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TMI Blog2007 (8) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Income-tax Appellate Tribunal, Madras "B" Bench, made in ITA No. 368/Mds/99, dated October 31, 2003, for the assessment year 1996-97. 2. The respondent-assessee filed his return of income for the assessment year 1996-97 admitting a total income of Rs. 74,620. He also filed another return of income for the above assessment year admitting the same total income of Rs. 74,620 and along with the said return, the assessee also enclosed proof for commission received in foreign currency in support of his claim for deduction under section 80-O of the Income-tax Act. The return was processed under section 143(1)(a). As the assessee had admitted service charges of Rs. 1,000 and claimed huge expenses amounting to Rs. 1,76,242 resulting in net loss of Rs. 1,75,242, he was asked to explain the reasons for claiming such huge expenses against the service charges of Rs. 1,000 received in India. Apart from the above, the assessee was asked to explain as to the nature of commission received to examine the admissibility of the deduction claimed under section 80-O of the Act. The assessee explained by stating that the expenses included a sum of Rs. 52,500 towards interest payment on loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced by the assessee. As the finding of the Tribunal being on appreciation of records, we answer the first question of law against the Revenue and in favour of the assessee. 4. So far as the second question of law is concerned, it appears that the assessee had claimed deduction under section 80-O of the Act on the com-mission received in foreign currency from M/s. Baggio Tecnologie s.r.l., Italy, on the basis that an exclusive agency agreement entered into by the assessee with the said foreign enterprise for promoting and concluding sales contract in the territory of India. 5. Section 80-O of the Act, as applicable for the assessment year in ques-tion, reads as under : ". . . any income by way of royalty, commission, fees or any similar payment received by the assessee from the Government of a foreign State or a foreign enterprise in consideration for the use outside India of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to such Government or enterprise by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income-tax (Appeals) had gone into the question that the commission represents the amount within India and not outside India and had consequently disallowed the claim of the assessee. In our opinion, in terms of section 80-O coupled with the facts pleaded on the basis of the agreement, the commission that was received by the assessee is from a foreign enterprise, namely, M/s. Baggio Technologie s.r.l., Italy, i.e., outside India. Therefore, the finding of both the Assessing Officer and the Commissioner of Income-tax (Appeals) to disallow the claim of the assessee under section 80-O on the above ground is unsustainable. 10. However, for the purpose of entitlement as to the deduction under section 80-O, the assessee must prove by supporting materials the fact that such commission was in fact received for passing of any commercial information to a foreign enterprise. From the order of the Assessing Officer, it is seen that immediately on the claim of deduction under section 80-O made by the assessee, he was asked to explain the nature of commission received in order to examine the admissibility of the deduction claimed under the said section. In view of the above, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sident in India ; (ii) commission was received in convertible foreign exchange ; and (iii) it earned income by way of commission in consideration, for the use outside India, of information concerning commercial knowledge, experience or skill made available to foreign enterprises. Of course, the claim of the assessee in that case was accepted by the Delhi High Court solely on the ground that there was no dispute that it was commercial information which the assessee provided to foreign buyers and in consideration thereof, the assessee received commission which was convertible foreign exchange. What is relevant for consideration is as to the availability of materials to sustain the claim for deduction under section 80-O. Inasmuch as the assessee had not produced any material except the explanation offered, the facts of the said case cannot be pressed into service by the assessee and the said judgment is distinguishable. 12. Per contra, the learned senior standing counsel for the Income-tax Department also relied upon a judgment of the Delhi High Court in Anand and Anand v. CIT [2006] 286 ITR 432, where the deduction under section 80-O was disallowed. In our opinion, the said judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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