2004 (3) TMI 712 - AT - Income Tax

Summary

Issues Involved:
1. Deduction under section 80-O of the Income-tax Act, 1961.
2. Applicability of CBDT Circular No. 253 dated April 30, 1979.
3. Relevance of CBDT Circular No. 700 dated March 23, 1995.
4. Scope of rectification under section 254(2) of the Income-tax Act.

Detailed Analysis:

1. Deduction under section 80-O of the Income-tax Act, 1961:
The applicant/assessee, a private limited company providing emergency and medical rescue services to foreign nationals, claimed a deduction under section 80-O on Rs. 16,95,775 received as consultation charges from foreign parties. The assessee argued that the services were professional and rendered from India to foreign parties. The Assessing Officer and the Commissioner of Income-tax (Appeals) disallowed the claim. The Division Bench of the Tribunal had a split opinion, with the Accountant Member favoring the deduction and the Judicial Member opposing it. The Third Member supported the Judicial Member's view, concluding that the services rendered were not technical or professional services eligible for deduction under section 80-O.

2. Applicability of CBDT Circular No. 253 dated April 30, 1979:
The Third Member considered CBDT Circular No. 253, which was introduced to prevent collusive arrangements for tax concessions under section 80-O. The assessee argued that this circular was not relevant to the amended provisions applicable to the assessment year in question. The Third Member, however, found the circular relevant in understanding the objectives behind section 80-O and concluded that the services provided by the assessee did not qualify for the deduction.

3. Relevance of CBDT Circular No. 700 dated March 23, 1995:
The assessee contended that Circular No. 700, which clarified that services rendered from India to foreign enterprises qualify for deduction under section 80-O, was ignored by the Third Member. The Third Member acknowledged the circular but did not find it necessary to apply it, as he concluded that the services provided by the assessee were general in nature and did not constitute technical or professional services.

4. Scope of rectification under section 254(2) of the Income-tax Act:
The assessee filed a miscellaneous application under section 254(2) to rectify the Third Member's order, arguing that it was influenced by an irrelevant circular and ignored relevant material. The Tribunal examined whether the Third Member's decision was solely based on Circular No. 253 and whether he ignored Circular No. 700. It concluded that the Third Member had considered all relevant material and that his decision was not solely influenced by the circular. The Tribunal emphasized that section 254(2) allows rectification of apparent mistakes but not a review of the order. The application was rejected as the Tribunal found no apparent mistake in the Third Member's order.

In conclusion, the Tribunal upheld the Third Member's decision, rejecting the assessee's claim for deduction under section 80-O and dismissing the miscellaneous application for rectification. The Tribunal reiterated the limited scope of rectification under section 254(2), emphasizing that it does not allow for a review of the order.