Income Tax Appellate Tribunal - Delhi
Justice Hari Swarup (Retd Judge),, vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `E' : NEW DELHI
BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER
AND SHRI B.P. JAIN, ACCOUNTANT MEMBER
I.T.A. No.20/Del/2005
Assessment Year : 2001-02
Justice Hari Swarup, Income-tax Officer,
130, Lawyers Chamber, Vs. Ward 37(3), New Delhi.
Supreme Court, New Delhi.
(Appellant) (Respondent)
Appellant by : Shri Manoj Swarup,& Ms. Lalita Kohli
Shri Anubhav Kumar.
Respondent by : Shri G.S. Sahota, Sr. DR.
ORDER
PER B.P. JAIN, ACCOUNTANT MEMBER.
This appeal by the assessee is directed against the order of the learned Commissioner of Income-tax (Appeals)-XXVIII, New Delhi, dated 27th October, 2004 in an appeal against order under section 143(3) of the Income-tax Act, 1961 (the Act) pertaining to the assessment year 2001-02.
2. The appellant in the present appeal has taken as many as 13 grounds of appeal before us mainly on the issue that he has been denied deduction under section 80RRA of the Act.
3. It has been stated that the appellant is a Retired Judge of Allahabad High Court and a regular assessee with the Income Tax Department. The 2 assessee has by long practice at the Bar and as Judge of the High Court acquired specialized knowledge of law and jurisprudence, which is a social science. It has been submitted that by doing arbitrations relating to construction engineering contracts he has acquired knowledge also of construction engineering works. The contract, in respect of which, he was appointed arbitrator to conduct arbitration in Montreal, Canada, also related to construction engineering work. The appellant was not a government employee and the amount payable to each arbitrator was dependent on the decision of the Board of Arbitrators as may be contained in the final award, the question of approval by the Central Government or the Prescribed authority did not arise. The appellant has filed his return of income on 30.3.2002 at Rs.7,06,870/- after claiming deduction u/s 80RRA of the Income Tax Act, 1961 of Rs.10,79,149/- being 60% of the total earned income of Rs.17,98,982/- shown in the Return of Income filed before the learned Assessing Officer. The assessee had derived income in Foreign Exchange (Canadian Dollars) as arbitrator being appointed as a person having specialised knowledge of law and also having knowledge concerning construction engineer Works and contracts. Law being Social Science, the appellant is covered within the definitions of 'technician' as enumerated u/s 80RRA of the Income Tax Act, 1961. The learned assessing authority by its 3 order dated 31.12.2003 did not allow the deduction under Section 80-RRA of the Income Tax Act. That the appellant filed Appeal before the learned Commissioner of Income Tax Appeals XXVII-New Delhi which was registered as appeal No. 245/03-04. In the appeal assessee also filed written submission. The learned Commissioner of Income Tax (Appeal)-XXVIII New Delhi dismissed the appeal on 27.10.2004 confirming the disallowance of claim made by the appellant.
4. We have heard the parties and perused the facts and material available on record. The disallowance made by the AO was mainly on two grounds as under:-
a) The appellant is not a technician within the meaning to Rule 11-
C of the I.T. Rules.
b) The terms and conditions of the appellant's services outside India were not approved by the Central Government as required under the provisions of section 80RRA(2)(ii).
5. Before the learned CIT(A) it was submitted that view taken by the AO is not correct for the following reasons:-
i) Rule 11C does not apply in the case of the appellant who claims to be technician within the meaning of sub clause (V) of Explanation (C) to section 80RRA and 4 not under sub clause (VI). The rule 11C is applicable only in case of sub clause (vi).
ii) Law is a field of social science as observed by most of the jurists in their respective books on jurisprudence.
iii) The appellant is a retired High Court judge and Senior Advocate of the Supreme Court of India having specialized knowledge of law, and, therefore, he qualifies as technician within the meaning of Explanation C sub clause (v) of section 80RRA.
iv) The second ground for not allowing the deduction by Income-tax Officer is that the conditions of assessee's service outside India had to be approved by Central Govt. or prescribed authority. This requirement is under sub section 2(ii) of section 80RRA.
In support of their stand the following case laws have been cited:
i) Smt. Kunti Verman Vs. CBDT (1996) Taxman 139 (Delhi). ii) CBDT vs. Aditya V. Birla (1988) 170 ITR 137 (SC).
iii) Taru Jethamal Lalvani Vs. Secretary, Ministry of Finance (1990) 185 ITR 418 (Bom.)."
The learned CIT(A) examined the issues whether deduction under section 80RRA is admissible i.e. whether the assessee qualifies for being a technician, whether the amount received by the assessee qualifies for deduction as remuneration and whether the approval of the Central Government or prescribed authority is a pre-requisite for claim of deduction under section 80RRA of the Act.
5
6. In regard to the qualification for being technician it was observed vide Para 9 of CIT(A)'s order that the assessee has cited separate definitions of various jurists and accordingly the learned CIT(A) treated the law as a social science and as regards Rule 11C, he had not disputed to the said Rule. Whereas on the issue of remuneration the learned CIT(A) observed that the assessee is one of the arbitrators appointed by National Hydro Electronic Power Corporation (NHPC) in the capacity as one of the three Members of the Arbitral Tribunal and the payment had been received in the capacity as Member of the Arbitral Tribunal. The proceedings are in the nature of arbitration and the payment has been made out of the account of the trust in which both the parties had deposited the money to be treated by the third arbitrator. The learned CIT(A) observed that the said amount is not remuneration or consultation fees and cannot be covered under section 80RRA for the deduction. The learned CIT(A) vide Para 12 of his order observed that it is not at all correct that the requirement for approval of the Central Government or the prescribed authority is only under sub-section 2(ii) of section 80RRA of the Act. The question of getting approval from the Central Government does not arise even when the application has not been filed. Therefore, in the circumstances and facts of the case the learned 6 CIT(A) dismissed the claim of the assessee for deduction under section 80RR of the Act.
7. As per section 80RRA(2)(ii), deduction under section 80RRA shall be allowed, if a person is a technician and the terms and conditions of his service outside India are approved by the Central Government or the prescribed authority. As per Explanation (c) to the said section, "`technician' means a person having specialised knowledge and experience in -
(i) constructional or manufacturing operations or mining or the generation or distribution of electricity or any other form of power; or
(ii) agricultural, animal husbandry, dairy farming, deep sea fishing or ship building; or
(iii) public administration or industrial or business management; or
(iv) accountancy; or
(v) any field of natural or applied science (including medical science) or social science; or
(vi) any other field which the Board may prescribe in this behalf, who is employed in a capacity in which such specialized knowledge and experience are actually utilized;"
On reading of the said section technician means a person having a specialised knowledge and experience in the field of social science. The learned CIT(A) does not have any objection in treating the field of law as a 7 social science as per his observation in Para 9 of his order. The assessee is retired Judge of Hon'ble Allahabd High Colurt where he has acquired as Judge of the Hon'ble High Court the specialized knowledge and experience of law and jurisprudence which is a social science. Therefore, there remains no dispute to the fact of the assessee for not treating him as a technician.
The assessee, according to our view, is a technician as per the definition given in Explanation (c) under section 80RRA(2)(ii) of the Act mentioned hereinbefore.
8. As regards the remuneration the learned CIT(A) has rightly pointed out that the assessee has not received fees as employee or consultant but as arbitrator. As arbitrator also the fees receipt has to be treated as remuneration for services rendered for which the assessee has received 4615 and 6695 Canadian Dollars after deduction of tax at source. The assessee on the last hearing before the Bench was asked to place on record the permission from the Central Government/prescribed authority, which is a pre-requisite condition under section 80RRA(2)(i) of the Act with a copy to the Departmental Representative. The same has been placed on record and copy was given to the learned DR. In the circumstances and facts of the case, the assessee having fulfilled conditions under section 80RRA(2)(ii) and the Explanation to the said section, therefore, is entitled to deduction 8 under section 80RRA of the Act. The AO is directed to allow the deduction under section 80RRA to the assessee. Thus, ground Nos. 1 to 13 raised before us in the Memorandum of Appeal are allowed.
9. In the result, the appeal is allowed.
Pronounced in the open court on 11th February, 2010.
(A.D. JAIN) (B.P. JAIN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 11th February, 2010.
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
By Order
*mg Deputy Registrar, ITAT.