TMI Blog2012 (11) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that there is no employee-employer relationship so as to consider the disallowance under section 40(a)(iii) of the Act - impugned payments made cannot be taxed under the head “Salaries” - in favour of assessee and ground raised by Revenue is dismissed. Relief u/s 91(1)- held that:- Word “paid” in Sec.91(1) of the Act means constructive payment of tax and the onus is on the assessee to lead evidence that the taxes had in fact being paid in any country with which there is no agreement u/s 90 for avoidance of double taxation. Assessee made the payment of taxes in Kuwait and the dates and amounts of the said payments of taxes were made available before the CIT (A) - Original documents were also filed evidencing the same for relief in respect of the said taxes paid in Kuwait u/s 91(1) of the Act - assessee is entitled to said relief - ground raised by Revenue is dismissed. Taxability of Income ie gain in foreign exchange fluctuation - “Business Income”vs “Income from Other Sources” - held that:- If Exchange fluctuation is on the export proceeds itself, then it has to be treated as gain in business and if the gains on exchange fluctuation occurs on the funds lying parked in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT (A) erred in directing to allow relief of Rs. 1,37,49,199/- u/s 91(1) of the I.T. Act, 1961. 4. On the facts and circumstances of the case and in law, the CIT (A) erred in directing to tax the income of Rs. 1,06,80,410/- under the head Business Income instead of taxing the same under the head Income from Other Sources . 3. Briefly stated the facts of the case are that the assessee is engaged in the business relating to Technical consultancy and Operational services and filed the return of income at Rs 17.17 crores and the assessment was completed u/s 143(3) of the Act determining the assessed income at Rs 28.16 cr (rounded off) after making various additions and some of them are subject matter of appeals before us. In this regard, at the outset, the learned Counsel for the assessee filed copies of orders of the Tribunal in various appeals of the assessee and mentioned that the grounds of the assessee s appeal are actually covered and, therefore, appeal of the assessee is required to be allowed in part. Ground-wise adjudication is given in the succeeding paragraphs. 4. Ground no.1 relates to the claim of deduction of Rs. 4,78,927/- u/s 80-O of the I.T. Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of PII for the assignment has comprehensive responsibilities, not just supply of manpower as the DR had pointed out. 11. We have heard the submissions from both the sides, one thing is clear that the DR has not challenged the allowability of deduction u/s. 80-O, he has shown serious reservations on the basis of allowability, i.e. whether the deduction should be allowed on net amount or on gross amount. The DR pointed out the decisions of Hon ble Bombay High Court in the case of CIT Vs Asian Cable Corpn. Ltd. I.T. Reference No. 530 of 1987, reported in 129 Taxman 590. The DR has also referred to the decision of Hon ble Karnataka High Court in the case of ACIT Vs Abcon Engg. Systems (P) Ltd. on the issue of allowability on export proceeds. Besides this, the AR also placed reliance on the decision of ITAT Bangalore in the case of ITO Vs Vivek Prabakar Kunte, ITA No. 79/Bangalore/2001, reported in 92 ITD 71, wherein it was held that the objective of Sec. 80-O is mainly the supply of technical know-how or technical services to developing countries. 12. We find that the issue of disallowance in the current appeal is virtually infructuous, following the decision of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ives flexibility of working pattern in either selected employees or placing them at the required position or places without having to take them on regular employment basis. Generally secondment last for not more than a year unless specifically provided for and the organization that supply the secondees continue to pay their salary and allowances during the secondment period and during the period this cost is generally reimbursed by the host organization. The secondment also taken place within the organization or externally to another organization, i.e. from public sector to private sector or to a voluntary organization. This is external secondment. According to the Oxford Dictionary this word has arisen in early 19th Century from the French word ensecond. In the secondment process, as demonstrated before us, the secondee will continue to be on the parent organization and continues to draw all the pay and allowances as applicable in the parent organization. 18. In the present case, the secondment undertaken by the PII is an external secondment from a member organization to a foreign organization with whom the assessee is entered into agreement. In this process, as submitted, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the commonality of the facts, we are of the opinion that ground no.2 is covered in favour of the assessee. Accordingly, ground raised by the Revenue is dismissed. 8. Ground no.3 relates to grant of relief u/s 91(1) of the Act. In this regard also learned Counsel for the assessee filed a copy of the order of the Tribunal for the assessment year 1996-97 vide ITA No.825/M/2002 and others dated 5.9.2008 in assessee s own case. Further, he mentioned that the issue relating to the applicability of provisions of section 91(1) of the Act are discussed in para 10, 11, and 14 of the said order dismissing the appeals of the Revenue which read as under: "10. The only ground of appeal of the Revenue is as under: In the facts and circumstances of the case and in law, the CIT (A) erred in directing to allow a relief of Rs. 31,94,792/- claimed by the assessee u/s 91(1) of the Act, although the assessee has not paid the taxes in Kuwait before the end of the previous year, since there was no agreement between India Kuwait Govt. for double taxation. 11. The Ld. DR submitted that the word paid in Sec.91(1) of the Act means constructive payment of tax and the onus i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these payments and the same have also been furnished before the Assessing Officer and has been verified by him. There is no material before us to controvert these findings of the CIT (A). In these facts of the case, we hold that the assessee is entitled to relief u/s 91(1) of the Act and the order of the CIT (A) is confirmed and the ground of appeal of the revenue is dismissed. 9. From the above, it is evident that the assessee made the payment of taxes in Kuwait and the dates and amounts of the said payments of taxes were made available before the CIT (A). Original documents were also filed evidencing the same for relief in respect of the said taxes paid in Kuwait u/s 91(1) of the Act. Therefore, the assessee is entitled to said relief. Accordingly, ground no.3 raised by the Revenue is dismissed. 10. Ground no.4 relates to taxability of income of Rs. 1,06,80,410/- ie gain in foreign exchange fluctuation, under the head Business Income instead of taxing the same under the head Income from Other Sources . In this regard, learned Counsel referred to a copy of the order of the Tribunal in assessee s own case vide order dated 16.4.2012 (supra) and mentioned that the identical is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on EEFC account .. 20. The Hon ble Bombay High Court has held that gains on exchange fluctuation does not have a nexus when the funds are kept in EEFC account and there is a variation in the exchange rate. We, respectfully follow the decision of Jurisdictional High Court, wherein it has been held that the gain on account of fluctuation in the foreign currency which takes place after the export proceeds have been realized and such funds or part thereof are parked in the EEFC account would be treated as income from other sources. 21. Ongoing through the arguments of both the sides, we deem it fit to direct the AO to verify the exchange fluctuation account, as maintained by the assessee, i.e. if the exchange fluctuation is on the export proceed stage itself, then it has to be treated as gain in business and if the gains on exchange fluctuation occurs on the funds lying parked in EEFC account, then in that case, the case of Shah Originals is to be applied and treat that gain as income from other sources. Further, he mentioned that the assessee is entitled to relief in this regard by virtue of jurisdictional High Court judgment in the case of CIT vs. Shah Originals, 327 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Counsels, it was noticed that against certain aspects decided by the CIT (A), it was necessary to file corss-objections. 3. That, therefore, Petroleum India International has filed cross objections on 06.01.2009 along with the application for condonation of delay. 14. Thus, learned Counsel for the assessee submitted that the reason of oversight and the realization of the need to file cross objection was noticed only when they had a conference with his Counsels, constitutes reasonable cause and prayed for condonation of said delay of 1529 days. 15. Per contra, learned DR vehemently opposed the said prayer of Ld Counsel for the assessee and mentioned that the oversight mentioned should be construed as assessee s negligence in filing the CO in time and the same does not amount to sufficient cause within the meaning section 253(5) of the Act. Further, he argued that it is not comprehensible that the assessee has not consulted the Advocates for nearly four years three months before they are advised to file CO finally. Further also, Ld DR has brought to our notice the fact of non-furnishing of any affidavit by the Advocates, who had conference with the assessee affi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if it is satisfied that there was sufficient cause for not presenting it within that period. 17. Sub-section (4) of section 253 of the Act mandates that the assessee should file Cross Objections within the 30 days from the date of receipt of the notice. In case of failure to file in that period, subsection (5) confers powers on the Tribunal to permit the filing of CO after the expiry of 30 days and the same subjected fulfillment of certain conditions by the assessee. The assessee has the duty of satisfying the Tribunal about the existence of cause and it should be sufficient enough for not presenting the CO within 30 days specified in subsection (4) of section 253 of the Act. Thus, the onus is on the assessee to explain to the Tribunal about the sufficient cause for the delay and the Tribunal should be satisfied about the said sufficient cause. It is true that the words sufficient cause for not filing the CO within the period of limitation no doubt is to be applied in a reasonable manner but depending upon the facts and circumstances of each case. Party has to give satisfactory explan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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