The Bombay High Court has upheld an order of the Income Tax Tribunal allowing world renowned architect Charles Correa the benefit of deduction under section 80O of Income Tax Act for money received from abroad as professional fees for the assessment year 2003-2004.
Justice JP Devadhar and Justice DY Chandrachud, in a recent order, observed that there was no merit in the argument of the Income Tax department that Correa was providing professional services and therefore could not be regarded as the owner of intellectual property rights.
The judges noted that the income in respect of which deduction is claimed was not income, generally speaking, received for rendering professional service outside India but it was income received specifically for providing designs of the assessee outside India.
"So long as the use has taken place outside India and the payment which is received in convertible foreign exchange is in India for the use of Intellectual property of the stated description outside India, the benefit of the deduction would have to be granted," the judges held.
"The assessee had prepared designs in India and had supplied them to its foreign counterpart outside India. There is no dispute about the fact that the designs were supplied and used outside India. All the conditions requisite for an exemption under Section 80O were fulfilled," the bench noted.
During the previous year relevant to the assessment year 2003-2004, Correa received professional fees of Rs3.15 crore, including an amount of Rs2.43 crore, which was received in convertible foreign exchange from Goody, Clancy & Associates, Incorporated, USA and Moffat Kinoshita Architects Incorporated, Canada.
Correa claimed a deduction on the receipts received in convertible foreign exchange under Section 80O to the extent of 20%. The Assessing Officer denied the benefit of deduction under Section 800.
In appeal, the Commissioner of Income Tax (Appeals) held that the assessee was entitled to a deduction under Section 80O. The Tribunal confirmed the decision of the Commissioner of Income Tax (Appeals). However, Commissioner of Income Tax challenged the Tribunal's order in the high court.
The judges said the issue before the court is as to find out whether the assessee had fulfilled the conditions specified in Section 800.
"In this case, as the facts before the court would show that it has not been disputed that the assessee did as a matter of fact to provide the designs. Nor is it disputed that the designs provided by him were used outside India. Moreover, it is an admitted position that income in convertible foreign exchange was received by the assessee in India. Thus, he had fulfilled the conditions in section 800," the bench noted.
In the result, the court dismissed the appeal filed by the IT department challenging the order of the Tribunal.
