1997 (11) TMI 93 - HC - Income Tax

Court upholds Commissioner's decision under section 263 of Income-tax Act on foreign exchange income

The High Court held that the Commissioner of Income-tax was correct in setting aside the assessment order under section 263 of the Income-tax Act, 1961, ... Foreign Exchange, Special Deduction Issues:1. Interpretation of provisions under section 80-O of the Income-tax Act, 1961 regarding allowance for income received in convertible foreign exchange.2. Validity of the Commissioner of Income-tax setting aside the assessment order under section 263 of the Act.3. Determination of entitlement to allowance under section 80-O based on actual receipt of income in India in convertible foreign exchange.4. Correctness of the Tribunal's decision in canceling the order under section 263 of the Income-tax Act, 1961 passed by the Commissioner.Analysis:The judgment dealt with a case involving the interpretation of section 80-O of the Income-tax Act, 1961, which provides for an allowance for income received in convertible foreign exchange. The main issue revolved around whether the entire income subject to the allowance had been received in India in convertible foreign exchange. The Commissioner of Income-tax set aside the assessment order under section 263 of the Act, directing a fresh assessment to verify the actual receipt of income in India. The Tribunal disagreed with the Commissioner and upheld the original assessment order, stating that the assessee was entitled to the full allowance despite problems with remittance from Nigeria. However, the High Court held that the Commissioner was correct in setting aside the assessment order as only a portion of the income had been received in India as convertible foreign exchange at the time of assessment.Regarding the entitlement to the allowance under section 80-O, the High Court emphasized that the allowance is specifically for the percentage of income actually received in India in convertible foreign exchange. The court noted that, at the time of assessment, only a partial amount had been received in India, and the remaining sum had not been received in convertible foreign exchange in India. Therefore, the Commissioner's decision to order a fresh assessment was deemed appropriate as per the provisions of the law.The Tribunal's observation that the remaining amount was later received in India in convertible foreign exchange was considered relevant by the High Court. However, the court highlighted that the Income-tax Officer had the authority to determine the extent of the allowance based on the actual receipt of convertible foreign exchange in India. The court reiterated that the Commissioner's directive for a fresh assessment was valid, emphasizing the importance of adhering to the statutory provisions while determining the allowance under section 80-O.In conclusion, the High Court disagreed with the Tribunal's decision to uphold the Assessing Officer's order and overturn the Commissioner's judgment. The court ruled in favor of the Revenue, affirming the Commissioner's decision to set aside the assessment order and directing a fresh assessment to ascertain the actual receipt of income in convertible foreign exchange in India.