2002 (6) TMI 592 - AT - Income Tax

Summary

Issues Involved:
1. Deduction under section 80-O.
2. Deduction under section 80HHC.
3. Doctrine of merger.
4. Revisionary jurisdiction under section 263.

Summary:

1. Deduction under section 80-O:
The assessee claimed deductions u/s 80-O for commissions received in foreign convertible exchange for services rendered outside India. The Commissioner found that no services were rendered outside India and the Assessing Officer (AO) wrongly allowed the deduction. The assessee argued that services were rendered both outside and from India, meeting the conditions of section 80-O, and that the agreements with foreign parties were genuine and specific. The Commissioner, however, observed that the services were performed within India and the knowledge provided was general. The Tribunal found that the AO had duly considered the nature of services and the provisions of section 80-O, and thus, the assessment orders were neither erroneous nor prejudicial to the interest of the Revenue.

2. Deduction under section 80HHC:
For the assessment year 1993-94, the Commissioner found that the AO wrongly allowed a deduction u/s 80HHC on the premium amount of import licenses, which were not obtained from exports. For the assessment year 1994-95, the Commissioner noted that the assessee claimed excess deduction by artificially reducing the total turnover. The assessee contended that the AO followed the law and previous appellate decisions. The Tribunal held that the AO's orders were in accordance with the law and the appellate orders, and thus, not erroneous.

3. Doctrine of Merger:
The assessee argued that the AO's orders on deductions u/s 80-O and 80HHC had merged with the appellate orders of the Commissioner (Appeals), and thus, could not be revised u/s 263. The Tribunal did not find it necessary to decide on this issue as the primary findings were in favor of the assessee.

4. Revisionary Jurisdiction under section 263:
The Tribunal concluded that the Commissioner was substituting his judgment for that of the AO, which is not permissible u/s 263. The AO had applied the law correctly and the assessments were not erroneous or prejudicial to the interest of the Revenue. Consequently, the Tribunal set aside the orders of the Commissioner for both assessment years.

Conclusion:
The Tribunal allowed the appeals of the assessee, setting aside the Commissioner's orders for both assessment years on the issues of deductions u/s 80-O and 80HHC.