2007 (7) TMI 208 - HC - Income Tax

Summary

Issues:
1. Eligibility for deduction under section 80-O for the assessment year 1998-99.
2. Assessment of income under the head 'Salary' versus 'Profits and gains of business or profession' affecting deduction under section 80-O.

Eligibility for deduction under section 80-O:
The case involved an individual assessee for the assessment year 1998-99, who initially claimed deduction under section 80-O of the Income-tax Act. The Assessing Officer disallowed this claim, leading to an appeal to the Commissioner of Income-tax (Appeals). The Commissioner dismissed the appeal, prompting the assessee to approach the Income-tax Appellate Tribunal. The Tribunal allowed the claim under section 80-O, but the Revenue contended that the Tribunal erred by disregarding the amendment to section 80-O introduced by the Finance Act, 1997. The amended provision restricted relief under section 80-O to income received for the use outside India of specific intellectual property. The Tribunal failed to consider this amendment, and the assessee, through their counsel, acknowledged that they were not entitled to relief under section 80-O post-amendment. Consequently, the court ruled in favor of the Revenue, disallowing the deduction under section 80-O.

Assessment under 'Salary' impacting deduction under section 80-O:
The second issue revolved around the assessment of the assessee's income under the head 'Salary' instead of 'Profits and gains of business or profession.' The Commissioner of Income-tax (Appeals) had directed the assessment under the latter head, but the actual assessment was done under 'Salary.' The Tribunal's decision to grant relief under section 80-O was based on this assessment. However, since the court ruled that the assessee was not eligible for relief under section 80-O due to the amendment, it directed the Tribunal to reevaluate the alternative plea made by the assessee for deduction under section 80RR. The court instructed the Tribunal to consider this alternative claim and make a decision in accordance with the law after providing the assessee with the opportunity to present their case.

In conclusion, the court's judgment primarily focused on the eligibility of the assessee for deduction under section 80-O for the assessment year 1998-99, highlighting the impact of the amendment introduced by the Finance Act, 1997. The assessment of income under the head 'Salary' and its effect on the deduction under section 80-O also formed a significant part of the judgment, leading to directions for further consideration of an alternative plea for deduction under section 80RR.