1979 (12) TMI 56 - HC - Income Tax

Issues Involved:
1. Interpretation of Section 10(6)(vii)(b) of the Income Tax Act, 1961.
2. Determination of the period of exemption for foreign technicians.
3. Application of the exemption to broken periods of stay in India.
4. Relevance of English case law in interpreting the term "period."
5. Historical context and legislative intent behind Section 10(6)(vii).

Issue-wise Detailed Analysis:

1. Interpretation of Section 10(6)(vii)(b) of the Income Tax Act, 1961:
The primary issue revolves around the interpretation of Section 10(6)(vii)(b), which exempts the remuneration of foreign technicians from income tax for a specified period. The section states that the remuneration due to or received by a technician for services rendered in India is exempt if the technician was not a resident in any of the four financial years immediately preceding the financial year in which he arrived in India. The exemption applies for a period of 365 days in all, commencing from the date of arrival in India.

2. Determination of the Period of Exemption for Foreign Technicians:
The Income Tax Officer (ITO) interpreted the section to mean that the exemption is only available for a continuous period of 365 days from the date of arrival. The Assistant Appellate Commissioner (AAC), however, contended that the exemption should apply to a total period of 365 days, whether continuous or broken. The Tribunal upheld the AAC's interpretation, emphasizing that the words "in all" mean that the exemption applies to an aggregate period of 365 days, regardless of whether the stay is continuous or broken.

3. Application of the Exemption to Broken Periods of Stay in India:
The Tribunal noted that the exemption should be available for an aggregate period of 365 days, whether the stay is continuous or broken. The Tribunal stated, "The words 'in all' appearing in section 10(6)(vii)(b) cannot be treated as mere surplusage." The Tribunal dismissed the departmental appeals for the assessment years 1963-64, 1964-65, and 1965-66, affirming that the AAC interpreted the subsection correctly.

4. Relevance of English Case Law in Interpreting the Term "Period":
The department's counsel argued that the term "period" should mean a continuous period, citing two English cases: In re Marryal (deceased) and In re Bedford (deceased). However, the court noted that these cases were concerned with interpreting clauses in wills and determining the testator's intention, which is not directly applicable to the present case. The court emphasized that the principles laid down in these cases could not be strictly applied to the interpretation of Section 10(6)(vii)(b).

5. Historical Context and Legislative Intent Behind Section 10(6)(vii):
The court examined the historical context and legislative intent behind Section 10(6)(vii). The Taxation Enquiry Commission's report recommended that foreign technicians be exempted from income tax for a total period of 365 days from the date of arrival in India, whether those days fall within one financial year or more. The Finance Acts of 1955 and 1956 introduced provisions that evolved into Section 10(6)(vii) of the 1961 Act. The court noted that the legislative intent was to provide an exemption for an aggregate period of 365 days, not necessarily a continuous period.

Conclusion:
The court concluded that the Tribunal correctly interpreted Section 10(6)(vii)(b) to mean that the exemption applies to an aggregate period of 365 days, whether continuous or broken. The court's answer to the referred question was in the affirmative and against the department, affirming the AAC's decision to allow the exemption for broken periods of stay. The judgment emphasized the importance of considering the legislative intent and the specific wording of the statute, rather than relying solely on dictionary definitions or unrelated case law. The court made no order as to costs.

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