T.K. Sharma, J.M. - (1.) THIS appeal filed by the assessee is directed against the order dated 19-2-2001 of the CIT (A)-I, Mumbai, upholding the disallowance of deduction of Rs. 1,79,608 being 75% of total receipt of Rs. 2,39,477 claimed by the assessee under section 80RR of the Income Tax Act, 1961, pertaining to the assessment year 1997-98.
(2.) The facts in brief are that the assessee is an individual and derives professional income from the work of music direction of films. For the assessment year under appeal, the assessee claimed deduction under section 80RR amounting to Rs. 1,79,608 on royalty income of Rs. 2,39,477. This was disallowed by the assessing officer in the assessment order observing as under: "(i) Form 10H were not filed in respect of the entire receipt of Rs. 2,39,477, which were not derived from the exercise of profession. (ii) There is no direct nexus between the royalty income received and the exercise of the profession. (iii) The appellant had exercised his profession when he first produced the said music. The foreign exchange remitted into India at that point of time, as a result of the exercise, was the income which was eligible for section 8ORR deduction. (iv) The royalty received thereafter for the usage of his copyrights by others would not partake the character of income derived from the exercise of his profession. In view of the Bombay High Court judgment in the case of Hindustan Lever Ltd. 121 ITR 951 (supra), the words 'derived from' cannot be accepted as the equivalent to the words 'referable to. (v) As the royalty income has been generated from the usage of the copy rights of the appellant's music which is not covered under section 80RR, the deduction is not allowable on the royalty receipts." The assessee carried the matter in appeal and before the CIT (A), the assessee made following submissions :- (i) He is a music director who composes tunes. His profession of composing entails giving permission to the producer for incorporating his composition in a film, permitting the music company to make records and giving permission for public use of the music to any one; (ii) In respect of first two items, the appellant, directly collect his fees, but in respect of the last item which involves making available his composition for public, he receives his fees for the 'play of music'; (iii) In the instant case, the said fees was collected by the Indian Performing Right Society Ltd., (hereinafter referred to as the IPRS) which has world wide organization; (iv) Through medium of cassettes and records, the appellant makes available his composition for public and it is physically impossible to render his composition in person every time. The composition is the result of direct use of the appellant's professional talents and skill and there is a close proximity between royalty income received and the exercise of profession.
(3.) IN the impugned order, the CIT (A) upheld the action of the assessing officer on the ground that receipt of Rs. 2,39,477 is for the usage of copyrights of assessee's music. This income cannot be said to be derived from the exercise of the assessee's profession. Therefore, does not qualify for deduction under section 8ORR of the INcome Tax Act, 1961. IN the impugned order, the CIT (A) also held that the assessee had exercised his profession when he first produced the music and foreign exchange was remitted to INdia. Aggrieved by this order of the CIT (A), the assessee is in appeal before us.;