M/S. J B BODA & CO PVT. LTD, MUMBAI v. THE ACIT CC 17 & 28, MUMBAI

ITA 5271/MUM/2007 | 1993-1994
Pronouncement Date: 03-02-2010 | Result: Dismissed

Appeal Details

RSA Number 527119914 RSA 2007
Assessee PAN AAACJ2289F
Bench Mumbai
Appeal Number ITA 5271/MUM/2007
Duration Of Justice 2 year(s) 5 month(s) 27 day(s)
Appellant M/S. J B BODA & CO PVT. LTD, MUMBAI
Respondent THE ACIT CC 17 & 28, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 03-02-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 03-02-2010
Date Of Final Hearing 29-01-2010
Next Hearing Date 29-01-2010
Assessment Year 1993-1994
Appeal Filed On 06-08-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI BEFORE SHRI R.S.SYAL AM AND SHRI N.V.VASUDEVAN JM ITA NO.5271/MUM/2007 : ASST.YEAR 1993-94 M/S.J.B.BODA & CO. PVT. LTD. MAKER BHAVAN 1 SIR V.T.MARG MUMBAI 400 020. PA NO.AAACJ2289F VS. THE ASSTT.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 17 & 28 MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI P.J.PARDIWALA & NITESH JOSHI RESPONDENT BY : SHRI LAL CHAND O R D E R PER R.S.SYAL AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 15.5.2007 I N RELATION TO THE ASSESSMENT YEAR 1993-94. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE REDUCTION IN THE AMOUNT OF DEDUCTION U/S.80-O. THE FACTUAL MATRIX OF THE CAS E IS THAT THE ASSESSEE COMPANY ENJOYED INCOME FROM RE-INSURANCE BUSINESS WITH HEAD OFFICE AT BOMBAY AND A BRANCH AT LONDON. ORIGINAL RETURN WAS FILED DECLARI NG TOTAL INCOME AT RS.98 26 080 WHICH WAS SUBSEQUENTLY REVISED SHOWING TOTAL INCOME AT RS.NIL. THE ASSESSEE HAD CLAIMED DEDUCTION U/S.80-O IN THE ORIGINAL RETURN A T RS.86 27 971 ON THE BASIS OF SOME EARLIER DECISION OF THE TRIBUNAL IN ITS OWN CA SE. IN THE REVISED RETURN THE AMOUNT OF DEDUCTION U/S.80-O WAS ENHANCED TO RS.2 0 0 72 050 BUT THE SAME WAS RESTRICTED TO THE EXTENT OF THE POSITIVE INCOME TO THE TUNE OF RS.1 83 65 761. THE ASSESSEE HAD RECEIVED TOTAL FOREIGN COMMISSION AMOU NTING TO RS.5 68 22 422 BUT FOREIGN COMMISSION ELIGIBLE FOR DEDUCTION U/S.80-O WAS STATED BY THE ASSESSEE VIDE ITS LETTER DATED 12.9.1994 AT RS.5 47 61 20 1. THE EXPENSES IN FOREIGN CURRENCY AMOUNTING TO RS.1 51 67 688 WERE DEDUCTED FROM THE ELIGIBLE INCOME. ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 2 THE RESULTANT AMOUNT OF RS.3 95 93 513 WAS CONSIDER ED FOR CLAIMING DEDUCTION AT THE RATE OF 50% WHICH AMOUNT CAME AT RS.1 97 96 75 6. THE ASSESSING OFFICER OPINED THAT THE AMOUNT OF DEDUCTION U/S.80-O COUL D NOT BE MORE THAN THE INCOME UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PR OFESSION WHICH AMOUNT WAS WORKED OUT AT RS.1 27 73 552. ACCORDINGLY THE AMOUN T OF DEDUCTION WAS REDUCED TO RS.1.27 CRORES. THE ASSESSEE CHALLENGED THE ACTI ON OF THE ASSESSING OFFICER ON THIS ISSUE BEFORE THE LEARNED FIRST APPELLATE AUTHO RITY WHO VIDE PARA 13 OF HIS ORDER DATED 26.11.1999 (HEREINAFTER CALLED THE ORIGINAL A PPELLATE ORDER) REFERRED THE MATTER BACK TO THE ASSESSING OFFICER AND ALSO DIREC TED THE ASSESSEE TO FILE ITS COMPUTATION WHICH COULD BE CONSIDERED BY THE ASSESS ING OFFICER AT THE TIME OF GIVING EFFECT TO THIS APPELLATE ORDER. 3. WHILE GIVING EFFECT TO THE CIT(A)S ORDER THE ASSESSING OFFICER IN THE INSTANT PROCEEDINGS NOTED THAT THE COMPUTATION OF D EDUCTION U/S.80-O WAS NOT PROPERLY DONE BY THE ASSESSEE. HE CONSIDERED THE ASSESSEES WORKING OF DEDUCTION U/S.80-O FURNISHED BEFORE HIM VIDE ITS LETTER DATED 20.2.2006 AS UNDER:- I. TOTAL FOREIGN COMMISSION RECEIVED RS.5 68 22 4 22 II. GROSS CONVERTIBLE FOREIGN EXCHANGE EARNED ELIGIBLE FOR DEDUCTION U/S.80-O RS.5 47 6 1 201 IV. TOTAL EXPENSES IN FOREIGN CURRENCY (INCLUDING LONDON OFFICE EXP. OF RS.12332507) RS.1 51 67 688 VI. NET FOREIGN COMMISSION ELIGIBLE FOR DEDUCTION U/S.80-O. RS.3 95 93 513 VII DEDUCTION U/S.80-O 50% RS.1 97 96 756 RESTRICTED TO RS.1 43 92 947 (U/S.80-A) I.E. GROSS TOTAL INCOME DEDUCTION U/ S.80-M ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 3 4. THE ASSESSING OFFICER DID NOT ACCEPT THIS WORKIN G IN VIEW OF THE FACT THAT THE ASSESSEE HAD CLAIMED DEDUCTION ON THE PROPERTY INCO ME INTEREST INCOME AND DIVIDEND INCOME ETC WHICH WAS NOT PERMISSIBLE. HE FURTHER TOOK INTO CONSIDERATION THE PROVISIONS OF SECTION 80-AB AND OPINED THAT THE SAID DEDUCTION WAS AVAILABLE ONLY ON THE NET AMOUNT OF INCOME AND NOT THE GROSS RECEIPT OF THE ELIGIBLE COMMISSION. HE WORKED OUT THE NET AMOUNT OF DEDUCT ION AT RS.80 22 990 BY ALSO REDUCING THE PROPORTIONATE INDIRECT EXPENSES RELATA BLE TO THE GROSS RECEIPTS ELIGIBLE FOR DEDUCTION U/S.80-O AS UNDER:- (I) TOTAL RECEIPTS AS PER PROFIT & LOSS ACCOUNT 6 70 13 427 (II) TOTAL FOREIGN RECEIPTS (GROSS) INCLUDED IN TH E ABOVE TOTAL RECEIPTS. 5 47 61 201 (III) TOTAL EXPENSES EXCLUDING PROVISION FOR TAXAT ION DONATIONS AND LOSS ON PORBUNDER PROPERTY DEBITED TO P & L ACCOUNT AS PER THE WORKING ATTACHED WITH THE ORIGINAL RETURN. 4 73 77 333 EXPENSES ATTRIBUTABLE TO ALLOWABLE RECEIPTS ON PRO-RATA BASIS. 4 73 77 333 X 5 47 61 201 ----------------------------------- COMES TO RS.3 87 15 221 6 70 13 427 INCOME ELIGIBLE FOR DEDUCTION U/S.80-O COMES TO (RS.5 47 61 201 3 87 15 221) I.E. RS.1 60 4 5 979 DEDUCTION @ 50% OF THE ABOVE WORKS OUT TO R S. 80 22 990 5. THE LEARNED CIT(A) DID NOT INTERFERE WITH THE OR DER PASSED BY THE ASSESSING OFFICER. ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 4 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD IN THE LIGHT OF PRECEDENTS CITED BEFORE US. A. PRELIMINARY ISSUE 7. THE LEARNED A.R. OBJECTED TO THE COMPUTATION OF DEDUCTION BY THE A.O. IN THE SECOND ROUND BY WHICH THE INDIRECT EXPENSES AT TRIBUTABLE TO THE ELIGIBLE INCOME WERE ALSO DISALLOWED ON PRO-RATA BASIS. HE CONTEND ED THAT IN THE ORIGINAL ASSESSMENT ORDER THE ASSESSEE CLAIMED DEDUCTION AT RS.1.97 CRORES WHICH AMOUNT WAS NOT DISPUTED BY THE ASSESSING OFFICER BUT THE D EDUCTION WAS RESTRICTED TO RS.1.27 CRORES ON THE GROUND THAT THE SAME COULD NO T EXCEED THE INCOME UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PROFESSION. WHILE INVITING OUR ATTENTION TOWARDS THE ORIGINAL APPELLATE ORDER THE LEARNED A .R. CONTENDED THAT THE AREA OF VERIFICATION BEFORE THE ASSESSING OFFICER IN THE P RESENT PROCEEDINGS WAS ONLY TO SEE AS TO WHICH OF THE TWO AMOUNTS VIZ. RS.1.97 C RORES BEING THE AMOUNT OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 80O OR RS.1. 27 CRORES AS ALLOWED BY THE ASSESSING OFFICER HIMSELF IN THE FIRST ROUND WAS ACCEPTABLE. IT WAS SUBMITTED THAT THE A.O. WAS NOT JUSTIFIED IN REDUCING THE QUANTUM OF INCOME ELIGIBLE FOR DEDUCTION U/S.80-O ON WHICH NEITHER THERE WAS NOR COULD HAVE BEEN ANY DIRECTION OF THE LEARNED CIT(A). HE ARGUED THAT THE POWER OF THE AS SESSING OFFICER IN THE INSTANT PROCEEDINGS WAS INCARCERATED TO CONSIDERING THE QUE STION OF AVAILABILITY OF DEDUCTION U/S.80-O ON THE BASIS OF THE GROSS TOTAL INCOME AND NOT THE INCOME DETERMINED UNDER THE HEAD `PROFITS AND GAINS OF BUS INESS OR PROFESSION AS WAS DONE BY HIM IN THE ORIGINAL ASSESSMENT. HE SUBMITTE D THAT THE AO WHILE GIVING EFFECT TO THE CIT(A)S ORDER WAS NOT COMPETENT T O ENHANCE THE INCOME ALREADY ASSESSED U/S 143(3) AND MORE SO WHEN THE CIT(A) HAD NOT PASSED ANY ENHANCEMENT ORDER. THE SUM AND SUBSTANCE OF HIS SUBMISSIONS WAS THAT IN THE FIRST PLACE THERE WAS NO DIRECTION IN THE ORIGINAL APPELLATE ORDER FO R ENHANCEMENT AND SECONDLY THERE COULD NOT HAVE BEEN ANY SUCH DIRECTION FOR ENHANCEM ENT. ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 5 8. IN THE OPPOSITION THE LEARNED DEPART MENTAL REPRESENTATIVE ARGUED THAT THE ASSESSEE HAD NOT FILED ANY DETAIL ABOUT ITS CLA IM OF DEDUCTION U/S 80O DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS WHICH LED THE LD. CIT(A) TO RESTORE THE ENTIRE ISSUE OF COMPUTATION OF DEDUCTIO N TO THE FILE OF THE ASSESSING OFFICER. IT WAS STATED THAT THERE WAS NOTHING IN TH E DIRECTION OF THE LD. CIT(A) TO RESTRICT THE POWER OF THE AO IN THE FRESH PROCEEDI NGS TO ANY PART OF THE DEDUCTION. AT THIS JUNCTURE IT WILL BE RELEVANT TO MENTION THA T BOTH THE PARTIES ADMITTED BEFORE US THAT THE ORIGINAL APPELLATE ORDER WAS ACCEPTED B Y THEM AND NO SECOND APPEAL WAS FILED AGAINST THAT. 9. IT IS NOTICED THAT THE ASSESSEE CLAIMED DEDUCTIO N U/S.80-O AT RS.1.97 CRORES WHICH WAS REDUCED BY THE ASSESSING OFFICER TO RS.1. 27 CRORES IN THE FIRST ROUND ON THE GROUND THAT THE AMOUNT OF DEDUCTION COULD NOT E XCEED THE INCOME ELIGIBLE UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PR OFESSION. WHEN THE MATTER CAME UP BEFORE THE LEARNED CIT(A) HE VIDE PARA 13 OF HIS ORDER RESTORED THE MATTER TO THE FILE OF A.O. WITH THE FOLLOWING OBSERVATIONS ON THIS ISSUE :- THE SEVENTH GROUND IS REGARDING THE AMOUNT OF DE DUCTION U/SEC. 80-O OF THE ACT. IT IS STATED THAT THE AMOUNT SHOUL D BE RS.1 97 96 756/- WHILE THE ASSESSING OFFICER HAS DE TERMINED THIS AMOUNT AT RS.1 27 73 552. THE APPELLANT HAS NOT GIVEN HOW IT HAS COME TO THIS FIGURE. THEREFORE THIS POINT IS REFER RED BACK TO THE ASSESSING OFFICER WHERE THE APPELLANT WILL FILE IT S COMPUTATION WHICH SHOULD BE CONSIDERED BY THE ASSESSING OFFICER AT THE TIME OF GIVING EFFECT TO THIS APPELLATE ORDER. (EMPHASIS SUPPLIED BY US) 10. FROM THE ABOVE OBSERVATIONS IN THE ORIGINAL APP ELLATE ORDER IT CAN BE EASILY NOTICED THAT THE ASSESSEE HAD NOT FILED ANY DETAIL OF ITS COMPUTATION OF THE AMOUNT OF DEDUCTION U/S.80-O AND THAT WAS THE REASON WHICH WEIGHED WITH THE LEARNED CIT(A) FOR REFERRING THE ENTIRE MATTER BACK TO THE FILE OF A.O. FOR CONSIDERING THE ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 6 COMPUTATION OF AMOUNT OF DEDUCTION U/S.80-O ON THE BASIS OF COMPUTATION TO BE FILED BY THE ASSESSEE. EVENTUALLY WHEN THE ASSESSI NG OFFICER STARTED PROCEEDINGS GIVING EFFECT TO THE LEARNED CIT(A)S ORDER HE CON SIDERED THE COMPUTATION OF DEDUCTION U/S.80-O FILED BY THE ASSESSEE IN THE FRE SH ROUND AND ON ITS VERIFICATION NOTICED THAT THE AMOUNT OF DEDUCTION WAS NOT PROPER LY CALCULATED INASMUCH AS THE ASSESSEE HAD NOT REDUCED INDIRECT EXPENSES ATTRIBU TABLE TO THE INCOME ELIGIBLE FOR DEDUCTION UNDER THIS SECTION. IN OUR CONSIDERED OP INION THE ASSESSING OFFICER DID NOT TRAVEL BEYOND THE SCOPE OF DIRECTION GIVEN BY T HE LEARNED CIT(A) AS HE RELIGIOUSLY FOLLOWED THE SAME BY LETTER AND SPIRIT BY RESTRICTING HIMSELF ONLY TO CONSIDERING THE COMPUTATION OF DEDUCTION U/S.80-O F ILED BY THE ASSESSEE BEFORE HIM FOR THE FIRST TIME. IT IS NOT AS IF HE TOOK UP AN A LTOGETHER DIFFERENT ISSUE UNRELATED WITH DEDUCTION U/S.80-O. WHEN THE A.O. WAS DIRECTED TO `CONSIDER THE COMPUTATION FOR ALLOWING DEDUCTION U/S.80-O ON THE ELIGIBLE INCOME IT WAS INCUMBENT UPON HIM TO VERIFY THE WORKING IN THIS RE GARD. 11. THUS IT CAN BE SEEN THAT THE POWER OF THE ASSESSING OFFICER IN THE INSTANT PROCEEDINGS WAS NOT ONLY RESTRICTED TO THE DETERMIN ATION OF THE QUESTION AS TO WHETHER THE DEDUCTION SHOULD BE ALLOWED WITH REFERE NCE TO THE GROSS TOTAL INCOME OR THE INCOME UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PROFESSION BUT TO CONSIDER THE ENTIRE GAMUT OF THE COMPUTATION OF DE DUCTION. WHEN THE LEARNED CIT(A) DIRECTED THE ASSESSING OFFICER TO CONSIDER T HE COMPUTATION OF DEDUCTION U/S.80-O TO BE FILED BEFORE HIM HE WAS DUTY BOUND TO EXAMINE ALL ASPECTS IN CONNECTION WITH SUCH COMPUTATION. 12. THE EDIFICE OF THE LD. ARS ARGUMENTS W AS ERECTED ON THE FOUNDATION THAT THE ACTION OF THE AO IN THE PRESENT PROCEEDINGS RES ULTED INTO ENHANCEMENT OF INCOME WHICH WAS IMPERMISSIBLE. HE SUBMITTED THAT THE DIRECTION OF THE LD CIT(A) IN THE ORIGINAL ORDER SHOULD HAVE BEEN SEEN IN THE LIGHT OF THE FACT SITUATION PREVAILING BEFORE HIM AT THAT TIME. WE ARE NOT CONV INCED WITH THIS SUBMISSION. ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 7 PRIMARILY THERE ARE NO FETTERS ON THE POWER OF THE LD. FIRST APPELLATE AUTHORITY TO MAKE ENHANCEMENT. SECTION 251(1) CLEARLY PROVIDES THAT `IN DISPOSING OF AN APPEAL THE COMMISSIONER (APPEALS) SHALL HAVE THE F OLLOWING POWERS (A) IN AN APPEAL AGAINST AN ORDER OF ASSESSMENT HE MAY CONFI RM REDUCE ENHANCE OR ANNUL THE ASSESSMENT... A CASUAL LOOK AT THE PROVISIO N INDICATES THAT THE FIRST APPELLATE AUTHORITY HAS BEEN GIVEN THE POWER INTER ALIA OF ENHANCEMENT OF ASSESSMENT. ENHANCEMENT MEANS THAT QUANTUM OF THE ADDITION MADE BY THE AO IS REVISED UPWARDS. IT THEREFORE PRE-SUPPOSES THE SUSTAINABILITY OF THE ACTION OF THE AO IN MAKING THE ADDITION BUT THE ADDITION SO MADE IS FURTHER INCREASED DUE TO SOME WRONG STEP(S) TAKEN BY HIM IN COMPUTING THE D ISALLOWANCE WHICH HAD THE EFFECT OF LOWERING TOTAL INCOME. BUT WHERE THE VER Y ACTION OF THE AO IN MAKING THE ADDITION IS SET ASIDE AND THE DIRECTION IS GIVE N TO RE-DO THE ENTIRE EXERCISE IT CANNOT BE EQUATED WITH ENHANCEMENT OF INCOME IF SUB SEQUENTLY IT TURNS OUT IN THE FRESH PROCEEDINGS THAT THE AMOUNT OF ADDITION EARLI ER MADE BY THE AO WAS INADEQUATE. SETTING ASIDE THE ASSESSMENT WHOLLY O R IN PART ERASES THE EARLIER ORDER PRO TANTO . IN THAT VIEW OF THE MATTER ONCE THE ASSESSMENT O RDER ITSELF IS OBLITERATED AND CONSEQUENTLY THE FRESH DETERMINATION IS MADE B Y THE AO THERE CANNOT BE ANY QUESTION OF ENHANCEMENT OF INCOME AS WITHOUT ANY EX ISTING ADDITION THE ENHANCEMENT CANNOT BE CONTEMPLATED. IT IS AXIOMATI C THAT A DIRECTION TO ADJUDICATE DE NOVO AND THE ENHANCEMENT CANNOT CO-EXIST. ADVERTING TO THE FACTS OF THE INSTANT CASE WE FIND THAT THE LD. FIRST APPELLATE AUTHORIT Y SIMPLY DIRECTED THE AO TO WORK OUT THE AMOUNT OF DEDUCTION ON THE BASIS OF THE COM PUTATION TO BE FILED BY THE ASSESSEE IN THE FRESH PROCEEDINGS WHICH WAS NOT FI LED AT THE ASSESSMENT STAGE. WHEN THE AO FOLLOWED THE SUIT AND WORKED OUT THE FR ESH AMOUNT OF ELIGIBLE DEDUCTION IT CANNOT BE TERMED AS ENHANCEMENT OF IN COME EITHER BY THE CIT(A) IN THE ORIGINAL APPELLATE ORDER OR THE AO IN THE CONSE QUENTIAL PROCEEDINGS. ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 8 13. IT IS PERTINENT TO KEEP IN MIND THAT T HE PRESENT APPEAL IS NOT AGAINST THE ORIGINAL APPELLATE ORDER BUT AGAINST THE PROCEEDIN GS RESULTING FROM IT. AS SUCH OUR SCOPE IS ALSO RESTRICTED TO ADJUDICATE ON THE ISSUE S ARISING OUT OF THE PRESENT PROCEEDINGS AND NOT TO TEST THE VERACITY OF THE ORI GINAL APPELLATE ORDER. IF THE FINDING OF THE LEARNED CIT(A) IN THE ORIGINAL APPEL LATE ORDER WAS NOT ACCEPTABLE TO THE ASSESSEE THE SAME COULD HAVE BEEN ASSAILED IN APPEAL BEFORE THE TRIBUNAL FOR NECESSARY MODIFICATION. ONCE THAT ORDER HAS BEEN A CCEPTED BY BOTH THE SIDES IT IS NO MORE PERMISSIBLE TO CHALLENGE ANY PART OF THAT O RDER IN THE PRESENT PROCEEDINGS. HAVING MISSED THE BUS BY NOT FILING ANY APPEAL AGAI NST THE ORIGINAL APPELLATE ORDER IT IS TOO LATE IN THE DAY FOR THE ASSESSEE TO DISPU TE THAT ORDER IN THE INSTANT PROCEEDINGS. 14. IN THIS VIEW OF THE MATTER AND CONSIDER ING THE PRESCRIPTION OF THE ORIGINAL APPELLATE ORDER AS SUCH WE DO NOT FIND THE ACTION OF THE AO IN VERIFYING THE COMPUTATION OF DEDUCTION U/S 80-O AS ULTRA VIRES . THE AO STRICTLY PROCEEDED ON THE DOTTED LINE DRAWN BY THE LD. CIT(A). THE ASSES SEE FILED THE COMPUTATION OF DEDUCTION IN THE PROCEEDINGS PURSUANT TO THE ORDER OF THE LD. CIT(A) WHICH THE AO VERIFIED AS DIRECTED. IF THE PLEA OF THE LD AR IS ACCEPTED THAT THE SCOPE OF THE AO WAS RESTRICTED ONLY TO DETERMINE THAT WHICH OF THE TWO FIGURES VIZ. RS. 1.97 CRORES OR RS. 1.27 CRORES SHOULD BE ALLOWED AS DEDUCTION THEN IT WOULD MEAN THAT THE LD. CIT(A) DIRECTED ONLY TO VERIFY WHETHER THE DEDUCTIO N IS TO BE ALLOWED BY CONSIDERING THE INCOME UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PROFESSION OR `GROSS TOTAL INCOME. IN THAT CASE THERE WAS NO NEED TO DIRECT THE ASSESSEE TO FILE THE COMPUTATION OF DEDUCTION AND GETTING IT VERIFIE D FROM THE AO. THE FINDING OF THE LD. CIT(A) BEING ON THE VERIFICATION OF COMPUT ATION OF DEDUCTION DID IMPLY VERIFICATION OF ALL THE ASPECTS OF DEDUCTION. WE THEREFORE DO NOT FIND ANY SUBSTANCE IN THE SUBMISSION MADE ON BEHALF OF THE A SSESSEE ON THIS ISSUE WHICH DESERVES AND IS HEREBY REJECTED. ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 9 B. ON MERITS 15. ON MERITS OF THE DEDUCTION U/S 80O W E FIND THAT THERE ARE CERTAIN ISSUES WHICH NEED TO BE ADDRESSED DISTINCTLY. I. IS IT RESTRICTED TO BUSINESS OR GROSS TOTAL INC OME 16. IN THE FIRST ROUND OF ASSESSMENT THE A O CAME TO HOLD THAT THE AMOUNT OF DEDUCTION U/S 80O WAS TO BE LIMITED TO THE EXTENT O F POSITIVE INCOME UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE LD. CIT(A) SET ASIDE THE ASSESSMENT ORDER ON THE QUESTION OF DEDUCTION UNDER THIS SECTION AND DIRECTED THE AO TO VERIFY THE COMPUTATION OF DEDUCTION. THUS H E DID NOT GO INTO THE LARGER QUESTION AS TO WHETHER THE DEDUCTION SHOULD BE REST RICTED TO `BUSINESS INCOME OR UP TO THE LEVEL OF GROSS TOTAL INCOME. IN THE PRESE NT PROCEEDINGS SINCE THE AMOUNT OF DEDUCTION COMPUTED BY THE AO WAS LESS THAN THE AMOUNT OF `BUSINESS INCOME THERE WAS NO OCCASION FOR THE AO TO GIVE FINDING ON THAT ASPECT OF THE MATTER. THE LD. CIT(A) TOO ECHOED THE ASSESSMENT ORDER ON THIS POINT. FROM THE ABOVE DISCUSSION IT IS SEEN THAT THE QUESTION WHICH AROSE IN THE ORIGINAL ASSESSMENT PROCEEDINGS ABOUT LIMITING THE QUANTUM OF DEDUCTION TO THE GROSS TOTAL INCOME VIS- -VIS THE INCOME UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PROFESSION REMAINED UNATTENDED. 17. SECTION 80-O PROVIDES THAT WHERE THE GROSS TOT AL INCOME OF AN ASSESSEE INCLUDES ANY INCOME RECEIVED FROM THE GOVERNMENT OF A FOREIGN STATE OR FOREIGN ENTERPRISE IN CONSIDERATION FOR THE USE OUTSIDE IND IA OF ANY PATENT INVENTION DESIGN OR REGISTERED MARK AND SUCH INCOME IS RECEIVED IN C ONVERTIBLE FOREIGN EXCHANGE IN INDIA ETC. THERE SHALL BE ALLOWED A DEDUCTION AT T HE RATE OF FIFTY PERCENT (AT THE MATERIAL TIME) OF THE INCOME SO RECEIVED IN OR BROU GHT INTO INDIA. ON GOING THROUGH MANDATE OF THE ABOVE STATUTORY PROVISION IT CAN BE NOTICED THAT THE DEDUCTION IS AVAILABLE AT THE RATE OF FIFTY PERCEN T OF THE INCOME RECEIVED IN OR ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 10 BROUGHT INTO INDIA FROM THE ITEMS SPECIFIED IN THE SECTION AND SUCH DEDUCTION IS TO BE ALLOWED FROM THE GROSS TOTAL INCOME OF THE ASSES SEE. SECTION 80A(1) PROVIDES THAT IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE THERE SHALL BE ALLOWED FROM HIS GROSS TOTAL INCOME THE DEDUCTIONS SPECIFIED IN SEC TION 80C TO 80U. SUB-SECTION (2) OF SECTION 80A PROVIDES THAT THE AGGREGATE AMOUNT O F DEDUCTIONS UNDER THIS CHAPTER SHALL NOT IN ANY CASE EXCEED THE GROSS TO TAL INCOME OF THE ASSESSEE. SECTION 80AB PROVIDES THAT THE DEDUCTIONS ARE TO BE MADE WITH REFERENCE TO THE INCOME INCLUDED IN THE GROSS TOTAL INCOME. SECTION 80B(5) DEFINES `GROSS TOTAL INCOME TO MEAN `THE TOTAL INCOME COMPUTED IN ACCO RDANCE WITH THE PROVISIONS OF THIS ACT BEFORE MAKING ANY DEDUCTION UNDER THIS CHA PTER. ON GOING THROUGH SUB- SECTION (5) OF SECTION 80B IT IS MANIFEST THAT THE GROSS TOTAL INCOME REFERS TO AGGREGATE OF INCOME UNDER ALL THE HEADS AS PER SEC TION 14 AS ADJUSTED BY THE PROVISIONS OF CHAPTERS V AND VI BUT BEFORE ALLOWING DEDUCTION AS PROVIDED IN CHAPTER VI-A. NOW WHEN WE READ SECTION 80-O IT TRA NSPIRES THAT THE DEDUCTION IS TO BE ALLOWED AT FIFTY PERCENT OF THE ELIGIBLE INCO ME AND SUCH AMOUNT OF DEDUCTION ALONG WITH OTHER ELIGIBLE DEDUCTIONS UNDER THIS CHA PTER SHOULD NOT IN ANY CASE EXCEED THE GROSS TOTAL INCOME. AS THE GROSS TOTAL INCOME REFERS TO TOTAL INCOME BEFORE MAKING ANY DEDUCTIONS UNDER CHAPTER VI-A IT WILL NATURALLY COVER INCOME CLASSIFIED UNDER ALL THE FIVE HEADS AS REFERRED TO IN SECTION 14 OF THE ACT. THUS IT IS INCORRECT TO DEDUCE THAT THE AMOUNT OF DEDUCTION U/ S.80-O SHOULD BE RESTRICTED ONLY TO THE EXTENT OF THE AVAILABILITY OF BUSINESS INCO ME. WE THEREFORE HOLD THAT THE AMOUNT WORKED OUT AS PER SECTION 80O ALONG WITH OTH ER DEDUCTIONS UNDER THIS CHAPTER NEEDS TO BE RESTRICTED TO THE GROSS TOTAL INCOME AND THERE IS NO WARRANT FOR SHRINKING SUCH UPPER LIMIT TO THE INCOME UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PROFESSION. ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 11 II. DEDUCTION ON GROSS OR NET INCOME 18. THE NEXT QUESTION TO DECIDE IS WHETHER THE AM OUNT OF DEDUCTION U/S.80-O SHOULD BE ALLOWED ON THE GROSS OR THE NET INCOME. T HIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS. ASIAN CABLE CORPORATION LTD. [(2003) 262 ITR 53 7 (BOM.)] HOLDING THAT THE AMOUNT OF DEDUCTION U/S.80-O SHOULD BE CALCULATED O N NET FEES RECEIVED BY THE ASSESSEE. IN SO HOLDING THE HONBLE COURT REVIEWED ITS EARLIER JUDGMENT IN CIT VS. ASIAN CABLE CORPORATION LTD. [(2003) 262 ITR 535 (B OM.)] IN WHICH IT WAS HELD THAT GROSS INCOME WAS TO BE TAKEN INTO ACCOUNT AND NOT THE NET INCOME FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S.80-O. THE V IEW WHICH NOW HOLDS THE FIELD IS THAT THE DEDUCTION UNDER THIS SECTION IS TO BE O N THE NET INCOME. SIMILAR OPINION HAS BEEN EXPRESSED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF S.R.GROVER VS. ACIT [(2006) 280 ITR 580 (DEL.)]. IN THE LIGHT OF THESE JUDGMENTS IT BECOMES CRYSTAL CLEAR THAT THE DEDUCTION U/S.80-O IS TO BE CALCULATED ON THE BASIS OF NET INCOME AND NOT THE GROSS RECEIPTS. III. MODE OF COMPUTATION OF NET INCOME 19. THE CENTRAL ISSUE IN THIS APPEAL ROTATES AROUND THE COMPUTATION OF NET INCOME ELIGIBLE FOR DEDUCTION U/S.80-O. AS NOTED ABOVE THE ASSESSEE CLAIMED DEDUCTION BY REDUCING A SUM OF RS.1 51 67 688 BEING THE AMOUNT OF TOTAL EXPENSES IN FOREIGN CURRENCY FROM THE GROSS CONVERTIBLE FORE IGN EXCHANGE EARNED AMOUNTING TO RS.5.47 CRORES THEREBY DETERMINING THE NET FORE IGN COMMISSION ELIGIBLE FOR DEDUCTION AT RS.3.95 CRORES. THE ASSESSING OFFICER DID NOT ACCEPT THE REDUCTION OF RS.1.51 CRORES FROM THE GROSS CONVERTIBLE FOREIGN E XCHANGE EARNED AS IN HIS OPINION THE EXPENSES ATTRIBUTABLE TO THE ELIGIBLE F OREIGN COMMISSION WERE TO BE REDUCED ON PRO-RATA BASIS BY CONSIDERING THE TOTAL EXPENSES DEBITED TO THE PROFITS AND LOSS ACCOUNT EXCLUDING PROVISION FOR TAXATION DONATIONS AND LOSS ON ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 12 PORBUNDAR PROPERTY. TO BE PRECISE WHILE THE ASSES SEE REDUCED ONLY THE EXPENSES IN FOREIGN CURRENCY FROM THE ELIGIBLE FOREIGN COMMI SSION RECEIVED THE A.O. HELD THAT THE REDUCTION WAS TO BE MADE BY CONSIDERING NO T ONLY THE EXPENSES INCURRED IN FOREIGN CURRENCY BUT ALSO THOSE AS INCURRED IN INDI A. THE LEARNED A.R. SUBMITTED THAT ONLY THE DIRECT EXPENSES INCURRED BY THE ASSES SEE IN EARNING ELIGIBLE FOREIGN COMMISSION WERE REQUIRED TO BE CONSIDERED AND THE A SSESSING OFFICER EXCEEDED HIS JURISDICTION BY ROPING IN THE PROPORTIONATE INDI RECT EXPENSES INCURRED IN INDIA AS WELL. TO BOLSTER HIS ARGUMENT THAT INDIRECT EXPENSE S COULD NOT BE TAKEN INTO CONSIDERATION HE RELIED ON CERTAIN JUDGMENTS RENDE RED IN THE CONTEXT OF SECTION 80M AND SOME TRIBUNAL ORDERS PASSED U/S 80O. THE LD . DR REITERATED THE REASONING GIVEN BY THE AUTHORITIES BELOW FOR CANVASSING THE VIEW THAT BOTH THE DIRECT AND INDIRECT EXPENSES CALLED FOR REDUCTION FROM THE GR OSS COMMISSION RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE IN INDIA. 20. WE HAVE GONE THROUGH THE COPY OF PROFIT A ND LOSS ACCOUNT AND BALANCE SHEET OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERAT ION. THE COMPOSITION OF ASSESSEES INCOME AS PER THE PROFIT AND LOSS ACCOUN T IS AS UNDER:- COMMISSION / FEES NET RS.5 95 67 592 SHARE OR PROFIT FROM A PARTNERSHIP FIRM RS. 8 685 OTHER INCOME RS. 74 37 150 ------------------ RS.6 70 13 427 =========== SCHEDULE OF OTHER INCOME DIVULGES ITS DETAIL AS UN DER:- INTEREST (TAX DEDUCTED RS.18 575/-) RS.63 05 040 DIVIDEND (GROSS) (TAX DEDUCTED RS.21 831/-) RS.11 24 584 PROFIT ON SALE OF FIXED ASSETS RS. 7 362 MISCELLANEOUS INCOME RS. 164 ---------------- RS.74 37 150 ========== ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 13 21. A CURSORY LOOK AT THE COMPOSITION OF INCOM E OF THE ASSESSEE DISCLOSES THAT THE ONLY BUSINESS ACTIVITY OF THE ASSESSEE WAS TO RENDER SERVICES FROM WHICH COMMISSION AMOUNTING TO RS.5.95 CRORES WAS EARNED. OTHER INCOME INCLUDES INTEREST DIVIDEND PROFIT ON SALE OF ASSETS WHIC H ARE NOT THE RESULT OF EXERCISE OF ANY SYSTEMATIC INDEPENDENT BUSINESS ACTIVITY. SHARE OR PROFIT FROM PARTNERSHIP FIRM AT RS.8 685 ALSO DOES NOT REQUIRE ANY ACTIVE PARTIC IPATION. THUS IT CAN BE SEEN THAT THE ONLY BUSINESS ACTIVITY OF THE ASSESSEE WAS RE NDERING OF SERVICES AND NOT ANYTHING ELSE. EVEN THE AUDITORS REPORT ALSO STATE S THAT THE ASSESSEE IS A SERVICE COMPANY. WHEN WE EXAMINE THE DEBIT SIDE OF THE PRO FIT AND LOSS ACCOUNT IT COMES OUT THAT THE LARGEST EXPENDITURE IS THAT OF EMPLOY EES REMUNERATION AND BENEFITS LED BY OPERATIONAL AND OTHER EXPENSES. DETAIL OF OPER ATIONAL AND OTHER EXPENSES IS AVAILABLE AS PER SCHEDULE-J WHICH INCLUDES RENT G ENERAL EXPENSES CONVEYANCE EXPENSES REPAIRS AND MAINTENANCE DONATION TELEPH ONE AND LONDON OFFICE EXPENSES. THE ASSESSEES POINT OF VIEW IS THAT ONL Y THE EXPENSES INCURRED IN FOREIGN CURRENCY SHOULD BE CONSIDERED AS HAVING BEE N SPENT FOR EARNING THE FOREIGN COMMISSION AND ALL OTHER EXPENSES INCURRED IN INDIA SHOULD BE IGNORED. WE ARE NOT CONVINCED WITH THIS POINT OF VIEW FOR THE REASON TH AT IN THE PRESENT CIRCUMSTANCES THE ONLY REGULAR BUSINESS ACTIVITY IS THAT OF RENDE RING SERVICES. NO OTHER SUBSTANTIAL BUSINESS ACTIVITY WAS CARRIED ON WHICH COULD ENTA IL ANY EXPENDITURE OR RESULT INTO ANY BUSINESS INCOME. AS NOTED ABOVE `OTHER INCOMES ARE NOT OF SUCH A NATURE AS TO EMANATE FROM CARRYING ON OF ANY DISTINCT BUSINES S. THIS SHOWS THAT ALL THE EXPENSES INCURRED BY THE ASSESSEE CONTRIBUTED TOWAR DS THE EARNING OF THE COMMISSION INCOME MAINLY. THE ASSESSEES CLAIM THA T ONLY THE EXPENSES INCURRED IN FOREIGN CURRENCY SHOULD BE REDUCED FROM THE CON VERTIBLE FOREIGN EXCHANGE RECEIVED IN INDIA DOES NOT MERIT ACCEPTANCE FOR THE OBVIOUS REASON THAT THESE ARE NOT THE WHOLE BUT ONLY A PART OF THE EXPENSES INCUR RED FOR EARNING SUCH INCOME. THE ENTIRE SET UP OF THE ASSESSEE IN INDIA IS ALSO ASSISTING IN EARNING THE FOREIGN COMMISSION. IF WE REDUCE ONLY THE EXPENSES INCURRED IN FOREIGN CURRENCY FROM THE ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 14 GROSS CONVERTIBLE FOREIGN EXCHANGE RECEIVED IN INDI A IT WILL GIVE US MORE A GROSS AND LESS THE NET INCOME AS AGAINST THE REQUIREMENT OF LAW FOR ALLOWING DEDUCTION ON THE NET INCOME ONLY. 22. NOW THE QUESTION OF FINDING OUT THE EXPENSES DEDUCTIBLE FROM ELIGIBLE GROSS RECEIPTS ASSUMES SIGNIFICANCE. IN VIEW OF THE FACT THAT THE TOTAL COMMISSION RECEIVED BY THE ASSESSEE WAS AT RS.5.95 CRORES WH EREAS THE CONVERTIBLE FOREIGN EXCHANGE RECEIVED IN INDIA ELIGIBLE FOR DEDUCTION W AS ONLY RS.5.47 CRORES IT CANNOT BE SAID THAT THE ENTIRE EXPENSES SHOULD BE A TTRIBUTED TO COMMISSION INCOME ELIGIBLE FOR DEDUCTION UNDER THIS SECTION. APART FR OM THAT THE ASSESSEE HAD ALSO EARNED OTHER INCOME OF RS.74.37 LAKHS AS DISCUSSED ABOVE. IN OUR CONSIDERED OPINION THE MOST SUITABLE METHOD IN THE PRESENT CIRCUMSTANCES IS TO WORK OUT THE PROPORTIONATE EXPENSES FOR EARNING ELIGIBLE INCOME IN THE RATIO OF TOTAL GROSS RECEIPTS TO THE RECEIPT OF ELIGIBLE GROSS INCOME A S HAS BEEN RIGHTLY DONE BY THE ASSESSING OFFICER. OUR VIEW IS FORTIFIED BY THE JUD GMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CONSOLIDATED COFFEE LTD. VS. STATE OF KARNATAKA [(2 001) 248 ITR 432 (SC)] IN WHICH THE ASSESSEE DERIVED INCOME FROM AGRICULT URAL AS WELL AS NON-AGRICULTURAL ACTIVITIES. THE APPORTIONMENT OF H EAD OFFICE EXPENSES ON THE BASIS OF GROSS RECEIPTS FROM AGRICULTURAL AND NON-AGRICUL TURAL ACTIVITIES WAS HELD BY THE HONBLE APEX COURT TO BE JUSTIFIED. 23. THE LD. AR ARGUED THAT SOME OF TH E EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT DID NOT HAVE ANY RELATION WITH THE EL IGIBLE COMMISSION INCOME WHICH WERE ALSO APPORTIONED BY THE AO. IN WAS THUS STATE D THAT SUCH EXPENSES SHOULD HAVE BEEN IGNORED. WE HAVE NOTED THE CALCULATION OF ELIGIBLE AMOUNT OF DEDUCTION MADE BY THE ASSESSEE AS WELL AS THE AO. THE ASSESSE E ACCEPTED THAT THE TOTAL AMOUNT OF RS. 1.54 CRORES INCURRED IN FOREIGN CURRE NCY WAS SPENT WHOLLY AND EXCLUSIVELY FOR EARNING THE ELIGIBLE COMMISSION INC OME. THE AO WAS VERY FAIR AND REASONABLE IN NOT INCLUDING THIS AMOUNT IN ENTIRETY FOR THE PURPOSES OF REDUCTION ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 15 FROM THE GROSS AMOUNT. HE TOOK THE TOTAL OF EXPENSE S INCLUDING THOSE INCURRED IN FOREIGN CURRENCY AND THEN PROPORTIONATELY DEDUCED T HE AMOUNT AS ATTRIBUTABLE TO THE ELIGIBLE COMMISSION. IN THIS WAY IF SOME OF THE EX PENSES NOT RELATABLE TO THE ELIGIBLE COMMISSION GOT DEDUCTED THEN THE EXPENSE S INCURRED IN FOREIGN CURRENCY WHOLLY RELATABLE TO ELIGIBLE COMMISSION ALSO STOOD PROPORTIONATELY REDUCED THEREBY SETTING OFF THE EFFECT OF SUCH ADJUSTMENTS. IN THIS METHOD OF APPORTIONMENT OF EXPENSES THERE IS AN UNDERLYING PRESUMPTION THA T ALL EXPENSES CONTRIBUTED TO EARNING ALL THE ITEMS OF INCOME. IT MAY NOT BE A SC IENTIFICALLY CORRECT METHOD IN ALL CIRCUMSTANCES BUT IN THE ABSENCE OF PRODUCTION OF A NY RECORD BY THE ASSESSEE SHOWING BIFURCATION OF EACH ITEM OF EXPENDITURE AS RELATABLE TO ELIGIBLE AND OTHER INCOME NO COURSE WAS LEFT OPEN TO THE AO EXCEPT FO R CALCULATING THE AMOUNT OF QUALIFYING EXPENSES PROPORTIONATELY. IN THE PRESENT CIRCUMSTANCES WE APPROVE THE ACTION OF THE AO IN WORKING OUT THE EXPENSES ATTR IBUTABLE TO THE ELIGIBLE INCOME ON PRO RATA BASIS. 24. NOW WE TURN TO THE JUDGMENTS RELIED ON BY THE LD. AR TO BRING HOME THE POINT THAT ONLY DIRECT AND NOT THE INDIRECT EX PENSES NEEDED TO BE REDUCED FROM THE GROSS ELIGIBLE COMMISSION INCOME. IT IS SEEN T HAT ALL THESE CASES ARE IN THE CONTEXT OF SECTION 80M WHICH CANNOT BE BLINDLY AP PLIED TO SECTION 80-O SINCE THE AMBIT OF BOTH THE PROVISIONS IS VASTLY DIFFERE NT. BE THAT AS IT MAY THE HONBLE BOMBAY HIGH COURT IN CIT VS. MAGANLAL CHAGANLAL (P) LTD. (2006) 284 ITR 663 (BOM) CONSIDERED THE QUESTION OF DEDUCTION U/S 80M IN THE CASE OF AN ASSESSEE WHO WAS DERIVING INCOME FROM THE BUSINESS OF MANUFA CTURING DRUMS AND BARRELS AND DEALING AND SPECULATION OF INCOME. IT RECEIVED DIVIDEND OF RS. 13.35 LACS WHICH WAS CLAIMED AS DEDUCTION IN ENTIRETY U/S 80M. THE AO WORKED OUT THE INTEREST ATTRIBUTABLE TO THE BORROWED FUNDS FOR ACQ UISITION OF SHARES AND ADJUSTED IT AGAINST THE DIVIDEND INCOME. SINCE NO DIVIDEND INCO ME REMAINED THE AO DENIED THE DEDUCTION. THE CIT(A) COMPUTED THE INTEREST ATT RIBUTABLE TO THE INVESTMENT IN SHARES AT RS.3.22 LACS BEING THE BORROWED FUNDS UT ILIZED FOR ACQUISITION OF SHARES ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 16 WHICH WAS UPHELD BY THE TRIBUNAL. RULING THE CONTR OVERSY IN FAVOUR OF THE REVENUE THE HONBLE JURISDICTIONAL COURT HELD THAT THE INTEREST PAID BY THE ASSESSEE ON THE FUNDS BORROWED FOR INVESTMENT IN SH ARES HAD TO BE REDUCED FROM THE GROSS DIVIDENDS FOR THE PURPOSES OF GRANTING RE LIEF U/S 80M. 25. THE LD. AR HAS THEN RELIED ON SOME TRIBUNAL ORDERS IN WHICH IT HAS BEEN HELD THAT ONLY THE DIRECT EXPENSES WERE TO BE REDUCED FROM THE GROSS INCOME FOR COMPUTING DEDUCTION U/S 80O. THESE ORDERS ARE BASED ON THE JUDGMENTS DELIVERED IN THE CONTEXT OF SECTION 80M. NO DIREC T JUDGMENT RENDERED BY ANY HONBLE HIGH COURT IN ASSESSEES FAVOUR WAS BROU GHT TO OUR NOTICE. IN CONTRAST WE FIND THAT THE LD. CIT(A) HAS RELIED ON THE JUDGM ENT OF THE HONBLE CALCUTTA HIGH COURT DIRECTLY ON POINT IN CIT VS. M.N.DASTUR AND CO. (P.) LTD. [(2000) 243 ITR 10 (CAL.)] WHICH IS DIRECTLY ON ISSUE AND THAT ALSO IN THE CONTEXT OF SECTION 80O. IN THAT CASE QUESTION NO . 1 IN R.A. NO. 8 (CAL) OF 1992 WAS : `WHETHER ON THE FACTS AND IN THE CIRCUMSTANC E OF THE CASE AND ON A CORRECT INTERPRETATION OF SECTIONS 80-O AND 80AB OF THE INC OME-TAX ACT 1961 THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THE D EDUCTION UNDER SECTION 80-O OF THE SAID ACT WOULD BE ADMISSIBLE TO THE ASSESSEE ON THE GROSS CONVERTIBLE FOREIGN EXCHANGE BROUGHT INTO INDIA WITHOUT TAKING INTO ACC OUNT THE EXPENSES DIRECT OR INDIRECT INCURRED IN INDIA? THIS QUESTION WAS ANSWERED IN NEGATIVE IN FAVOUR OF THE REVENUE BY HOLDING THAT THE ONLY THE NET INCOME AFTER TAKING INTO CONSIDERATION THE EXPENSES DIRECT OR INDIRECT INCURRED IN INDIA IS TO BE DEEMED TO BE THE AMOUNT OF INCOME DERIVED OR RECEIVED BY THE ASSESSE E FOR THE PURPOSE OF DEDUCTION U/S.80-O. IN THE LIGHT OF THIS DIRECT PRECEDENT AVA ILABLE U/S.80-O WE FIND NO REASON TO RESTRICT THE DEDUCTION ONLY TO DIRECT EXPENSES I NCURRED ABROAD. IT HAS BEEN MADE CLEAR IN THIS CLEAR THAT NOT ONLY THE DIRECT OR IND IRECT EXPENSES BUT ALSO THE EXPENSES INCURRED IN INDIA ARE ALSO TO BE CONSIDERED FOR THE PURPOSES OF COMPUTING DEDUCTION UNDER THIS SECTION . ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 17 26. IT IS PATENT THAT IN CASE OF A CONFLICT BETWEEN THE VIEWS OF A SUPERIOR AND JUNIOR AUTHORITY THE VIEW TAKEN BY THE JUNIOR AUTHORITY HAS TO PAVE THE WAY FOR THE WISDOM OF SUPERIOR AUTHORITY TO PREVAIL. IN VI EW OF THE ABOVE REFERRED JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT WE AR E OF THE CONSIDERED VIEW THAT NOT ONLY THE DIRECT BUT THE INDIRECT EXPENSES ALSO NEED TO BE CONSIDERED FOR THE PURPOSES OF REDUCTION FROM THE GROSS AMOUNT OF ELI GIBLE COMMISSION AS HAS BEEN THE CONSISTENT FINDING OF THE AUTHORITIES BELOW. WE THEREFORE UPHOLD THE VIEW TAKEN BY THE LD. CIT(A) ON THIS ISSUE. 27. IN THE RESULT THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 3 RD DAY OF FEBRUARY 2010. SD/- SD/- ( N.V.VASUDEVAN ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI : 3 RD FEBRUARY 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A)-IV MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI. ITA NO.5271/MUM/2007 M/S.J.B.BODA & CO.PVT. LTD. 18 DATE INITIAL 1. DRAFT DICTATED ON 29.01.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 01.02.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.