ASSTT CIT Vs. PRAKASH DARYANI
LAWS(IT)-2008-1-15
INCOME TAX APPELLATE TRIBUNAL
Decided on January 11,2008

Appellant
VERSUS
Respondents

JUDGEMENT

D.R. Singh, J.M. - (1.) THE revenue has filed this appeal against the order of the Commissioner (Appeals), New Delhi, passed in appeal No. 305 of 2003-04, dated 8-3-2004 on the following grounds: 1. On the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in directing the assessing officer to allow deduction under Section 80RRA in respect of consulting fee of USD 26,000 which was adjusted by the foreign employer against a prior loan taken by the assessee.
(2.) On the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in reducing disallowance of travelling expenses from Rs. 8,64,225 to Rs. 2,26,740. 2. First, we shall deal with ground No. 1 of the appeal of the revenue involving the issue of deduction claimed by the assessee under Section 80RRA of the Income Tax Act, 1961 in respect of consultancy fee. Briefly stated, the facts relating to this issue are that the assessee is a business consultant rendering services to M/s KLT Power Inc., USA and EI Pasco Energy Co., USA. In the return of income for the assessment year under consideration, the assessee claimed deduction of Rs. 17,53,876 under Section 80RRA of the Act in respect of remuneration/fee received by the assessee for providing consultancy services to M/s KLT Power Inc., USA (KLT).
(3.) DURING September, 1996 to August, 1997, KLT had advanced a loan of US $ 50,000 to the assessee for purchase of a car. However, the aforementioned loan was not utilized by the assessee for purchase of a car and KLT recovered US $ 24,000 @ US $ 2000 per month from consulting fees in the earlier year and the assessee in his books of account showed the balance amount of US $ 26,000 as amount due to KLT. DURING the year under consideration, the KLT adjusted the balance amount due, i.e. US $ 26,000 against the success fee payable to the assessee. The assessee accounted and offered the said amount for tax as income during the relevant previous year and claimed deduction under Section 80RRA of the Act on the amount of US $ 26,000 but the same was denied by the assessing officer on the ground that the assessee had failed to fulfil the conditions as envisaged in the provisions of Section 80RR of the Act because the said section does not allow set off of advance taken against subsequent income for the services rendered. The assessing officer held that the said fee does not relate to the projects undertaken, although the same was brought to tax as income of the assessee in the year under appeal, so, he disallowed the deduction of US $ 26,000 (Rs. 9,19,090) under Section 80RRA of the Act.;


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