9911796707
TMI Blog1988 (8) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, i.e., M/s Schreiner Airways B. V. (hereinafter referred to as "M/s Schreiner") is a company registered in theNetherlands. It entered into a Time Charter agreement with Oil Natural Gas Commission (ONGC) on27th March, 1984, whereby ONGC chartered M/s Schreiner to provide to them the helicopters as per terms of the said agreement (Helicopters were provided to ONGC on 16th Aug., 1983, 23rd Jan., 1984 and 31st Jan., 1984). According to cl. 3 of the said agreement, M/s. Schreiner were to provide, apart from the helicopters, two (2) IFR licensed and experienced pilots for the operation of the Helicopter and qualified maintenance crew for the servicing of the Helicopter". M/s Schreiner did not, prima facie, have its own pilots and engineers and, therefore, they entered into an agreement with M/s Aviation Personnel Recruitment and Management Limited ("APRAM"). This agreement is dt.1st Jan., 1983. Prima facie, the agreement between M/s Schreiner and M/s APRAM was not with reference to the contract of M/s Schreiner with ONGC only but it was a general agreement with reference to the work which M/s Schreiner was doing all over the world. It was stated in the preamble of this agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el from time to time. 7.2. APRAM and its personnel shall be named as co-insures on the policies of the insurances referred to above. 7.3. The Company shall held APRAM and/ or its personnel free and harmless from any claims resulting from acts or omissions in connection with the services under this agreement not covered by the above insurance unless caused by the wilful misconduct of APRAM or its personnel." The Schedule A referred to in cl. 1 Part I of the Agreement dt.1st Jan., 1983may also be extracted as below: "Schedule A Helicopter crew : Rates to be adjusted every year in July Rates valid for the year July, 1982. June, 1983 Pilots per month Dfl. 8286 Engineers per month D. 6825" 6. Obligations of APRAM were as below.: 1. APRAM shall provide personnel as required by the Company from time to time as advised with due notice. If personnel should abandon work or be unable to work due to illness, death or otherwise, APRAM shall recruit replacement personnel on behalf of the Company. All costs of recruitment of personnel in connection with increases requirements of the Company as well as all costs of replacement and recr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses were being reimbursed by the assessee-company to APRAM and that these expenses were incurred by the APRAM for the account of Company, i.e., the assessee. The second kind of payment was by way of service fee which was to be paid monthly by the assessee-company to APRAM equal to 10 per cent of the total sum of all expenses paid by APRAM for the account of the company referred to in Schecule A. 9A. Pages 137, 138 and 139 of paper Book No. 4 indicate the conditions for professional services, which APRAM entered into with professional persons whom it engaged for working as a Pilot or as an Engineer on different assignments at different places in the would as per requirement of its clients. According to cl. 3.1 of these conditions, professional persons were required to make themselves ready "for carrying out the professional services at the Base". Base was defined to mean "Working area outsideCyprusfrom which the party will perform his professional services for the companies." According to condition No. 4.1". APRAM shall arrange at its expenses for all licences, working permits, visas and all documents required by the relevant authorities of the Base to enable that Party to perf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether M/s Schreiner could be appointed as agents of M/s APRAM in India for purposes of s. 163 of the IT Act, 1961. 13. Let us, therefore, first look at the provisions of s. 163 of the IT Act, 1961. It reads as below: "163. (1) For the purposes of this Act, "agent", in relation to a non-resident, includes any person inIndia (a) who is employed by or on behalf of the non-resident; or (b) who has any business connection with the non-resident; or (c) from or through whom the non-resident is in receipt of any income, whether directly or indirectly; or (d) who is the trustee of the non-resident and includes also any other person who, whether a resident or non-resident, has acquired by means of a transfer, a capital asset inIndia: " From a bare reading of the aforesaid provisions, it would be clear that if the relationship of M/s Schreiner, and M/s. APRAM gets caught in any of the cl.(a) to (d) referred to above, M/s Schriner can be treated as an agent of M/s APRAM. If the said relationship does not fit in, it will not be possible to treat M/s Schriner and APRAM inIndia. 14. The provisions of cl.(a) and (d) above clearly do not apply to the relationship of M/s Schreiner, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he situation of requires. It is, therefore, not correct to say that APRAM has no link with the persons, who are deputed by it for working at different various bases or working areas. The said persons continued the relationship of employees with APRAM wherever they be, and they look forward to APRAM for payment of their remuneration. The brevity of contract for payment is between professionals and APRAM and it subsists all through whichever 'Base' the professional be and there is no privity of contract between them and M/s Schriner. If at all, there is a contract between Schriner and APRAM and the payment Schriner and APRAM in the manner indicated above, including the payments, as per Schedule A and the payment indicated in part III of the agreement i.e., Service fee. 17. Apart from the above, it is worth noting that the quantum assessment made by the ITO and as sustained by the learned CIT(A) after some modification, has not been challenged by the assessee in appeal. In other words, it is common ground between the assessee and the Revenue that there is income accruing and arising to APRAM inIndiaand inasmuch as such income is accruing and arising to them through M/s Schreiner, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, ITA No. 5496(Del)/1986 stands rejected. 22. This brings us to the Departmental appeals against quantum appeals for the asst. yrs. 1984-85 and 1985-86. In both the above years, the controversy is common, namely, the justification of the order of the learned CIT(A) in excluding from the assessable income of M/s APRAM of the living allowances of Rs. 5,72,900 and of Rs. 31,65,375 in respect of the asst. yrs. 1984-85 and 1985-86, respectively. The aforesaid living allowances were paid by M/s Schriner to the personnel professionals sent on deputation by M/s APRAM in terms of cl. II(1) and cl. I(2), which have been quoted by us as above. According to it, the company M/s Schriner "shall arrange for its account messing, accommodation and all transportation of Personnel on duty in accordance with the Company standards and regulations for comparable personnel. " The living allowance given in terms of the aforesaid clause was not given by way of remittance to M/s APRAM. These were the expenses incurred by M/s Schriner inIndiadirectly on the said employees. The remittances to M/s APRAM were with regard to these payments mentioned in Schedule A and these mentioned in cl. III of the agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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