2004 (5) TMI 530 - AT - Income Tax

Deduction under section 80RRA - Specifically related to the calculation - remuneration received for services rendered outside India - HELD THAT - It is to be understood that the language of the provisions of law in sections 80-O and 80RRA are different. The deduction available under section 80-O and other analogous provisions are on the income from specified sources and included in the gross total income of the assessee. On the other hand the deduction is available under section 80RRA on the remuneration received by specified technicians. As rightly understood remuneration is the compensation paid for services rendered. There is no concept of adjusting expenditure against such remuneration. Remuneration is not in the nature of business receipts. The setting off of expenditure against receipt is necessary where the income is required to be computed. In the case of remuneration there is no cause for any such computation. This is because the remuneration is always predetermined on the basis of the terms of the service contract. The computation of remuneration is not dependent on the turnover or price level etc. as in the case of business profit. The remuneration is fixed either on time basis or on piece basis. It is to be seen that remuneration is always predetermined. Therefore the concept of netting cannot be deployed while working out the deduction in the context of remuneration. We therefore accept the contention of the assessee and allow the ground raised by the assessee. We direct the Assessing Officer not to deduct any expenditure from the remuneration included in the course of total income of the assessee and give the deduction on the whole of the remuneration as such.

Summary

Issues:
The first issue in this appeal concerns the deduction under section 80RRA of the Income-tax Act, 1961, specifically related to the calculation of the deduction based on remuneration received by the assessee for services rendered outside India.

Details of the Judgment:

The assessee claimed a deduction under section 80RRA for remuneration received for services rendered outside India. The Assessing Officer adjusted the expenditure incurred by the assessee against the remuneration received, resulting in only the net remuneration being considered. The Commissioner of Income-tax (Appeals) upheld this adjustment, leading to the appeal before the tribunal.

The assessee's counsel argued that the concept of "net amount" is not applicable to the deduction under section 80RRA, emphasizing the distinction between "income" and "remuneration." While deductions under other sections like 80-O are based on income accrued to the assessee, section 80RRA focuses on remuneration for services rendered, where no netting of income and expenditure is required.

The tribunal considered various definitions of "remuneration" from legal sources and concluded that remuneration is the compensation for services rendered, distinct from business receipts. The tribunal noted that remuneration is predetermined based on service terms, not dependent on turnover or price levels, and does not require computation like business profit. Therefore, the concept of netting expenses against remuneration does not apply to remuneration calculations.

The tribunal accepted the assessee's contention, directing the Assessing Officer not to deduct any expenditure from the remuneration for the purpose of calculating the deduction under section 80RRA. Additionally, the tribunal acknowledged the assessee's alternate argument that only direct expenses attributable to earning remuneration should be deducted, if necessary, but deemed this finding academic since the main ground raised by the assessee was already allowed.

In conclusion, the tribunal ruled in favor of the assessee, clarifying the treatment of remuneration for services rendered outside India under section 80RRA and emphasizing the distinction between income and remuneration in determining deductions under the Income-tax Act, 1961.