ORDER
K.K. Boliya, A.M.
1. This appeal has been filed by the assessee against the order dt. 3rd Oct., 2000, of CIT(A)-I, Mumbai. The grounds of appeal raised by the assessee pertain to only one issue, i.e., denial of deduction by the Revenue authorities under Section 80RR of the IT Act in respect of income of Rs. 2,67,150.
2. The facts, briefly stated, are that the assessee is a music director by profession, produces music primarily for Hindi films. Apart from the above activity, the assessee also receives royalty as well as income from music shows conducted abroad. During the previous year relevant to the assessment year under appeal, the assessee, inter alia, received a sum of Rs. 2,67,150 in convertible foreign exchange by way of advance for the shows to be performed abroad. On account of certain problem faced by the organisers of this show, the arrangement was cancelled and as per the terms and conditions of the agreement, the aforesaid sum was forfeited by the assessee. The AO held that since the assessee did not perform any shows abroad and thus he did not exercise his profession in earning the aforesaid income, deduction under Section 80RR is not admissible. The learned CIT(A) approved the view taken by the AO.
3. The learned counsel appearing on behalf of the assessee submitted before us that the assessee entered into an agreement to perform music show abroad and this agreement was executed during the normal course of carrying on the profession of the assessee. The assessee was willing and prepared to perform the show and he had already set apart his time for this activity. However, for no fault of the assessee, the music show was cancelled by the organisers as they faced some difficulties. It is argued that insofar as the assessee is concerned, the sum of Rs. 2,67,150 was derived during the course of the assessee’s professional activity and, therefore, deduction under Section 80RR is available. It is submitted that all the conditions laid under Section 80RR are fulfilled by the assessee. The learned counsel relied upon the Andhra Pradesh High Court judgment in the case of J.R. Kimtee & Sons v. CIT (1978) 115 ITR 190 (AP). In this case, it was held that in view of Section 28(ii) of the IT Act, compensation received for the loss of managing agency has to be deemed to be profits or gains from, business, liable to charge of income-tax. The learned counsel submitted that in the present case, the income of Rs. 2,67,150 received by the assessee is clearly a professional income. The learned Departmental Representative wrongly supported the orders of the Revenue authorities and invited our attention to the provisions of Section 80RR, which are reproduced below :
“80RR. Where the gross total income of an individual, resident in India, being an author, playwright, artist [musician, actor or sportsman (including an athlete)], includes any income derived by him in the exercise of his profession from the Government of a foreign State or any person not resident in India, there shall be allowed, in computing the total income of the individual, a deduction from such income of an amount equal to–…”
The learned Departmental Representative pointed out that the assessee becomes eligible for deduction only if any income is derived by him in the exercise of his profession. He submitted that in the present case, the sum of Rs. 2,67,150 may be incidental to the assessee’s profession, but cannot be said to be income derived from profession.
4. We have considered the rival submissions vis-a-vis the relevant facts and have gone through the provisions of law in this regard. There is no dispute about the facts. The assessee is a music director and derived income, inter aha, from music shows performed abroad. There is no dispute about the fact that the income derived by the assessee from performing such shows is eligible for deduction under Section 80RR. The assessee enters into contractual agreement for such music show and part of the royalty income is paid by way of advance. The moot question is that if any music show is cancelled by the organisers, whether the character of the income received by the assessee by way of advance would change. The crucial words in Section 80RR are ‘any income derived in the exercise of profession’, in contra-distinction under Sections 80HH, 80-I, 80-IA and other similar other sections; the requirement is that the gross total income of the assessee includes ‘any profit and gains derived from an industrial undertaking’. Thus, under Section 80HH, etc., the mandatory requirement is that the income should be derived from an industrial undertaking. On the other hand, under Section 80RR, the income has to be derived in the exercise of profession. In our view, the language used by the legislature in Section 80RR is to be liberally interpreted. If any income is derived by the assessee in the exercise of carrying on his profession, the assessee would be eligible for deduction under Section 80RR. In the present case, the assessee entered into agreement during the course of exercise of his profession. The income received by the assessee by way of advance directly flows from the exercise of this profession. Merely because on account of no fault on the part of the assessee, the organisers cancelled the music show, it cannot be said that the character of the income undergoes any substantial change. We, therefore, hold that the assessee is entitled to deduction under Section 80RR in respect of the impugned sum of Rs. 2,67,150 and the AO is accordingly directed to allow deduction as admissible under Section 80RR.
5. In the result, the assessee’s appeal stands allowed.