2004 (9) TMI 85 - HC - Income Tax

Payment made to advocate, and chartered accountant - permissible limit of fee - Whether, Tribunal s finding that payment made to Shri Atma Ram Agrawala, advocate, and Dr. R.C. Vaish, chartered accountant were not covered by the provision of section 80VV is vitiated as the Tribunal had failed to take into account that both of them have represented the assessee in income-tax proceedings? - payment was made to Dr. R.C. Vaish and Sri Atma Ram Agarwal as retainers for giving opinion on company law matters and not for income-tax proceedings and the payment made for income-tax matters was below the permissible limit of Rs. 5,000 which has been affirmed by the Tribunal - We are of the opinion that the provisions of section 80VV of the Act were not attracted in the present case. - In this view of the matter, we answer the question referred to us in the affirmative, i.e., in favour of the assessee

Issues involved:
Interpretation of section 80VV of the Income-tax Act, 1961 regarding the deduction of legal expenses for income-tax proceedings.

Analysis:
The case involved a reference to the High Court by the Income-tax Appellate Tribunal regarding the interpretation of section 80VV of the Income-tax Act, 1961. The main issue was whether the payment made to the advocate and chartered accountant representing the assessee in income-tax proceedings was covered by the provisions of section 80VV. The respondent had claimed a deduction of legal expenses for the assessment year 1977-78. The Income-tax Officer disallowed a portion of the claimed amount, stating it exceeded the permissible limit under section 80VV. However, the Commissioner of Income-tax deleted the disallowed amount, emphasizing that the payments were for retainership in company law matters, not specifically for income-tax proceedings. The Tribunal upheld this decision, stating that the payments were not covered by section 80VV as they were for advice on company law matters, not for income-tax proceedings.

The Revenue appealed the Tribunal's decision, arguing that the disallowed amount was justified under section 80VV. The Revenue contended that the payments exceeded the permissible limit for fees paid to counsel in income-tax proceedings. However, the High Court disagreed with the Revenue's interpretation. The High Court noted that the Commissioner of Income-tax had found the payments were for retainership in company law matters, not specifically for income-tax proceedings. The High Court held that the provisions of section 80VV were not applicable in this case, as the payments were for advice on company law matters and did not exceed the permissible limit for income-tax matters.

In conclusion, the High Court answered the question referred to them in favor of the assessee and against the Revenue. The Court held that the payments made to the advocate and chartered accountant were not covered by section 80VV as they were for retainership in company law matters, not specifically for income-tax proceedings. The Court also mentioned that there would be no order as to costs in this matter.

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