1989 (12) TMI 101 - AT - Income Tax

Court dismisses appeals for assessment years 1984-85 and 1985-86, upholds disallowance under section 80-O.

The court dismissed the appeals for the assessment years 1984-85 and 1985-86, as it upheld the disallowance of the claim under section 80-O due to ... - Issues:1. Disallowance of claim under section 80-O for the assessment years 1984-85 and 1985-86.2. Disallowance of retainership fee under section 80VV for the assessment year 1984-85.3. Dispute regarding deduction under section 80HHB for the assessment year 1984-85.Analysis:1. The judgment addresses the disallowance of the claim under section 80-O for the assessment years 1984-85 and 1985-86. The assessee company provided technical know-how to Bangladesh, leading to a claim under section 80-O. The dispute revolved around the deduction claimed, with the assessee restricting it to Rs. 20,952 for the year 1984-85. The Assessing Officer considered regular employees' salaries as an expenditure in computing the deduction, which the counsel disputed. The judgment highlighted the change in deduction computation pre and post the insertion of section 80AB. It emphasized that net income derived from technical know-how should be excluded from total income, considering salaries paid to employees involved in foreign projects. The CIT(A) rejected the claim due to the obligation of employees to perform duties in foreign countries, leading to the dismissal of the appeals for both assessment years.2. The judgment also addressed the disallowance of retainership fee under section 80VV for the assessment year 1984-85. The Assessing Officer disallowed retainership fees paid to individuals, invoking section 80VV. However, the CIT(A) allowed the claim, and the Tribunal upheld this decision based on previous rulings. The judgment aligned with the Tribunal's view, rejecting the Revenue's appeal on this ground.3. Furthermore, the judgment discussed a dispute regarding the deduction under section 80HHB for the assessment year 1984-85. The Assessing Officer allowed a deduction of Rs. 5,421, calculated based on gross receipts less expenditure. The assessee claimed a higher deduction, stating that salaries paid to employees involved in foreign projects should not be considered for profit computation. However, the judgment emphasized that salaries attributable to foreign projects must be included in profit computation, even if the employees would have received salaries regardless. The claim accepted by the CIT(A) under section 80HHB was withdrawn, and the Revenue's appeal was partly allowed on this ground.In conclusion, the judgment delves into various issues concerning deductions under different sections of the Income Tax Act, emphasizing the computation of income, obligations of employees in foreign projects, and the applicability of specific sections for deduction claims.