P.A. CHACKO MUTHALALY, MUMBAI v. ACIT 21(1), MUMBAI

ITA 1286/MUM/2010 | 2003-2004
Pronouncement Date: 15-12-2010 | Result: Allowed

Appeal Details

RSA Number 128619914 RSA 2010
Assessee PAN AABPM8652M
Bench Mumbai
Appeal Number ITA 1286/MUM/2010
Duration Of Justice 9 month(s) 28 day(s)
Appellant P.A. CHACKO MUTHALALY, MUMBAI
Respondent ACIT 21(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 15-12-2010
Assessment Year 2003-2004
Appeal Filed On 17-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C : MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B.RAMAKOTAIAH ACCOUNTANT MEMBER ITA. NO. 1286/MUM/2000 ASSESSMENT YEAR 2003-2004 MR. P.A. CHACKO MUTHALALY MUMBAI 400 056 PAN AABPM-8652-M VS. ACIT 21 (1) MUMBAI. (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI R.N. VASANI (AR) FOR RESPONDENT : SHRI SUMEET KUMAR (DR) ORDER PER B.RAMAKOTAIAH A.M. 1. THIS APPEAL BY THE ASSESSEE AGAINST THE PENALTY ORD ER PASSED UNDER SECTION 271 (1) (C) OF THE ACT RS.3 38 057/- IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) BY ORDER DATED 18/12/2009. 2. BRIEFLY STATED THE ASSESSEE IS AN INDIVIDUAL AN D IS A QUALIFIED ELECTRONIC ENGINEER SPECIALISED IN LASER TECHNOLOGY AND HAS BEEN RENDERING SERVICES AS A TECHNICIAN IN THE NAME AND STYLE OF M /S. LIVE TECH. HE HAS ALSO A PARTNER IN EUROSTAR AND EARNED INCOME BY WAY OF SHARE OF PROFIT AND REMUNERATION. DURING THE YEAR UNDER CONSIDERATION T HE ASSESSEE RECEIVED PROFESSIONAL FEES OF RS.35 77 317/- FROM FOREIGN EN TERPRISE IN CONVERTIBLE FOREIGN EXCHANGE AND CLAIMED DEDUCTION UNDER SECTIO N 80RRA OF THE I.T. ACT OF RS.10 73 195/- BEING 30% OF THE SAME. THE ASSESS ING OFFICER DENIED THE CLAIM MADE UNDER SECTION 80RRA OF THE ACT STATING T HAT UNDER SUB SECTION (2) IN THE CASE OF A TECHNICIAN APPROVAL OF THE CENTRAL GOVERNMENT OR PRESCRIBED AUTHORITY IS REQUIRED AND SINCE ASSESSEE HAS NOT FULFILLED THE CONDITION DEDUCTION UNDER SECTION 80RRA COULD NOT BE ALLOWED. PENALTY PROCEEDINGS UNDER SECTION 271 (1) (C) OF THE ACT AR E INITIATED ON THIS ISSUE. THE CLAIM U/S 80RRA WAS CARRIED UP TO THE ITAT AND ITAT WHILE UPHOLDING THAT ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER S ECTION 80RRA OF THE ACT RESTORED THE MATTER BACK TO THE ASSESSING OFFICER T O EXAMINE THE ALTERNATIVE ITA. NO. 1286/MUM/2000 MR. P.A. CHACKO MUTHALALY 2 CLAIM UNDER SECTION 80O WAS ELIGIBLE AND THE MATTER WAS SENT TO THE FILE OF THE CIT(A). IN THE MEANTIME THE ASSESSING OFFICER ON CONFIRMATION BY THE ORDER OF THE CIT(A) HAS CONCLUDED THE PENALTY PROCE EDINGS AND LEVIED THE PENALTY. THE CIT(A) CONFIRMED THE PENALTY HOLDING T HAT ASSESSEE HAS NOT MADE A BONAFIDE CLAIM. 3. IT WAS THE SUBMISSION OF THE LEARNED COUNSEL TH AT ASSESSEE WAS UNDER BONAFIDE IMPRESSION THAT THEY ARE ELIGIBLE FO R DEDUCTION UNDER SECTION 80RRA AS THE ASSESSEE HAS RENDERED SERVICES TO A FO REIGN COMPANY. HE THEN REFERRED TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TARU JETUMAL LALVANI VS. SECRETARY MINISTRY OF FIN ANCE 185 ITR 418 TO SUBMIT THAT IT IS NOT A REQUISITE CONDITION TO TRAV EL ABROAD FOR RENDERING SERVICES THE BASIS OF WHICH THE ASSESSEE WAS DENIE D BY THE CBDT AN APPROVAL BY LETTER DATED 2 ND JUNE 2005. IT WAS HIS SUBMISSION THAT HONBLE BOMBAY HIGH COURT HAS SET ASIDE THE DIRECTION GIVEN IN THE ABOVE SAID CASE HOLDING THAT RENDERING OF SERVICES OUTSIDE INDIA OF A TECHNICIAN WAS NOT NECESSARY AND WHAT IS IMPORTANT IS WHETHER SERVICE S WERE RENDERED TO THAT COMPANY OUTSIDE INDIA AND ALSO THERE IS NO NEED FOR ANY EMPLOYEE-EMPLOYER RELATIONSHIP BETWEEN THE ASSESSEE AND THE FOREIGN C OMPANY. SIMILAR OPINION WAS ALSO HELD BY THE HONBLE KARNATAKA HIGH COURT I N THE CASE OF A.S. MANI VS. UNION OF INDIA 264 ITR 5 (KAR). IT WAS HIS SUBM ISSION THAT THE ASSESSEE WAS UNDER BONAFIDE IMPRESSION THAT BASED ON THE HON BLE JURISDICTIONAL HIGH COURT JUDGMENT THAT THE SERVICES RENDERED TO A FORE IGN COMPANY IS ALLOWABLE UNDER SECTION 80RRA OF THE ACT. FURTHER HE HAS ALSO SUBMITTED THAT UNDER SIMILAR FACTS THE CBDT HAS PERMITTED THE AMOUNTS RE CEIVED AS A TECHNICIAN FOR ASSESSMENT YEAR 2000-2001 TO AN AMOUNT OF $ 180 00 VIDE LETTER DATED 2 ND JUNE 2005 ON AN APPLICATION MADE BY THE ASSESSEE. IT WAS HIS SUBMISSION THAT ON A GENUINE CLAIM MADE BY THE ASSE SSEE REJECTION OF WHICH DOES NOT ATTRACT PENALTY UNDER SECTION 271 (1) (C) AND HE RELIED ON THE JUDGMENTS OF DELHI HIGH COURT IN THE CASE OF CIT VS . PHI SEEDS INDIA LTD. 301 ITR 13 AND BANYAN TOURS AND TRAVELS P. LTD. VS. ITO 314 ITR (AT) 281 (MUM). HE ALSO RELIED ON THE JUDGMENT OF THE HONBL E SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS 322 ITR 158 ON THE PRINCIPLE THAT MAKING AN INCORRECT CLAIM WHICH WAS NOT ALLOWED BY THE ASSESS ING OFFICER DOES NOT ATTRACT PENALTY PROCEEDINGS. ITA. NO. 1286/MUM/2000 MR. P.A. CHACKO MUTHALALY 3 4. ON THE OTHER HAND LEARNED DR SUPPORTED THE ORD ERS OF THE ASSESSING OFFICER AND CIT(A) AND SUBMITTED THAT THE CLAIM PER SE IS NOT ALLOWABLE AND ACCORDINGLY THE ASSESSING OFFICER WAS CORRECT IN LEVYING PENALTY. 5. WE HAVE CONSIDERED THE RIVAL CLAIMS. AS SEEN FR OM THE RECORD THE ASSESSEE IS A TECHNICIAN AND HAS RENDERED SERVI CES AS A TECHNICIAN TO A FOREIGN COMPANY FROM WHOM HE RECEIVED REMUNERATION IN FOREIGN EXCHANGE. THE ASSESSEE WAS CLAIMED THE DEDUCTION THAT BEING A TECHNICIAN HE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80RRA OF THE ACT AS THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TARU JETHMAL LALVANI VS. SECRE TARY MINISTRY OF FINANCE 185 ITR 480 HAS CONSIDERED THE SIMILAR ISSUE BY THE MINISTRY OF FINANCE AND HELD THAT RENDERING OF SERVICES OUTSIDE INDIA AS A TECHNICIAN IS NOT NECESSARY AND REQUIREMENT IS THAT SERVICES MUST BE RENDERED O UTSIDE INDIA AND ALSO FURTHER HELD THAT CREATION OF EMPLOYEE AND EMPLOYER RELATIONSHIP BETWEEN THE ASSESSEE AND FOREIGN EMPLOYER OR INDIAN CONCERN IS NOT NECESSARY. THE PROVISIONS OF SECTION 80RRA HAVE NOT UNDERGONE ANY CHANGE AFTER THIS JUDGMENT WAS RENDERED BY HONBLE BOMBAY HIGH COURT AS FAR AS THE CONDITIONS ARE CONCERNED. A SIMILAR VIEW WAS ALSO E XPRESSED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF A.S. MANI VS. U NION OF INDIA (SUPRA). ON THE BASIS OF LIBERAL INTERPRETATIONS GIVEN TO TH E PROVISIONS OF SECTION 80RRA OF THE ACT IT CANNOT BE SAID THAT THE ASSESS EE WAS NOT UNDER BONAFIDE IMPRESSION WHILE CLAIMING DEDUCTION UNDER SECTION 8 0RRA OF THE ACT. IT IS TRUE THAT CBDT ON AN APPLICATION BY THE ASSESSEE HA S REJECTED ON THE GROUND THAT ASSESSEE HAS NOT TRAVELLED OUTSIDE INDI A FOR RENDERING SERVICES BUT PARTLY ALLOWED FOR AY 2000-2001 TO THE EXTENT A SSESSEE TRAVELLED ABROAD AND EARNED REMUNERATION. THIS ALSO INDICATES THAT T HE ONLY REASON FOR DISALLOWING THE ASSESSEES CLAIM IS THAT ASSESSEE H AS NOT RENDERED SERVICES BY GOING ABROAD. BASED ON THE JUDICIAL PRINCIPLES A VAILABLE AT THE TIME OF FILING THE RETURN (AND EVEN AT PRESENT) IT CANNOT B E STATED THAT ASSESSEES CLAIM IS A MALAFIDE ONE. ONCE IT IS CONSIDERED THAT THE CLAIM WAS MADE UNDER BONAFIDE INTERPRETATION OF PROVISIONS JUST BECAUSE THE SAME WAS NOT ENTERTAINED BY ASSESSING OFFICER OR REJECTED IT CA NNOT AUTOMATICALLY COME WITHIN THE PURVIEW OF PENALTY AS THERE IS NEITHER A CONCEALMENT OF INCOME NOR FURNISHING INACCURATE PARTICULARS. THIS ASPECT WAS CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS 322 ITR 158 ITA. NO. 1286/MUM/2000 MR. P.A. CHACKO MUTHALALY 4 (SC) AND RESPECTFULLY FOLLOWING THE PRINCIPLES LAID DOWN THEREIN WE ARE OF THE OPINION THAT DENIAL OF THE CLAIM DOES NOT ATTRACT P ENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. IN VIEW OF THESE FACT S WE ARE OF THE OPINION THAT THE FACTS DOES NOT JUSTIFY ANY PENALTY UNDER SECTIO N 271(1)(C) OF THE ACT AND ACCORDINGLY THE SAME IS CANCELLED. ASSESSEES GROU NDS ARE ALLOWED. 6. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON THIS THE 15 TH DAY OF DECEMBER 2010. SD/- (R.S. PADVEKAR) JUDICIAL MEMBER SD/- (B.RAMAKOTAIAH) ACCOUNTANT MEMBER DATED : 15 TH DECEMBER 2010 VBP/- COPY TO : 1. MR. P.A. CHACKO MUTHALALY B-702 PRIME AVENUE S.V. ROAD VILE PARLE (WEST) MUMBAI 056. PAN AABPM8652M 2. ACIT 21 (1) C.-10 6 TH FLOOR PRATYAKSHA KAR BHAVAN BANDRA-KURLA COMPLEX BANDRA (E) MUMBAI 051. 3. CIT(A)-32 MITTAL COURT B WING R.NOS. 13 AND 14 3 RD FLOOR NARIMAN POINT MUMBAI 021. 4. CIT CITY-21 MUMBAI 5. DR C BENCH 6. GUARD FILE TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI