2004 (5) TMI 243 - AT - Income Tax

Summary

Issues:
1. Exemption under section 10(6)(viia) for a technician employed by a foreign company in India.
2. Requirement of approval for extension beyond 24 months.
3. Tax treatment of salary paid by the employer to the employee.

Analysis:
1. The case involved an appeal by the Department against the order of CIT(A) regarding the exemption under section 10(6)(viia) for a technician employed by a foreign company in India. The AO contended that the exemption required approval if the individual worked in a business carried on in India. The AO also raised concerns about the salary being paid by the employer and the tax treatment under section 17(2)(iv).

2. The AO insisted that the approval for extension beyond 24 months was necessary for granting the exemption. The AO highlighted the conditions stipulated in the section, emphasizing that the approval from the Central Government was crucial for the exemption. The AO noted that the section had undergone a change, and for the relevant assessment year, such approval was essential. Since the assessee had not provided the approval for extension, the AO denied the exemption.

3. The CIT(A) reversed the AO's decision and deleted the additions made. The authorized representative of the assessee argued that the technician's activity was covered under the definition of technician as per the notification issued by the Government. The representative also clarified that the approval for extension was a composite one, covering both the initial and extended periods. The representative cited relevant legal provisions and precedents to support the claim for exemption.

4. Upon considering the submissions, the Tribunal found that the approval for extension had been granted before the relevant assessment year and covered both periods. The Tribunal confirmed that the technician was entitled to exemption under section 10(6)(viia) based on the notification covering the field of information technology. The Tribunal concluded that there was no basis for grossing up the technician's salary and upheld the CIT(A)'s decision to delete the additions made by the AO.

5. The Tribunal dismissed the Department's appeal, affirming the decision in favor of the assessee. Consequently, the Department's appeal was rejected, and the decision in favor of the assessee was upheld.