Provisions of section 10(6)(viia) of Income Tax Act, 1961. - Income Tax - 1255/CBDT

INSTRUCTION NO. 1255/CBDT Dated : April 8, 1979 Section(s) Referred: 10(6)(vii) ,10(6)(viia) Statute: Income - Tax Act, 1961 Attention is invited to Office Memorandum No. *458/9/72-FTD, dated 8th December, 1972 addressed to all Commissioners of Income-tax outlining the manner in which the provisions of section 10(6)(viia) are to be applied by the various Ministries. 2. It has been observed that in many cases lapses have occurred at the level of both the administrative Ministries and the Income-tax Officers in verifying whether the provisions stipulated in section 10 (6)(vii)/(viia) of the Act, had been satisfied in each case or not. 3. Keeping in view the need to ensure that all the conditions laid down in the Act are satisfied before the Income-tax Officer grants exemption to a foreign technician, some of the important specific points that should be kept in mind by the Income-tax Officer are indicated below:- (i) Section 10(6)(vii) prescribes a time limit of one year from the commencement of the service of the technician within which the administrative Ministry should have approved the contract of service of the foreign technician concerned if his employment had commenced prior to 1st April, 1971. Section 10(6)(viia) provides that the application for approval by the Central Government of the contract of service of such technician should have been made to the Government before the commencement of such service or within six months of such commencement. There is no provision in the Act for condonation of any delay in the matter of these time limits. It is, therefore, necessary for the Income-tax Officer to verify before granting exemption under these sections that the time limits prescribed have been followed in all cases. In other works, benefit of section 10(6)(vii)/(viia) should not be granted wherever approvals have been allowed in violation of the statutory time limits. An intimation should however, be sent to the Board regarding such cases. (ii) In case of continued employment of the technician in India after the expiry of 36 months/24 months, Section 10(6)(vii), (a)(ii)/10(6)(viia)(B), provides that the approval of the Central Government should be obtained before the first day of October of the relevant assessment year. In all cases, where the technicians continue in employment after the initial period of 36 months/24 months, the Income-tax Officer should carefully check up whether the sanction by the administrative Ministry had been issued within the specified time limit. Where the time limit had not been adhered to, exemption will not be admissible. Such cases should also be brought to the notice of the Board. (iii) Who is a technician for purposes of Section (10(6)(vii)/(viia), is specifically defined in these sections themselves. Instructions already exist as to the course of action to be followed in cases of doubt vide Board's Instruction No. 515 (F. No. 458/19/73-FTD), dated 26.2.73. As stated therein, such cases should be brought to the notice of the Board so that the matter can be taken up further with the concerned Ministry. (iv) The Explanation to section 10(6)(vii)/(viia) specifically provides that the technician should be employed in India in a capacity in which " such specialised knowledge and experience are actually utilised". In view of this provision, the Income-tax Officers should satisfy themselves before granting the actual exemption that the technician who came for a particular job was actually employed in that job during the period for which exemption is claimed. Cases where there are any variations should be reported to the Board, so that the administrative Ministry may be consulted before a final decision is taken in such cases. (v) One of the points brought out in the C AG's Report of 1976-77 is that in one case the employer paid a higher remuneration than what had been approved by the Central Government in its order. The Board have been advised that any such violation of the sanction of the administrative Ministry will disentitle the technician to any exemption under this provision. It is, therefore, necessary for the Income-tax Officer to verify whether the salary, perquisites etc., paid to the technicians are those which have been approved by the Central Government in their order. (vi) In the Board's Instruction No. 529, dated 22.3.73, it was reiterated that the term "remuneration" will include also those payments which are payable/were provided by the employer outside India (whether in Rupees or in any foreign currency). It is, essential that the Income-tax Officers while scrutinising the income-tax returns of foreign technicians, verify whether any part of their salary accrued/arose or was paid to them outside India and take action accordingly. 4. The correct import of the works "in the employment of" and "in any business carried on in India" in section 10(6)(viia) has already been clarified in the Board's Instruction No.1168 (F.No. 458/14/76-FTD), dated 3.5.1978. The Income-tax Officers dealing with the cases of foreign technicians should carefully check up whether the technician is employed in a business carried on in India as clarified in the above Instruction.