1987 (11) TMI 5 - SC - Income Tax

Salary received by an employee abroad - Section 80RRA - term remuneration - besides salary term also includes the fees received for the consultation services rendered by the assessee - revenue appeal dismissed

Summary

Issues Involved:
1. Interpretation of Section 80RRA of the Income-tax Act, 1961.
2. Determination of whether the respondent's status was that of an "employee" or a "consultant."
3. Eligibility for tax deduction under Section 80RRA for remuneration received in foreign currency.

Issue-wise Detailed Analysis:

1. Interpretation of Section 80RRA of the Income-tax Act, 1961:

The core issue in this appeal revolves around the interpretation of Section 80RRA of the Income-tax Act, 1961. The section provides for a deduction from the gross total income of an individual who is a citizen of India, for any remuneration received in foreign currency from any employer for services rendered outside India. The deduction is fifty percent of such remuneration, subject to certain conditions, including the approval of the terms and conditions of service by the Central Government. The section aims to encourage the earning of foreign exchange by Indian nationals and to improve their status abroad.

2. Determination of whether the respondent's status was that of an "employee" or a "consultant":

The Government of India denied approval under Section 80RRA, asserting that the respondent was a "consultant" and not an "employee." The High Court, however, quashed this decision, directing the Government to reconsider the application. The Supreme Court examined whether the remuneration received by the respondent from the Thai company constituted remuneration from an "employer" for services rendered outside India. The Court found that the terms "employee" and "employer" in Section 80RRA are broad enough to include a consultant or a technician. The Court noted that the section does not restrict the term "remuneration" to "salary" alone, thereby encompassing fees received by a consultant or a technician.

3. Eligibility for tax deduction under Section 80RRA for remuneration received in foreign currency:

The Supreme Court held that the respondent's remuneration, received in foreign currency from the Thai company for services rendered outside India, qualifies for the deduction under Section 80RRA. The Court emphasized that the section's objective is to encourage Indian nationals to earn and bring foreign currency to India, and to enhance the marketability of Indian technicians abroad. The Court rejected the Revenue's argument that the section should only apply to salaried employees, noting that the literal meaning of "remuneration" includes fees paid to consultants or technicians. The Court concluded that there is no rationale for distinguishing between salary and other forms of remuneration for the purposes of the deduction under Section 80RRA.

Conclusion:

The Supreme Court upheld the High Court's decision, affirming that the respondent is entitled to the deduction under Section 80RRA. The appeal by the Revenue was dismissed, with no order as to costs. The judgment clarifies that the scope of Section 80RRA includes remuneration received by consultants or technicians, not just salaried employees, provided the terms and conditions of their service are approved by the Central Government.