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2012 (5) TMI 125 - AT - Income TaxFull exemption of salary under DTAA u/s 90 to the assessee for the salary received from foreign company AO contested that the claim of the salary received from Polish Company as per Article 17(2) of the Agreement between India and Poland DTAA the person is required to be Top Level Managerial position - Held that - As per the Cooperation agreement entered into between the assessee and the Polish Company, the function of the assessee was to support establishing and preparing organization of the company s representative office in India at best be termed as a management function but cannot be equated with Top Level Managerial Position - further findings of the A.O. that the Assessee has made only two short visits to Poland in favour of revenue. Allowing deduction u/s. 80G by CIT (A) Held that - Revenue has not brought any material on record which could prove that the donations made were not genuine and made in cash - whereas assessee has submits that the donations were made by cheque and also furnished the copies of the receipts of the donations - no infirmity in the order of CIT(A) allowing the benefit of deduction u/s 80G - against revenue.
Issues Involved:
1. Exemption of salary under DTAA as per Article 17(2) for AY 2005-06 and AY 2006-07. 2. Deduction under Section 80G of the Income Tax Act for AY 2005-06. Detailed Analysis: 1. Exemption of Salary under DTAA (Article 17(2)): Facts and Arguments: - The assessee filed returns declaring income and claimed exemption for salary received from a Polish company under the DTAA between India and Poland. - The Assessing Officer (AO) rejected the exemption claim, arguing that the assessee was employed in Bangalore, India, and did not qualify as a "Top Level Managerial Position" as required by Article 17(2) of the DTAA. - The AO noted that the assessee was designated as a "Service Provider" and had visited Poland only twice briefly. The AO initiated penalty proceedings for furnishing inaccurate particulars of income. CIT(A) Decision: - The CIT(A) accepted the assessee's plea, stating that the assessee worked as a top official in the Bangalore office of the Polish company, handling significant responsibilities such as establishing the office, obtaining necessary permissions, and managing the office's operations. - The CIT(A) directed the AO to grant full exemption under DTAA. Tribunal's Findings: - The Tribunal noted that the assessee was employed as a "Service Provider" and worked from Bangalore. The function of supporting the establishment of an office was considered a management function but not equivalent to a "Top Level Managerial Position." - Definitions from various sources were cited to clarify that top-level management includes titles like CEO, President, etc., responsible for the entire enterprise. - The Tribunal found that the assessee did not meet these criteria and upheld the AO's decision to add the salary to the total income, setting aside the CIT(A)'s order. Conclusion: - The appeal by the Revenue for AY 2005-06 and AY 2006-07 on this ground was allowed, denying the exemption under DTAA. 2. Deduction under Section 80G: Facts and Arguments: - The assessee made donations totaling Rs. 1,00,000/- in cash to Shree Mahavir Research Foundation and claimed a deduction under Section 80G. - The AO denied the deduction, arguing that the cash withdrawals made by the assessee were insufficient for both household expenses and donations. CIT(A) Decision: - The CIT(A) allowed the deduction, noting that the assessee's family had a simple lifestyle, and the cash withdrawals, along with credit/debit card expenses, were sufficient to cover both household expenses and donations. - The CIT(A) rejected the AO's assumption-based disallowance. Tribunal's Findings: - The Tribunal found no evidence from the Revenue to counter the genuineness of the donations. - The Tribunal upheld the CIT(A)'s order, allowing the deduction under Section 80G. Conclusion: - The appeal by the Revenue on this ground was dismissed, and the deduction under Section 80G was allowed. Final Outcome: - The Revenue's appeal for AY 2005-06 was partly allowed (denying DTAA exemption but allowing Section 80G deduction). - The Revenue's appeal for AY 2006-07 was allowed (denying DTAA exemption).
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