Income Tax Appellate Tribunal - Mumbai
Nadeem Akhtar Saifee vs Joint Cit on 23 August, 2004
Equivalent citations: [2005]1SOT268(MUM)
ORDER
T.K. Sharma, J.M. This appeal filed by the assessee is directed against the order dated 19-2-2001 of the CIT (A)-I, Mumbai, upholding the disallowance of deduction of Rs. 1,79,608 being 75% of total receipt of Rs. 2,39,477 claimed by the assessee under section 80RR of the Income Tax Act, 1961, pertaining to the assessment year 1997-98.
2. The facts in brief are that the assessee is an individual and derives professional income from the work of music direction of films. For the assessment year under appeal, the assessee claimed deduction under section 80RR amounting to Rs. 1,79,608 on royalty income of Rs. 2,39,477. This was disallowed by the assessing officer in the assessment order observing as under:
"(i) Form 10H were not filed in respect of the entire receipt of Rs. 2,39,477, which were not derived from the exercise of profession.
(ii) There is no direct nexus between the royalty income received and the exercise of the profession.
(iii) The appellant had exercised his profession when he first produced the said music. The foreign exchange remitted into India at that point of time, as a result of the exercise, was the income which was eligible for section 8ORR deduction.
(iv) The royalty received thereafter for the usage of his copyrights by others would not partake the character of income derived from the exercise of his profession. In view of the Bombay High Court judgment in the case of Hindustan Lever Ltd. 121 ITR 951 (supra), the words 'derived from' cannot be accepted as the equivalent to the words 'referable to.
(v) As the royalty income has been generated from the usage of the copy rights of the appellant's music which is not covered under section 80RR, the deduction is not allowable on the royalty receipts."
3. The assessee carried the matter in appeal and before the CIT (A), the assessee made following submissions :-
(i) He is a music director who composes tunes. His profession of composing entails giving permission to the producer for incorporating his composition in a film, permitting the music company to make records and giving permission for public use of the music to any one;
(ii) In respect of first two items, the appellant, directly collect his fees, but in respect of the last item which involves making available his composition for public, he receives his fees for the 'play of music';
(iii) In the instant case, the said fees was collected by the Indian Performing Right Society Ltd., (hereinafter referred to as the IPRS) which has world wide organization;
(iv) Through medium of cassettes and records, the appellant makes available his composition for public and it is physically impossible to render his composition in person every time. The composition is the result of direct use of the appellant's professional talents and skill and there is a close proximity between royalty income received and the exercise of profession.
4. In the impugned order, the CIT (A) upheld the action of the assessing officer on the ground that receipt of Rs. 2,39,477 is for the usage of copyrights of assessee's music. This income cannot be said to be derived from the exercise of the assessee's profession. Therefore, does not qualify for deduction under section 8ORR of the Income Tax Act, 1961. In the impugned order, the CIT (A) also held that the assessee had exercised his profession when he first produced the music and foreign exchange was remitted to India. Aggrieved by this order of the CIT (A), the assessee is in appeal before us.
5. At the time of hearing on behalf of the assessee, Sh. D.J. Thakkar appeared and filed following documents in the form of paper book
1. Order for assessment year 1995-96 under section 143(3).
2. Computation of income for assessment year 1995-96.
3. Intimation under section 143(1)(a) for assessment year 1996-97.
4. Document and Declaration of the Indian Performing Right Society Ltd.
6. The counsel for the assessee submitted that in the assessment year 1995-96, the assessing officer framed the assessment under section 143(3) and allowed the deduction under section 80RR amounting to Rs. 45,109 claimed by the assessee in the return of income. For the assessment year 1996-97 also, the assessee claimed deduction under section 80RR, which was also allowed in the intimation issued on 3-2-1997 under section 143(1)(a). The counsel also submitted that a certificate dated 14-2-2001 obtained from the Indian Performing Right Society Ltd., was also filed before the assessing officer, wherein, they have certified that Indian Performing Right Society Ltd. receives from its overseas affiliated Societies is also brought into India on behalf of its Members in Convertible Foreign Exchange as required under section 80RR of the Income Tax Act, 1961.
7. The learned Counsel for the assessee submitted that facts regarding claim of deduction under section 80RR are identical with that of assessment years 1995-96 and 1996-97. Therefore, on identical facts, in the assessment year under appeal, the assessing officer is not justified in denying the deduction under section 80RR of the Income Tax Act, 1961. The counsel for the assessee relied on the following decisions regarding consistency in allowing deduction/claim :-
1. CITv. A.K.J. Security Printers (2003) 264 ITR 276 (Del)
2. Berger Paints India Ltd. v. CIT (2004) 266 ITR 99 (SC).
8. Continuing his arguments, the counsel further submitted that provisions reg.,..trding allowance of deduction/exemption are to be liberally construed as held in the following judgments:-
1. Bajaj Tempo Ltd. v. CIT(1992) 196 ITR 188 (SC).
2. CIT v. Strawboard Mfg. Co. Ltd. (1989) 177 ITR 43 (SC).
3. CITv. Western Mechanical Ind. (P) Ltd. (1991) 187 ITR 264 (Bom.).
9. The counsel concluded that it is not possible for the assessee to remain physically present. Therefore, through medium of cassettes and records, the assessee makes available his composition for public. The assessee has no other source of income except income from profession and income from the Indian Performing Right Society Ltd., received in convertible foreign exchange though it is called royalty is eligible for deduction under section 80RR of the Income Tax Act, 1961 and the assessing officer be directed to allow the same.
10. The learned Departmental Representative supported the orders of the authorities below. The learned Departmental Representative submitted that the assessee has not filed Form H in respect of entire receipt of Rs. 2,39,477, which was alleged to be derived from exercise of profession. The learned Departmental Representative drew our attention to page 7 of the paper book which contains letter dated 16-3-1995 of the Indian Performing Right Society Ltd., enclosing therewith a certificate in respect of payment made to the assessee for Public Performance of his music overseas to enable him to claim the deduction under section 80RR. The learned Departmental Representative submitted that on the basis of this certificate, deduction was allowed in the relevant assessment year when the assessee made public performance of his music overseas. In respect of royalty, the assessee is not entitled to deduction under section 80RR because no certificate in Form 10H as required by rule 29A of Income-tax Rules, 1962 was furnished either alongwith the return of income or during the course of assessment proceedings. There is no evidence that royalty in question is received either from government or foreign state or any person non-resident Indian because the assessment year under appeal, the assessee has not furnished Form 10H as required by rule 29A of the Income Tax Rules, 1962. He submitted that regarding rule of consistency, each assessment year is an independent assessment year and principle of adjudication is not applicable to the income-tax proceedings.
11. In rejoinder, the learned counsel for the assessee submitted that facts are identical and requirement of furnishing Form 10H alongwith return of income is not mandatory. The deduction under section 80RR has been allowed to the assessee in earlier and subsequent years on identical facts. Therefore, there is no justification whatsoever for not allowing the same for the assessment year under appeal, following the rule of consistency.
12. Having heard both the sides, we have carefully gone through the provisions contained in section 80RR of the Income Tax Act, 1961. This section allows a deduction to a resident individual in respect of his professional income from foreign sources, included in his gross total income, subject to the following:
(1) Resident individual is an author, play right, artist, script writer and director of a film but not the producer, musician, actor or sportsman (including an athlete).
(2) Such income is derived from (a) a foreign government, or (b) any person not resident in India.
(3) Such income is brought into India, by him or on his behalf in convertible foreign exchange within-
(a) 6 months from the end of the previous year; or
(b) such further period, as may be allowed by the competed authority which is the Reserve Bank of India or other authority regulating foreign exchange transactions (allowed by the Chief CIT or the CIT upto the 31-5-1999) (4) The assessee furnishes a certificate in Form No. 10H alongwith the return of income, certifying the correctness of the deduction claimed under this section.
13. Before us, the assessee has notfurnished certificate in Form No. 10H as required by rule 29A of the Income Tax Rules, 1962. There is no evidence available on record to suggest that the amount in question on which the assessee claimed deduction under section 80RR is derived from (a) a foreign Government (b) any person not resident in India. The certificate from the Indian Performing Right Society Ltd., also do not certify the amount as well as source from which the same was received. It is also not known whether the amount in question was received by the assessee or on his behalf in convertible foreign exchange within the prescribed period of 6 months or whether the assessee sought some extension of time.
14. We also found that the assessing officer has stated that no certificate under section 10H was filed by the assessee alongwith the return of income. It is not known whether the same is filed during the course of assessment proceedings or before the CIT (A) because the assessee has not furnished a copy of the same before us. In the impugned order, the CIT (A) upheld the action of the assessing officer disallowing the deduction under section 80RR of the Act on the ground that income question is not derived from exercise of assessee's profession because the assessee exercised his profession when he first produced music and foreign exchange was remitted to India. On a plain reading of section 80RR, we found that this section provide that deduction is to be allowed in respect of professional income from foreign source as mentioned in the section. It is not necessary for the assessee to render physical service outside India, which is a requisite condition for allowance of deduction under. Section 80RRA. Under section 80RR, professional income can be derived by exercising profession in India, but it should be from foreign source. We are, therefore, of the view that in case the assessee has received through medium of cassettes and records from a foreign government or any person non-resident Indian as provided in section 80RR, the assessee is eligible under this section. In the impugned order, the learned CIT (A) has not examined the various other conditions including the agreement of the assessee if any with the Indian Performing Right Society Ltd. The learned CIT (A) has also not verified whether the assessee has furnished Form No. 10H or brought into India the income earned by him or on his behalf in convertible foreign exchange within six months or extended period of time as provided in section 80RR.
15. In view of the foregoings, we set aside the order of the CIT (A) and direct him to examine the various conditions mentioned in section 80RR because the income earned by the assessee for playing cassettes from foreign source as mentioned in section 80RR is eligible for deduction subject to fulfilment of various conditions enumerated by us hereinabove.
16. Before parting with we may add that the principle of fresh adjudication are not applicable to the income-tax proceedings. Therefore, we do not consider it necessary to go into the details/circumstances/facts under which the assessing officer allowed the deduction under section 80RR in earlier and subsequent years as stated by the assessee. At any rate, this contention was not raised by the assessee before the CIT (A). Therefore, the CIT (A) is at liberty to examine this aspect also. The CIT (A) will readjudicate the issue involved in this appeal afresh after giving opportunity of being heard to both the sides.
17. In the result, the appeal is allowed for statistical purposes.