2002 (5) TMI 210 - AT - Income Tax

Summary

Issues Involved:
1. Taxation of remuneration received by foreign technicians.
2. Employer-employee relationship between foreign technicians and BHEL.
3. Taxability of perquisite value of free accommodation.
4. Validity of proceedings initiated under Section 148.
5. Deduction under Section 56(1).
6. Application of the Supreme Court decision in Emil Webber vs. CIT.
7. Charging of interest under Sections 234A and 234B.

Detailed Analysis:

1. Taxation of Remuneration Received by Foreign Technicians:
The primary issue was whether the remuneration received by foreign technicians from their foreign employers for services rendered in India could be taxed under Indian law. The Tribunal upheld the tax authorities' decision, concluding that the remuneration received for services rendered in India is taxable in India under Section 9(1)(ii) of the Income Tax Act, 1961, read with its Explanation.

2. Employer-Employee Relationship Between Foreign Technicians and BHEL:
The foreign technicians were deputed by their foreign employer (M/s Skoda Export) to assist BHEL in India. The Tribunal noted that there was no direct employer-employee relationship between BHEL and the foreign technicians. The technicians were employees of M/s Skoda Export, and their remuneration was paid by their foreign employer. However, the tax paid by BHEL on behalf of the technicians was considered a perquisite and taxable under Section 56(1) of the Act.

3. Taxability of Perquisite Value of Free Accommodation:
The Tribunal held that the perquisite value of free accommodation provided by BHEL to the foreign technicians was taxable. The accommodation was a benefit arising from their employment and was, therefore, assessable as income from other sources under Section 56(1).

4. Validity of Proceedings Initiated Under Section 148:
The Tribunal upheld the validity of the proceedings initiated under Section 148. The notice issued under Section 148 was considered legal, and the reassessment proceedings were deemed valid. The Tribunal rejected the argument that the notice was void ab initio due to the non-compliance with the time requirement for filing the return.

5. Deduction Under Section 56(1):
The Tribunal rejected the assessee's claim for deduction under Section 56(1). The tax authorities' decision to add the amount of Rs. 2,07,934 as income from other sources was upheld. The Tribunal found that the decision in Emil Webber vs. CIT was correctly applied by the tax authorities.

6. Application of the Supreme Court Decision in Emil Webber vs. CIT:
The Tribunal agreed with the tax authorities that the Supreme Court's decision in Emil Webber vs. CIT was applicable. The decision established that tax paid by an employer on behalf of an employee is a perquisite and taxable as income from other sources. The Tribunal noted that the foreign technicians' case was similar, and the tax paid by BHEL on their behalf was rightly included in their taxable income.

7. Charging of Interest Under Sections 234A and 234B:
The Tribunal upheld the charging of interest under Sections 234A and 234B. The interest under Section 234A was justified due to the late filing of the return in response to the notice under Section 148. The interest under Section 234B was also upheld, as the advance tax paid was less than 90% of the assessed tax. The Tribunal noted that the tax paid by BHEL on behalf of the technicians was treated as advance tax, and the provisions of Section 234B were applicable.

Conclusion:
The Tribunal dismissed all the appeals filed by the assessees, upholding the tax authorities' decisions on all issues. The remuneration received by foreign technicians for services rendered in India was taxable, the perquisite value of free accommodation was assessable, the proceedings under Section 148 were valid, and the interest under Sections 234A and 234B was correctly charged. The application of the Supreme Court decision in Emil Webber vs. CIT was also affirmed.