1998 (7) TMI 87 - HC - Income Tax

Summary

Issues involved: Taxability of salary received in Germany, taxability of daily allowance received in India, interpretation of sections 5(1)(c), 6(1), 6(6) of the Income-tax Act, 1961, and applicability of section 10(14) of the Act.

Taxability of Salary Received in Germany:
The petitioner, a technician working in Germany, was deputed to India by Siemens, Germany, to provide technical guidance to BHEL. The petitioner contended that his salary received in Germany was not taxable in India as he was "not ordinarily resident" in India. The court held that as per the proviso to section 5(1)(c) read with sections 6(1) and 6(6) of the Act, the petitioner, having stayed outside India for the preceding years, was "not ordinarily resident" in India. Therefore, his salary received in Germany was not taxable in India.

Taxability of Daily Allowance Received in India:
The petitioner received a daily allowance in India, which he claimed as non-taxable under section 10(14) of the Act. The court referred to the provisions of section 10(14)(i) and (ii) and a notification issued by the Government of India specifying special allowances. It was found that the daily allowance received by the petitioner, meant to cover expenses incurred due to absence from normal place of duty, was not taxable. The court held that the daily allowance of Rs. 1,11,264 received by the petitioner was also not taxable.

Interpretation of Relevant Sections:
The court analyzed sections 5(1)(c), 6(1), and 6(6) of the Act to determine the petitioner's residential status and tax liability. It was established that the petitioner being "not ordinarily resident" in India, as per the Act, was not liable to pay tax on his salary earned in Germany. The court also discussed the provisions of section 10(14) and a government notification to conclude that the daily allowance received by the petitioner was not taxable.

Judgment:
The court quashed the assessment orders passed by the tax authorities and directed the refund of the tax amount paid by BHEL under mistaken belief. The respondents were instructed to refund the sum of Rs. 2,51,240 within two months, failing which interest at the rate of 24% per annum would be payable to the petitioner until the refund was made.