TMI Blog2012 (6) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the relevant statutory provisions under the Income Tax Act and in consonance with the Double Taxation Avoidance Agreement - Assessing Officer is directed to consider the claim of the assessee on the relief under DTAA agreement in respect of expenses towards free training, exemption under Section 9(i)(vi) in respect of lumpsum royalty as well as the claim for deduction under Section 44D towards expenses – partly in favour of assessee. - TC(A). No. 26 of 2005 - - - Dated:- 25-4-2012 - Mrs.Justice CHITRA VENKATARAMAN, Mr.Justice K.RAVICHANDRA BAABU, JJ. For Appellant : Mr.R.Vijayaraghavan For Respondent : Mr.T.Ravikumar Standing Counsel for Income Tax JUDGMENT CHITRA VENKATARAMAN, J. The assessee is on appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed for a further period of six years. Thus, the agreement entered into on 26.11.73 was renewed by an agreement dated 21.8.81 for a further period of seven years from 16.11.80. According to the assessee, the two agreements are separate agreements and the latter agreement dated 21.8.81 would not be construed as an amendment to the agreement dated 26.11.1973. 3. It is seen that during the previous year relevant to assessment year, the appellant received royalty on export sales, indigenous sales and lumpsum royalty. The assessee claimed that the receipt of the royalty on import sales was not taxable as per Section 9(i)(iv) of the Income Tax Act. Thus, the assessee claimed exemption on export sales royalty and 50% of the royalty on indigeno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of 20% towards training and exemption in respect of lumpsum royalty and royalty on export sales. 5. The Commissioner of Income Tax however rejected the contention of the assessee as regards the subsequent agreement as a separate agreement, pointing out that the second agreement was entered into only for extending the period of agreement originally prescribed. The Revisional authority thus set aside the order of assessment and confirmed the proposal. 6. As regards the alternative claim of the assessee for deduction of expenditure and exemption in respect of part of royalty, the Commissioner of Income Tax however rejected the plea, holding that granting the relief would be contrary to the provisions of Section 263 of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rates prescribed under the Act. Further, when the assessee is entitled to the benefit of Double Taxation Avoidance Agreement, the same should have been considered by the Tribunal. Learned counsel for the assessee pointed out that when the Tribunal and the Commissioner of Income Tax (Appeals) had treated the agreement of the year 1981 as part of earlier agreement entered in the year 1973, the relief on the expenditure towards free training under Section 44D of the Act and exemption under Section 9(1)(vi) in respect of lumpsum royalty ought to have been considered as a logical sequence to the above finding. In the circumstances, the Tribunal committed a serious error in its view that granting of such relief would not fall within the jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered as logical sequence to the finding on the first question of law. In the circumstances, we hold that the Tribunal should have considered this aspect of the matter while giving necessary directions to the Assessing Authority to work out the taxable income in accordance with law. It is seen that the assessee felt prejudiced about this aspect only by reason of the fact that the alternative ground taken before the Commissioner of Income Tax was rejected. Thus, it preferred further appeal before the Tribunal. In paragraph 7 of the order of the Tribunal, it is stated that the above stated relief would not fall under Section 263 of the Income Tax Act. The Tribunal however viewed that the assessee was not precluded from raising this issue b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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