O of the Act. In view of answering the questions, that the assessee is not entitled to relief u/s 80-O of the Act,

we direct the Tribunal to consider the alternative plea as to whether the assessee is entitled to relief u/s 80RR of the Act or not, and pass orders in

accordance with law, after giving opportunity to the assessee.