1995 (9) TMI 8 - HC - Income Tax

Issues Involved:
1. Taxability of sums received by the assessee.
2. Determination of employer-employee relationship.
3. Nature of employment contract.
4. Taxability of amounts received outside India for services performed in India.
5. Taxability of pocket allowance.
6. Eligibility for standard deduction on pocket allowance.

Issue-wise Detailed Analysis:

1. Taxability of Sums Received by the Assessee:
The Tribunal concluded that sums of Rs. 70,875, Rs. 7,908, and Rs. 945 were not taxable in the hands of the assessee. This conclusion was based on the provisions of section 16 and section 9 of the Income-tax Act, 1961, and the precedent set by CIT v. S. G. Pgnatale [1980] 124 ITR 391 (Guj). The Tribunal found that the employer-employee relationship between the assessee and the Indian company could not be established, and the sums were received abroad. Consequently, these sums were not taxable under the Income-tax Act.

2. Determination of Employer-Employee Relationship:
The Tribunal found that the employer-employee relationship between the assessee and the Indian company could not be established. The Tribunal noted that the assessee was an employee of the collaborator company and was sent to India to work with the Indian company. This finding was consistent with the decision in CIT v. S. G. Pgnatale [1980] 124 ITR 391 (Guj). The Tribunal's finding was upheld by the High Court, which noted that the Tribunal had indeed found that the assessee was not an employee of the Indian company.

3. Nature of Employment Contract:
The Tribunal did not explicitly decide whether the employment of the assessee was a composite contract or a contract for a period of not less than 1,095 days. However, the High Court observed that this question had become academic in light of the Tribunal's findings and the decision in CIT v. S. G. Pgnatale [1980] 124 ITR 391 (Guj).

4. Taxability of Amounts Received Outside India for Services Performed in India:
The Tribunal held that the amount received by the assessee outside India for services performed in India was not taxable under the Income-tax Act, 1961. This decision was based on the precedent set by CIT v. S. G. Pgnatale [1980] 124 ITR 391 (Guj). The High Court affirmed this finding, noting that the Tribunal was right in concluding that the sums were not taxable in the hands of the assessee.

5. Taxability of Pocket Allowance:
The Tribunal found that the pocket allowance of Rs. 13,860 received by the assessee in India was taxable. The Tribunal distinguished the case from CIT v. S. G. Pgnatale [1980] 124 ITR 391 (Guj), noting that the assessee had not substantiated the claim that the pocket allowance was paid to meet the increased cost of living in India. The High Court agreed with the Tribunal's finding that the pocket allowance was taxable in the hands of the assessee and not exempt under section 10(14) of the Income-tax Act.

6. Eligibility for Standard Deduction on Pocket Allowance:
The Tribunal held that the pocket allowance was not paid to the assessee in his capacity as an employee of the Indian company and, therefore, the standard deduction was not permissible. However, the High Court disagreed with this finding. The High Court noted that the pocket allowance was part of the remuneration received by the assessee under the head "Salary" and was eligible for standard deductions. The High Court concluded that the Tribunal was not right in holding that the standard deduction was not allowable from the pocket allowance income.

Conclusion:
Both references were disposed of with no order as to costs. The High Court affirmed the Tribunal's findings on the non-taxability of certain sums and the taxability of the pocket allowance but held that the pocket allowance should be eligible for standard deductions.

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