2005 (2) TMI 82 - HC - Income Tax

Perquisites - Foreign Technician - benefit claimed u/s 10(6)(viia) - Whether assessee is entitled to the benefit u/s 10(6)(viia) in respect of the salary, including perquisites received by him? - pre-condition to claim benefit u/s 10(6)(viia) is that such individual should be in the employment for carrying on scientific research or in any business carried on in India - In the present case, the scientific research was being carried on by M/s. J.K. Synthetics Ltd. Under an agreement with the Italian firm the respondent was deputed to perform the work. It is the own case of the respondent that he was not an employee of the Indian firm but the employee of the Italian firm and, therefore, it cannot be said that he was in employment with the Indian firm for the business carried on with the said firm. Thus, exemption under section 10(6)(viia) was not available - Tribunal has committed an error in holding that the exemption under section 10(6)(viia) is available.

Summary

Issues Involved:
Interpretation of section 10(6)(viia) of the Income-tax Act, 1961 for exemption of salary and perquisites received by a foreign national working in India under a technical collaboration agreement.

Analysis:

The High Court of Allahabad was tasked with interpreting the provisions of section 10(6)(viia) of the Income-tax Act, 1961 in a case concerning the exemption claimed by a foreign national employee working in India under a technical collaboration agreement. The respondent-assessee, an employee of an Italian firm deputed to work in India, claimed exemption under section 10(6)(viia) for the salary and perquisites received. The assessing authority denied the claim, stating that the respondent did not meet the criteria for exemption as he was not employed by the Indian firm conducting business in India. The Commissioner of Income-tax (Appeals) upheld this decision, emphasizing that the respondent's employment did not align with the specified categories under the section.

Upon further appeal, the Tribunal ruled in favor of the respondent-assessee, citing a previous decision and stating that the respondent's specialized knowledge and experience utilized in the Indian firm's operations qualified him for the exemption under section 10(6)(viia). The High Court considered the arguments presented by both parties, noting that the exemption under this section is available to individuals employed in scientific research or in businesses conducted in India, provided certain conditions are met.

The Court observed that the respondent was not an employee of the Indian firm but of the Italian firm, as per his own admission. Therefore, it was concluded that he did not fulfill the requirement of being in employment with the Indian firm conducting business in India to qualify for the exemption under section 10(6)(viia). Consequently, the Court held that the Tribunal erred in granting the exemption and ruled in favor of the Revenue, denying the benefit to the assessee. The judgment clarified the specific conditions under which the exemption under section 10(6)(viia) applies, emphasizing the necessity for the individual to be employed in the business conducted in India to avail of the exemption.

In conclusion, the High Court's decision in this case centered on the interpretation of section 10(6)(viia) of the Income-tax Act, 1961 and the eligibility criteria for claiming exemption on salary and perquisites for foreign nationals working in India under technical collaboration agreements. The judgment highlighted the importance of the individual's employment status with the Indian firm conducting business in India as a determining factor for granting the exemption under the specified section.