2004 (5) TMI 518 - AT - Income Tax

Summary

Issues:
1. Whether the assessee was employed in a business carried on in India and eligible for exemption under section 10(6)(vii)(a)?
2. Whether the exemption under section 10(6)(vii)(a) was subject to fulfillment of all conditions, including approval by the Central Government for a period exceeding 24 months?
3. Whether the salary of the assessee should be treated as a perquisite under section 17(2)(iv) and grossed up under section 195A?

Analysis:

Issue 1:
The Assessing Officer contended that the assessee, a technician employed with M/s. Cray Research India Limited, was not eligible for exemption under section 10(6)(vii)(a) as he was drawing his salary in the UK. However, the Commissioner of Income-tax (Appeals) disagreed and ruled in favor of the assessee, stating that the individual was rendering services as a technician in a business carried on in India by M/s. Cray Research India Ltd. The Tribunal upheld this decision, confirming that the assessee was entitled to the exemption under section 10(6)(vii)(a) based on the notification issued by the Government covering the field of information technology.

Issue 2:
The Assessing Officer raised concerns regarding the approval by the Central Government for exemption under section 10(6)(vii)(a) for a period exceeding 24 months. The assessee had applied for approval within the stipulated time, and the approval was granted before the relevant assessment year. The Tribunal noted that the approval was granted after considering both the initial and extended periods, thereby fulfilling the conditions for exemption. The Tribunal concluded that the assessee met the requirements for exemption under section 10(6)(vii)(a) and dismissed the department's appeal.

Issue 3:
Regarding the treatment of the assessee's salary as a perquisite under section 17(2)(iv) and the grossing up of tax under section 195A, the Tribunal held that there was no basis for grossing up the salary as the assessee was entitled to exemption under section 10(6)(vii)(a). The Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) and dismissed the department's appeal, thereby rejecting the contention that the salary should be treated as a perquisite.

In conclusion, the Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) and ruled in favor of the assessee, confirming the eligibility for exemption under section 10(6)(vii)(a) and dismissing the department's appeal.