9911796707
TMI Blog1986 (8) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... 56 as service charges, foreign allowance and expenses on staff as stipulated in the three agreements. These agreements had been approved by the board for the purposes of section 80-O of the Income-tax Act, 1961 ("the Act'). The assessee-company had received Rs. 14,66,103 in convertible foreign exchange and the balance had been received in Indian rupees. 2. Before the ITO, the assessee claimed that it should get the deduction of Rs. 14,66,103 under section 80-O. The ITO was, however, of the view that under section 80-O read with section 80AB of the Act the assessee was entitled for a deduction of only that amount which would be arrived at after deducting the proportionate expenses from the amount of Rs. 14,66,103 received in convertible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that as this net income had been arrived at after deducting the expenditure, the net income relatable to the receipt by way of convertible foreign exchange could be determined by deducting proportionate expenses from such receipt. He arrived at this proportionate figure at Rs. 7,06,033. Deducting this amount from the receipt of Rs. 14,66,102 the ITO arrived at the figure of Rs. 7,60,069 which he held as deductible under section 80-O. 4. In appeal before the Commissioner (Appeals), the assessee challenged the working by the ITO. The contention of the assessee before the Commissioner (Appeals) was that the assessee was entitled to deduction of the entire amount which was received in convertible free foreign exchange, i.e., an amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract expenditure incurred for earning the income in respect of contract undertaken in foreign country. If the contention of the appellant is accepted it will amount to the fact that the entire expenditure amounted to Rs. 22,29,123 as per statement filed, incurred for earning the gross receipts from the foreign country will pertain to the earning of only the rupee portion received by the appellant which is included in the gross receipts. Obviously, such an interpretation is not acceptable. The appellant has stated earlier that it was entitled to receive payments in Indian currency as well as in foreign currency. This is part of one contract. For earning both components that is amount receivable in Indian rupee and amount receivable in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case the net income was Rs. 23,99,732 and as the receipt in convertible foreign exchange inIndiawas less than this amount of net income, the whole of such receipt in convertible foreign exchange was deductible. He conceded that the limits laid down under section 80AB are applicable and the assessee cannot get a deduction of an amount which is more than the gross total income itself. The learned counsel submitted that the ITO and the learned Commissioner (Appeals) have read with section 80-O some provision which is not there, and the interpretation placed by them does not follow from the language of the provision. He pointed out that what the ITO has done was to add a particular condition that the convertible foreign exchange could be redu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oreign exchange in India, or having been received in convertible foreign exchange outside India or having been converted into convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction of the whole of the income so received in, or brought into, India in computing the total income of the assessee : " Section 80AB reads as under : "80AB. Where any deduction is required to be made or allowed under any section (except section 80M) included in this Chapter under the heading 'C.---Deductions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner (Appeals) does not follow from the language of the provision itself. As the amount received in convertible foreign exchange was lesser than the net income, this amount received in convertible foreign exchange itself was a part of such income and, thus, it was deductible under section 80-O. The reasoning given by the learned Commissioner (Appeals) that the whole of the expenditure could not be related to Rupee payment is not convincing. What the law provides is the total deduction of the net income earned in rendering the foreign service, etc., and in case the receipt in convertible foreign exchange is less than that amount that receipt in foreign exchange has to be deducted. This, however, could be subject to the limits pl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
