ITAT confirms Additions against Magician Gopinath Muthukad [Read Order]

The Income Tax Appellate Tribunal (ITAT), Cochin bench, while allowing a departmental appeal against Magician Gopinath Muthukad, has held that the deduction under section 80 RR was allowable on the net income received and deposited into Bank account by the assessee in convertible foreign exchange.

The assessee had been carrying on his profession and earning income from India and abroad. The assessment was completed u/s 143(3) disallowing the claim for certain expenditure raised by the assessee.

On appeal, the CIT(A) held that the deduction can be claimed on the gross receipts and expenditure need not be reduced from the foreign exchange brought into India. Though there is a direct nexus between the travel expenses and the earning of the income of the assessee, the CIT(A) observed that the same was not relevant for the purpose of section 80 RR since the intention of the Act is clear that the amount received in foreign currency and brought to India should qualify for deduction. According to the CIT(A), Section 80 AB only says about the nature of income that should be considered and not the quantum of income that is to be borne in mind to claim deduction under Chapter VIA of the Act.

Before the Tribunal, the department contended that the Commissioner of Income-tax (Appeals) ought to have taken note of the fact that as per the provisions of Section 80AB deduction u/s 80RR can only be given at 30% of magic profession foreign income included in the gross total income.

The tribunal noted that there is no justification for treating the whole gross receipts of foreign income instead of gross total income earned from foreign sources so as to grant deduction u/s. 80 RR of the Act.

“The gross foreign receipts were accounted by the assessee and from that, net foreign income is to be ascertained and thereafter, deduction u/s. 80RR is to be granted at specified rate. The expenses considered by the Assessing Officer is to be deducted from the gross foreign receipts. The contention of the assessee that gross foreign receipts is to be considered so as to grant deduction u/s. 80RR of the Act is devoid of merit. In our opinion, the foreign income represented net income received and deposited into Bank account and it is not gross foreign receipts,” the Tribunal said.