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2012 (11) TMI 904 - AT - Income TaxDeduction u/s 80-O - held that - Supply of man power is one of the services rendered by the assessee and otherwise, mainly the assessee does the supply of comprehensive technical services for designing and development - assessee is entitled to relief as given by CIT (A) and is eligible for claiming deduction u/s. 80-O - ground raised by Revenue is dismissed. Deduction u/s 40(a)(iii)- Employer-Employee relationship - salary payble outside India - held that - Seconded personnel who is deputed by a foreign company to an Indian Companywere not employees of the assessee company foreign allowance paid to them by the assessee company cannot be considered as part of salary and so provisions of section 40(a)(iii) are not applicable as there is no Employer-Employee relation. overseas allowances is not chargeable under the head Salary . Therefore, section 40(a)(iii) does not apply. Similar view is also endorsed by the Hon ble Kerala High Court in the case of CIT vs. G. Eroppino Giovanni 1991 (7) TMI 36 - KERALA HIGH COURT - CIT (A) is correct in holding that there is no employee-employer relationship so as to consider the disallowance under section 40(a)(iii) of the Act - impugned payments made cannot be taxed under the head Salaries - in favour of assessee and ground raised by Revenue is dismissed. Relief u/s 91(1)- held that - Word paid in Sec.91(1) of the Act means constructive payment of tax and the onus is on the assessee to lead evidence that the taxes had in fact being paid in any country with which there is no agreement u/s 90 for avoidance of double taxation. Assessee made the payment of taxes in Kuwait and the dates and amounts of the said payments of taxes were made available before the CIT (A) - Original documents were also filed evidencing the same for relief in respect of the said taxes paid in Kuwait u/s 91(1) of the Act - assessee is entitled to said relief - ground raised by Revenue is dismissed. Taxability of Income ie gain in foreign exchange fluctuation - Business Income vs Income from Other Sources - held that - If Exchange fluctuation is on the export proceeds itself, then it has to be treated as gain in business and if the gains on exchange fluctuation occurs on the funds lying parked in EEFC account, then in that case, the case of CIT vs Shah Originals 2010 (4) TMI 216 - BOMBAY HIGH COURT is to be applied and treat that gain as income from other sources - ground raised stands covered by the said decision of the Tribunal in the assessee s own case - In the result, appeal of the Revenue is allowed in part. Condonation of delay of 1529 days in filing C.O. - held that - Expalnation of assessee which revolves around the oversight and assessee s conference with his counsel after expiry of four years, in our opinion does not constitute sufficient cause within the meaning of section 253(5) of the Act. It is not in the normal course that the assessee has not met his counsel for all these four years. As such there is no confirmation from the said Counsel by way of any affidavit that the assessee had impugned conference to advise for filing the impugned CO. In the present case, there is a negligence on part of the appellant and it is a case of absence of due diligence. Further also, the assessee has not demonstrated that it was beyond his control that the Cross Objection could not be filed before the expiry of the limitation period of 30 days specified in section 253(4) of the Act. Therefore, delay in filing the Cross Objection remains unexplained - no sufficient cause for condonation of delay of 1529 days - impugned application for condonation of delay by the Cross Objector, Respondent is dismissed - In the result, Revenue appeal is allowed in part and the Cross Objection is dismissed.
Issues Involved:
1. Deduction under Section 80-O of the I.T. Act, 1961. 2. Deduction under Section 40(a)(iii) of the I.T. Act, 1961. 3. Relief under Section 91(1) of the I.T. Act, 1961. 4. Taxability of income under the head 'Business Income' vs. 'Income from Other Sources.' 5. Condonation of delay in filing Cross Objection. Issue-wise Detailed Analysis: 1. Deduction under Section 80-O of the I.T. Act, 1961: The assessee claimed a deduction of Rs. 4,78,927/- under Section 80-O, which was initially disallowed by the AO based on previous years' CIT(A) decisions. However, the Tribunal referenced its earlier decision for AY 1999-2000, where it was established that the assessee provided comprehensive technical services, including design and development, not just manpower supply. The Tribunal upheld the CIT(A)'s decision, allowing the deduction as the assessee was eligible under Section 80-O. Consequently, the Revenue's appeal on this ground was dismissed. 2. Deduction under Section 40(a)(iii) of the I.T. Act, 1961: The Revenue contested the CIT(A)'s decision to allow a deduction of Rs. 10,70,75,199/- under Section 40(a)(iii). The Tribunal reviewed its previous rulings for AYs 1989-90, 1990-91, and 1991-92, which clarified that there was no employer-employee relationship between the assessee and the seconded personnel. The seconded employees remained on the rolls of their parent organizations, and the assessee merely reimbursed their salaries. Citing the Supreme Court's decision in Emil Webber vs. CIT, the Tribunal concluded that Section 40(a)(iii) was inapplicable, and thus, the Revenue's appeal on this ground was dismissed. 3. Relief under Section 91(1) of the I.T. Act, 1961: The Revenue's appeal against the CIT(A)'s grant of relief of Rs. 1,37,49,199/- under Section 91(1) was reviewed. The Tribunal referred to its decision for AY 1996-97, which clarified that Section 91(1) does not require taxes to be paid within the relevant previous year. The assessee had provided evidence of tax payments in Kuwait in subsequent periods, which was verified by the CIT(A). The Tribunal upheld the CIT(A)'s decision, affirming that the assessee was entitled to the relief, and dismissed the Revenue's appeal on this ground. 4. Taxability of income under 'Business Income' vs. 'Income from Other Sources': The Revenue argued that the gain of Rs. 1,06,80,410/- from foreign exchange fluctuation should be taxed under 'Income from Other Sources.' The Tribunal referred to its previous decision and the Bombay High Court's ruling in CIT vs. Shah Originals. It directed the AO to verify if the exchange fluctuation gains were related to export proceeds (to be treated as business income) or to funds in the EEFC account (to be treated as income from other sources). The Tribunal's decision was to follow this verification process, thereby disposing of this ground. 5. Condonation of delay in filing Cross Objection: The assessee filed a Cross Objection with a delay of 1529 days, citing oversight and realization during a conference with their counsel. The Tribunal found the explanation insufficient and lacking supportive evidence, such as an affidavit from the counsel. It emphasized that the assessee failed to demonstrate 'sufficient cause' for the delay as required under Section 253(5) of the Act. Consequently, the application for condonation of delay was dismissed. Conclusion: The Tribunal allowed the Revenue's appeal in part, dismissing the grounds related to deductions under Sections 80-O and 40(a)(iii), and relief under Section 91(1). It directed verification for the taxability of foreign exchange gains and dismissed the assessee's Cross Objection for delay.
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