1996 (8) TMI 538 - AAR - Income Tax

Whether, on the facts and in the circumstances of the case, exemption under section 10(5B) of the Income-tax Act, 1961, would be available to the applicant ? Whether, on the facts and in the circumstances of the case, the applicant would be considered as a technician for the purpose of section 10(5B) of the Income-tax Act, 1961 ?

Summary

Issues Involved:
1. Whether exemption under section 10(5B) of the Income-tax Act, 1961, is available to the applicant.
2. Whether the applicant qualifies as a "technician" under section 10(5B) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Exemption under Section 10(5B):
The applicant, a non-resident during the financial year 1994-95, sought a ruling on whether he is entitled to exemption under section 10(5B) of the Income-tax Act, 1961. The provision exempts income for individuals rendering services as a technician in specified employment conditions, provided they were not residents in India in any of the four financial years preceding their arrival and the tax on their income is paid by the employer. The Authority concluded that the applicant meets these conditions, as his tax was paid by his UK employer and he was a non-resident in the relevant preceding years. Thus, the exemption under section 10(5B) is available to the applicant.

2. Qualification as a "Technician":
The core issue was whether the applicant qualifies as a "technician" under section 10(5B). The applicant's role involved specialized knowledge and experience in film processing operations at Kodak India Limited's factory in Goa. The Authority examined the detailed description of the manufacturing processes carried out by the applicant, which included precision operations like slitting, perforating, and quality control under stringent conditions. Despite arguments that these processes did not constitute manufacturing, the Authority determined that the operations indeed involved manufacturing, as they transformed raw materials into distinct commercial commodities conforming to international standards. Therefore, the applicant's expertise and specialized knowledge in these manufacturing operations qualified him as a "technician" under section 10(5B).

Employment and Tax Payment Context:
The applicant, though employed by the UK company, rendered services in India, and the tax on his income was paid by the UK employer. The Authority clarified that section 10(5B) does not restrict the exemption to technicians employed by Indian entities alone. The provision applies to any technician employed in a business carried on in India, regardless of the employer's nationality. Thus, the applicant, being a technician employed in a business in India and having his tax paid by his foreign employer, is entitled to the exemption.

Conclusion:
The Authority ruled affirmatively on both questions, confirming that the applicant is entitled to the exemption under section 10(5B) and qualifies as a "technician" for the purposes of the said section.

Ruling:
| Question | Answer |
| --- | --- |
| 1. Whether on the facts and in the circumstances of the case, exemption under section 10(5B) of the Income-tax Act, 1961, would be available to the applicant? | Yes. |
| 2. Whether, on the facts and in the circumstances of the case, the applicant would be considered as a technician for the purpose of section 10(5B) of Income-tax Act, 1961? | Yes. |

The ruling confirms the applicant's entitlement to the exemption and his status as a technician under section 10(5B) of the Income-tax Act, 1961.