TMI Blog1998 (3) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... agreed to pay a fee of DM 16000 per year in consideration of the services provided by the petitioner. The petitioner was granted approval under section 80RRA for the financial years 1991-92 to 1994-95. The petitioner sought for a similar approval by way of extension/renewal being granted for the financial year 1995-96. The Ministry of Finance vide its letter dated May 6, 1996 (annexure P-8), refused the approval on the ground that the petitioner was a full time professional chartered accountant in practice. His main field of specialisation was law and accountancy and not business management. A perusal of the terms and conditions of the consultancy agreement entered into with the two foreign companies revealed that the petitioner was required to render services in a field other than the field of accountancy which was his specialised technical area of experience. The nature of services rendered by the petitioner could not be said to be rendered outside India only. As per section 7 of the Chartered Accountants Act, 1949, it was doubtful if the petitioner being a member of the Institute of Chartered Accountants and a full time professional chartered accountant in practice could ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with the Foreign Exchange Regulation Act, 1973, and rules made thereunder. According to the respondent, the petitioner is entitled to deduction equal to 50 per cent. only under section 80-O. We may examine the statutory provisions relevant to the petition. Section 80-0 applies also to an assessee who is resident in India receiving an income by way of fees, etc., from a foreign enterprise in consideration for the use outside India of any information concerning industrial, commercial, scientific knowledge, experience or skill made available or provided or agreed to be made available or provided by such assessee or in consideration of technical or professional services rendered or agreed to be rendered outside India to such enterprises by the assessee, subject to fulfilment of other conditions provided by section 80-O, a restatement whereof is not necessary for our purpose. Section 80-0 as it originally stood, underwent a change by the Finance (No. 2) Act of 1991 (w.e.f. 1-4-1992). The provision which applied earlier to an Indian company only was extended in its application to non-corporate taxpayer residents in India. The concession became available in relation to profess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rest is entitled to deduction at 50 per cent. merely. We have referred to these amendments in law in brief inasmuch as they would be of some relevance for appreciating the submissions made by learned counsel for the parties and the case law relied on by them in support of their respective submissions. It is not disputed that if the contention of the assessee is upheld then he would be entitled to the benefit of 75 per cent. deduction from the remuneration brought into India by him or on his behalf. The first question which arises for decision is whether the existence of an employer-employee relationship in the sense of creating a master and servant relationship is an essential ingredient of section 80RRA. In CBDT v. Aditya V Birla [1988] 170 ITR 137 (SC), the approval under section 80RRA was denied to the respondent by the tax authorities on the ground that according to the terms and conditions of the agreement, the status of the respondent was that of a "consultant" and not of an "employee". It was submitted on behalf of the Revenue that the provision should be confined to deduction to be given only in the case of the remuneration given to an employee and not to fees pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he salary earned abroad by working as a technician was introduced, did not appeal to their Lordships who observed that there was no warrant in the section to restrict the expression "remuneration received from the foreign employer" only to the salary received by an employee. In Smt. Kunti Verman v. CBDT [1996] 220 ITR 120 (Delhi), the assessee was to advise and act as a consultant to the company on terms relating to formulation of plant and programmes for the development, staffing and equipment of certain systems in the company. The application for approval of the agreement under section 80RRA was refused by the Government of India. One of the reasons assigned was that the relationship between the applicant and the foreign party was not that of an employer and an employee and the status of the former under the contract was that of an independent contractor. The Delhi High Court, following the law laid down by the Supreme Court in the case of Aditya V. Birla [1988] 170 ITR 137. held the decision of the Government "not sound". The assessee a consultant and receiving retainership for the services rendered outside India from a foreign employer was held entitled to the benefit of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Collector of Central Excise v. Indian Petro Chemicals [1997] 11 SCC 318. In our opinion, Mr. Syali is right in his submission. In CIT v. Indian Engineering and Commercial Corporation Pvt. Ltd. [1993] 201 ITR 723 (SC), the situation was that section 40(c) applied to directors among others though the provision was applicable to companies only. Section 40A(5) was applicable to the employees whether of companies or others. The directors being employees of the company were covered by section 40A(5) also which confer a higher benefit. As both the provisions were attracted their Lordships held that in the case of directors who were also "employees" the higher of the two ceilings had to be applied. In Collector of Central Excise v. Indian Petro Chemicals [1997] 11 SCC 318, there were two exemption notifications. Their Lordships approved the view of the High Court giving the assessee the benefit of that notification which was more beneficial to it. The above-said two decisions of the Supreme Court support the submission of Mr. Syali. We are of the opinion that if an assessee in the same set of facts and circumstances, is entitled to deduction from the remuneration received at 50 per c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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