1985 (11) TMI 71 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of salary received abroad.
2. Taxability of living allowances received in India.
3. Exemption under section 10(6)(viia) of the Income-tax Act, 1961.
4. Tax treatment of perquisites such as free residential accommodation, gas, and electricity.

Detailed Analysis:

1. Taxability of Salary Received Abroad:
The primary issue was whether the salary received by the assessee abroad is exigible to tax under the Indian Income-tax Act. The assessee contended that the salary paid abroad was not earned in India within the meaning of section 9(1)(ii) of the Act and thus not taxable. However, the Income-tax Officer (ITO) disagreed, citing an amendment to section 9(1)(ii) which included an Explanation stating that income payable for services rendered in India shall be regarded as income earned in India. The Commissioner (Appeals) upheld the ITO's view, noting that the amendment nullified the Gujarat High Court's earlier decision in CIT v. S.G. Pgnatale. The Tribunal, however, found that the salary income could be taxed under section 9(1)(ii) but would be exempt under section 10(6)(viia) if the conditions were met.

2. Taxability of Living Allowances Received in India:
The assessee argued that the living allowances received in India were reimbursements and not perquisites under section 17 of the Act, and thus not taxable. The ITO rejected this claim, treating the allowances as taxable perquisites. The Commissioner (Appeals) sided with the assessee, referencing the Gujarat High Court decision in S.G. Pgnatale, which supported the non-taxability of such allowances. The Tribunal upheld this view, affirming that the living allowances were exempt from tax under section 10(14).

3. Exemption under Section 10(6)(viia):
The assessee claimed exemption under section 10(6)(viia), arguing that he was a technician rendering services in India under terms approved by the Government of India. The ITO and Commissioner (Appeals) rejected this claim, stating that the exemption did not apply because the assessee was employed by S.P., which did not carry on business in India. The Tribunal disagreed, interpreting section 10(6)(viia) to mean that a technician need not be employed by a business in India but must render services in a business carried on in India. The Tribunal concluded that the assessee's specialized knowledge and experience used in GNFC's constructional or manufacturing operations qualified him for the exemption, making his salary including perquisites exempt from tax.

4. Tax Treatment of Perquisites:
The assessee contended that benefits such as free residential accommodation, gas, and electricity should not be taxable as perquisites under section 17. The Tribunal did not specifically address this issue separately, as it was subsumed under the broader exemption granted under section 10(6)(viia).

Conclusion:
The Tribunal allowed the assessee's appeal, granting exemption under section 10(6)(viia) for the salary and perquisites received. The Tribunal also upheld the non-taxability of living allowances under section 10(14). Consequently, the revenue's appeal was dismissed.