2004 (5) TMI 246 - AT - Income Tax

Summary

Issues Involved:
1. Deduction under section 80-O of the Income-tax Act, 1961.
2. Applicability and influence of CBDT Circulars.
3. Scope of rectification under section 254(2) of the Income-tax Act, 1961.

Detailed Analysis:

1. Deduction under section 80-O of the Income-tax Act, 1961:

The assessee, a private limited company, claimed a deduction under section 80-O for consultation charges received in convertible foreign exchange from foreign insurance companies. The services provided included medical and emergency rescue services to foreign nationals in India and forwarding treatment details to the foreign companies. The Assessing Officer and the CIT(A) disallowed the deduction, stating that the services were not technical or professional services rendered outside India. The Division Bench of the Tribunal had differing opinions, leading to the appointment of a Third Member, who ruled in favor of the Revenue. The Third Member concluded that the information transmitted was of a general nature and did not constitute technical or professional services under section 80-O.

2. Applicability and influence of CBDT Circulars:

The assessee argued that the Third Member's decision was influenced by CBDT Circular No. 253 dated 30-4-1979, which was not relevant to the amended provisions of section 80-O applicable to the assessment year in question. The assessee contended that Circular No. 700 dated 23-3-1995 should have been considered, which clarified that technical and professional services rendered from India to foreign enterprises qualify for deduction under section 80-O. The Tribunal examined whether the Third Member was unduly influenced by the earlier circular and concluded that the Third Member considered all relevant materials, including the circulars and case laws, and was not solely influenced by the CBDT Circular No. 253.

3. Scope of rectification under section 254(2) of the Income-tax Act, 1961:

The assessee filed a miscellaneous application under section 254(2), claiming that there was a mistake apparent on record in the Third Member's order. The Tribunal analyzed whether the Third Member's order contained any apparent mistake or if it was a case of reviewing the order. The Tribunal referred to various judicial precedents, including the Supreme Court's decision in T.S. Balram, ITO v. Volkart Bros., which stated that a mistake apparent on the record must be an obvious and patent mistake, not something established by a long-drawn process of reasoning. The Tribunal concluded that the Third Member's decision was based on a thorough consideration of all relevant materials and did not contain any apparent mistake that warranted rectification under section 254(2). The application for rectification was thus rejected.

Conclusion:

The Tribunal upheld the Third Member's decision, rejecting the assessee's claim for deduction under section 80-O and the miscellaneous application for rectification under section 254(2). The Tribunal found no apparent mistake in the Third Member's order and emphasized the limited scope of rectification under section 254(2), which does not allow for a review of the earlier order.