2002 (3) TMI 219 - AT - Income Tax

Appeal Partially Allowed, Deduction Denied under Section 80-O, Car Expenses Disallowed

The Tribunal allowed the appeal in part, denying the deduction under section 80-O based on the Third Member's decision, which held that the information ... Deductions Issues Involved:1. Deduction under section 80-O of the Income-tax Act.2. 1/6th disallowance out of car maintenance expenses and car depreciation.Detailed Analysis:1. Deduction under section 80-O of the Income-tax Act:The primary issue in this case pertains to whether the assessee is entitled to deduction under section 80-O of the Income-tax Act for the assessment year 1994-95. The assessee-company provides professional services in the field of medicine and claimed deduction under section 80-O for the amount received from foreign insurers for providing medical information about their customers. The Assessing Officer disallowed the deduction on the grounds that the services were rendered in India and not outside India, and the information provided was general and not technical or professional.The Commissioner (Appeals) upheld the Assessing Officer's decision, stating that the information sent via telex/fax messages contained general information and did not qualify as professional or technical services. The assessee argued that the information provided was technical and professional, as it included medical advice, laboratory test results, and treatment details, which were used by foreign insurers to process claims.The Tribunal examined the provisions of section 80-O, which requires that the income should be received from a foreign enterprise for technical or professional services rendered outside India and received in convertible foreign exchange. The Tribunal noted that the assessee's directors were qualified doctors and the information provided was indeed technical and professional. The Tribunal concluded that the services were rendered from India but used outside India, fulfilling the conditions of section 80-O. Consequently, the Tribunal vacated the order of the Commissioner (Appeals) and directed the Assessing Officer to allow the deduction under section 80-O.However, there was a dissenting opinion by one member, who argued that the information provided was not technical or professional services and was used in India, thus not qualifying for deduction under section 80-O. The matter was referred to a Third Member, who upheld the view of the dissenting member, stating that the information provided was general and did not constitute technical or professional services rendered outside India. The Third Member concluded that the assessee was not entitled to deduction under section 80-O.2. 1/6th disallowance out of car maintenance expenses and car depreciation:The second issue involved the disallowance of 1/6th of car maintenance expenses and car depreciation by the Assessing Officer, which was confirmed by the Commissioner (Appeals). The assessee argued that as a company, there could be no personal use of the car, and relied on the decision in ITO v. Ashoka Betelnut Co. (P.) Ltd. [1984] 10 ITD 788 (Mad.) (TM).The Tribunal considered the rival submissions and referred to the decision in CIT v. Chitram & Co. (P.) Ltd [1991] 191 ITR 96, which justified the disallowance of car expenses in the case of companies. The Tribunal found that the 1/6th disallowance was not excessive or unreasonable and upheld the order of the Commissioner (Appeals), dismissing this ground of appeal.Conclusion:The appeal was partly allowed, with the deduction under section 80-O being denied based on the Third Member's decision, and the disallowance of car maintenance expenses and depreciation being upheld.