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TMI Blog1989 (9) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... s are identical, the submissions of the parties were also the same. It was further agreed that the facts as in the case of Mr. Jacob J. Sulzbach, one of the technicians may be considered and adjudicated upon and the conclusions arrived at therein may be applied in all the remaining 27 cases. In the circumstances, we shall discuss the facts in relation to Mr. Jacob J. Sulzbach. 3. M/s Gilley & Associates Incorporated, USA with its head office at 1666, General Mounton Ave., P.O. Box 52568, Lafayette Louisiana 70505, USA, a foreign company (hereinafter referred to as Gilley & A.I.) entered into an agreement with Oil & Natural Gas Commission, Dehradun, a body corporate and established under Oil & Natural Gas Act, 1959 (hereinafter referred to as the 'Commission') on 27th June, 1984. The Commission had invited tenders for back up consultancy and technical services in respect of off-shore, deep drilling etc. in India. M/s Gilley & A.I. represented that they were capable of providing and have been actively engaged for such consultancy services for off-shore and on-shore drilling of Deep High Pressured Wells by preparing the design of the wells, list of materials required to drill these w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not done so, the CIT held the order passed by the former to be erroneous and prejudicial to the interest of the revenue and set aside the order passed by him with the direction to pass a fresh assessment order by including in the total income the taxes paid at Rs. 3,12,986 as income under the head "Income from Other Sources". Similar are the additions directed to be made by the CIT in respect of the remaining 27 assessees. AU the 28 assessees aggrieved by the orders of the CIT are in appeals before the Appellate Tribunal. 4. Shri R.S. Singhvi, the Ld. Counsel for the assessees vehemently argued that the technician assessees were the employees of the Commission and, therefore, the income-tax paid by the Commission was salary and, therefore, the same was exempt u/s 10(6)(viia) of the Act. The learned Sr. D.R., on the other hand contended that these technicians were the employees of M/s Gilley & A.I. and not of the Commission. According to her, master-servant relationship did not exist between the Commission and the technicians. It was also contended by her that they were not the employees of the Commission and since the income-tax paid by the Commission, nor being an employer, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead 'Other sources'. She also referred to a judgment of the Calcutta High Court in the case of CIT v. West Bengal State Electricity Board [1987] 166 ITR 507, where similar technicians were held to be the employees of the foreign company and not of the Indian employer. She referred to page 514 of this judgment to emphasise that master-servant relationship must exist before the remuneration received by the employee could be considered as salary. Since master-servant relationship did not exist between the Commission and the technicians, the taxes paid by the Commission could not be considered as perquisites u/s 17 of the Act. She also referred to a judgment of the Andhra Pradesh High Court in the case of Zdzizlaw Skakuz v. CIT [1986] 158 ITR 420, where tax paid by the Indian company was held to be income taxable under the head 'Other sources' under similar circumstances. 6. We have to consider the issue in the background of the facts of the case taking into consideration the Agreement and various other documents and the language of section 10(6)(viia). Before considering the issue we consider it worthwhile to reproduce herebelow, the relevant provisions i.e. section 10(6)(viia) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act, 1956 (1 of 1956), the tax so paid by the employer for a period not exceeding twenty-four months next following the expiry of the first-mentioned twenty-four months : Provided that the Central Government may, if it considers it necessary or expedient in the public interest so to do, waive the condition, specified in item (1) of this sub-clause in the case of any individual who is employed in India for designing, erection or commissioning of machinery or plant or supervising activities connected with such designing erection or commissioning. Explanation : For the purposes of this sub-clause, "technician" means a person having specialized knowledge and experience in-- (i) constructional or manufacturing operations, or in mining or in the generation of electricity or in any other form of power, or (ii) agriculture, animal husbandry, dairy farming, deep sea-fishing or ship building, or (iii) such other field as the Central Government may, having regard to the availability of Indians having specialised knowledge and experience therein, the needs of the country and other relevant circumstances, by notification in the Official Gazette, specify, who is employed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case have been complied with. The dispute, however, is in relation to the words "employment" and "employer" occurring in clause 6(viia) in the second line and sub-clause (A) and also the words "the remuneration for such services due to or received by him, which is chargeable under the head 'Salaries' to the extent mentioned below", just above sub-clause (A). We shall try to simplify this clause by omitting the conditions which are not in dispute. It will read as under :-- "Where such individual renders services as a technician in the employment of the Government or of a local authority or of any corporation set up under any special law, the remuneration for such services due to or received by him which is chargeable under the head "Salaries" to the extent mentioned in sub-clause (A), shall be exempt." Sub-clause (A), we have already reproduced above. Under this sub-clause, income from salary above Rs. 48,000 per annum is liable to income-tax. In terms of the Agreement, clause 8.2 of Annexure III of the Agreement -- Terms and conditions read with Article 9 of the agreement this liability is to be discharged by the Commission. It states :-- "Income-tax on Gilley A.I. and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad 'Other sources'. For assessment of income under the head 'salaries', master-servant relationship is a necessary condition as held by various authorities including the Hon'ble Supreme Court of India. The emphasis by the department was that it will be exempt only if it falls under the head income from 'Salaries'. We are in respectful agreement with various High Courts that the tax paid by the ONGC is not paid by the employer of the technician in the technical sense as the master-servant relationship does not exist between the Commission and the assessee technicians. To our mind, it is not remuneration chargeable under the head 'income from salaries' alone which will be exempt. Under sub-clause (A), even the income assessable under the head 'other sources' on account of income-tax by the Commission will be exempt from payment of tax. Clause (A) has two parts. The first part puts a ceiling on remuneration which are chargeable under the head 'Salaries'. Salaries have been granted exemption up to Rs. 4,000 p.m. and the balance salary income will be taxable. The second part is that the taxes paid on such salary in excess of the ceiling of Rs. 4,000 p.m., if paid by the employer will al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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