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Issues: Whether living allowance paid to a foreign technician constitutes income of the assessee?
The High Court of Bombay considered whether the living allowance paid to a German citizen, deputed to India by a German company under a technical assistance agreement with an Indian company, constituted income. The Assessing Officer initially held the amount taxable as income, considering the technician as a regular employee of the Indian company during his stay in India. However, the appellate authority and the Tribunal found that the reimbursement of expenses was not a salary or profit in lieu of salary. They concluded that the technician was not an employee of the Indian company and that the reimbursement was part of the contract terms. The court agreed, emphasizing that the reimbursement for boarding and lodging expenses did not constitute income under the Income Tax Act. The court highlighted that the technician was on a special assignment and the reimbursement was not related to his salary. The court referenced a similar case where foreign technicians working in India were found exempt from tax on daily allowances related to necessary expenses incurred for their duties. The court upheld the decision, dismissing the appeal. In conclusion, the High Court of Bombay ruled that the living allowance paid to the foreign technician did not constitute income taxable under the Income Tax Act. The court emphasized that the reimbursement for expenses incurred during the technician's special assignment in India was not considered salary or profit in lieu of salary. The court referenced a precedent involving foreign technicians working in India, where daily allowances related to necessary expenses were found exempt from tax. The court upheld the decision of the appellate authority and the Tribunal, dismissing the appeal.
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