1994 (8) TMI 304 - AAR - Income Tax

Summary

Issues Involved:
1. Maintainability of the application under section 245N of the Income-tax Act, 1961.
2. Definition and qualification of the applicant as a "technician" under section 10(5B) of the Income-tax Act, 1961.
3. Eligibility of the applicant for exemption under section 10(5B) of the Income-tax Act, 1961.

Detailed Analysis:

1. Maintainability of the Application:

The primary issue was whether the applicant, a non-resident, could maintain the application under section 245N of the Income-tax Act, 1961. The applicant had arrived in India on May 12, 1993, and made his application on December 16, 1993. By the date of his application, his stay in India had exceeded 182 days. However, the applicant argued that his stay up to the date of application was only 159 days, thus qualifying him as a non-resident.

The Authority noted that section 245N does not specify that the applicant must be a non-resident on the date of the application. Instead, non-residence is determined with reference to a previous year, not a specific date. The relevant "previous year" for determining the applicant's status was the financial year preceding the financial year in which the application was made. Since the applicant was non-resident in all earlier financial years up to and including 1992-93, the application was considered maintainable.

2. Definition and Qualification as a "Technician":

The second issue was whether the applicant qualified as a "technician" under section 10(5B) of the Income-tax Act, 1961. The definition of "technician" includes individuals with specialized knowledge and experience in constructional or manufacturing operations. The applicant, a qualified mechanical engineer with extensive experience in the construction and commissioning of chewing gum plants, was employed in India to oversee the construction and manufacturing operations of Wrigley's (India) Private Limited (W.I.P.L.).

The Authority concluded that the applicant's qualifications and experience met the criteria of a "technician" as defined in the Explanation to section 10(5B).

3. Eligibility for Exemption under Section 10(5B):

The third issue was whether the applicant was entitled to exemption under section 10(5B) of the Income-tax Act, 1961. The requirements for exemption include:
- The individual must be a technician.
- The individual must be employed in a business carried on in India.
- The individual must not have been resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India.
- The tax on the individual's salary income should be paid by the employer.

The applicant's employment with W.I.P.L., which had not yet commenced its business, raised the question of whether the exemption could be granted. The Authority noted that the purpose of section 10(5B) was to encourage foreign technicians to assist in setting up and managing Indian industries. The term "business carried on in India" was interpreted to include the stages of setting up and commencement of a business.

The Authority emphasized that the exemption should be granted liberally to promote industrial development and acquisition of foreign expertise. The applicant met all the conditions for exemption, including being a non-resident in the relevant financial years and having the tax on his salary paid by his employer.

Conclusion:

The Authority ruled that:
1. The exemption under section 10(5B) of the Income-tax Act, 1961, is available to the applicant.
2. The applicant is a "technician" within the meaning of the Explanation to section 10(5B) of the Income-tax Act, 1961.

The ruling emphasized the liberal interpretation of the exemption provisions to encourage foreign expertise in Indian industries.