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TMI Blog1989 (8) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of Rs. 30,873 from M/s. Bharat Heavy Electricals Ltd. towards fees for rendering technical services of its expert, namely, the assessee as per the terms of the agreement dated 29-1-1971. It may be stated that M/s. Bharat Heavy Electricals Ltd. (hereinafter called the Indian company) entered into a collaboration agreement with M/s. Nuovo Pignone (hereinafter called the Italian company) on 29-1-1971. 2. Similarly the Indian company entered into an agreement with M/s. Siemens of West Germany (hereinafter called the West German company) on 21-6-1974. The appellants in the second, third and fourth appeals before me are the experts working under the West German company. As per the certificate dated 4-3-1987 given by M/s. Siemens, the second, third and fourth appellants were given DM.2.697 00, DM.2.128,00 and DM.1.620,00 respectively for the services rendered by them in India during the financial years relevant for the assessment years 1980-81 and 1981-82. However, the West German company charged the Indian company with an amount of Rs. 65,287, Rs. 22,909 and Rs. 27,258 for supplying the services of these experts to the Indian company. When converted into Indian rupee the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Italian and West German masters respectively are shown in the foreign currencies. The amounts shown as paid as salary to the technicians by the foreign collaborators and their daily allowance paid by the BHEL are the rupee equivalents of the remuneration and allowances thus shown in the certificates. The assessee appellants along with the certificates supplied to them by M/s. Nuovo Pignone of Italy and M/s. Siemens of West Germany filed petitions to admit the two certificates as additional evidence in this case. Since the certificates contained the particulars of the salary and other allowances allowed to the four assessees herein and since those particulars are very essential to determine the main point at issue, I hold that they should be allowed as additional evidence since they are very essential for a just disposal of the appeals. 3. M/s. Siemens of West Germany granted the certificate only on 4-3-1987. The Italian company stated that Mr. Righetti Luigi was deputed to the Indian company and he worked for 12 days in the financial year 1981-82 for which he was paid a salary of 428.062 Italian Lira and allowances amounting to 226.800 Italian Lira. So also the West German compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company to the Italian company for each calendar day for the absence of its personnel from their normal place of work, which is in Italy, which are as under :--- For Chief Engineer Italian Lira 50,000 plus Rs. 86 For an Engineer Italian Lira 43,000 plus Rs. 86 For a Technical Asstt. Italian Lira 32,000 plus Rs. 73 For a Foreman Italian Lira 30,000 plus Rs. 73 Besides the above the Indian company undertook to bear the travelling expenses of the experts and also bear the responsibility to provide accommodation and medical attendance to the foreign technicians deputed. 5. So also the West German company agreed to part with the know-how for the design and manufacture of industrial turbines to the Indian company. The West German company agreed to render technical assistance to the Indian company, inter alia, in providing or furnishing design, information, including information on improved manufacturing and testing information, erection and commissioning information, operating and maintenance information on improvements of industrial turbines and also undertook to train the personnel of the Indian company to enable the Indian company to undertake design, manufacture, testing of ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rators, and the perquisites given to the foreign technicians, towards the technical services rendered by these four foreign technicians :--- (a) Payments to collaborators in foreign currency on 'per day' rates ; (b) Payments made in rupees to the technicians in India for the purpose of their maintenance, and (c) Expenditure on facilities provided by them. Out of the above three categories the rupee equivalent of the payments mentioned in para (a) above which the Indian company agreed to pay to the foreign collaborators towards the total value of the technical services rendered by each of the four technicians formed the subject matter of the assessments as well as the corresponding appeals. Different rates were agreed upon towards services rendered by different categories of technicians. It is the contention of the assessee that since the fee is paid to the foreign collaborators towards the services rendered by the technicians which it had deputed to work with the Indian company, the amount of fees chargeable for the services rendered by the foreign technicians should not be considered under the head 'salary' in the hands of each of these assessees. However, this argument did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion raised the Appellate Assistant Commissioner found that it is an afterthought, since it was not raised at the time of original assessment. He held that in any event the subject matter of appeal is not the assessment of the fees paid to the collaborators but represents the remuneration earned by the assessee-foreign-technicians working in India in terms of the agreement entered into with BHEL by the foreign collaborators. Therefore, there is no force in the argument that the amount was not paid to the appellants but to the foreign collaborators. The second argument was found to be misdirected inasmuch as section 10(6)(vi) applies only if the remuneration is received by the employee of the foreign collaborator. However, the amount in question was not received by the foreign employee but only remitted to the foreign collaborator. On that ground the Appellate Assistant Commissioner held that the provisions of section 10(6)(vi) of the Income-tax Act, 1961 are not attracted or do not cover the payments in the present case. Dealing with the contention relating to the provisions of the Avoidance of Double Taxation Agreements between India and West Germany as well as Italy he held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok to their masters only for their salary payments and they have no claim against the Indian company for any part of their salary amounts. 10. Secondly the case is squarely covered by the exemption provided under section 10(6)(vi), which is as follows :--- " 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-- (6) in the case of an individual who is not a citizen of India,--- (vi) the remuneration received by him as an employee of a foreign enterprise for services rendered by him during his stay in India, provided the following conditions are fulfilled-- (a) the foreign enterprise is not engaged in any trade or business in India ; (b) his stay in India does not exceed in the aggregate a period of ninety days in such previous years ; and (c) such remuneration is not liable to be deducted from the income of the employer chargeable under this Act." In any event the payment is not taxable in view of the provisions of the Double Taxation Avoidance Agreement which India entered into with West Germany with effect from 18-3-1959 and a similar agreement which India entered into with Italy w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in the agreements that the ordinary place of work of these assessees is either Czechoslovakia (Prague), Italy or West Germany. There is no material before the learned Commissioner to hold that the foreign technicians working in India, though employees of foreign collaborators, yet the remuneration received by them for services rendered in India is assessable to tax in the hands of the assessees under the head ' salaries '. In our considered opinion unless there is an employer-employee relationship between the technicians on the one hand and the BHEL on the other the assessees cannot be stated to be receiving salaries. In N.Sciandra v. CIT [1979] 118 ITR 675 the Calcutta High Court is clear on that point. In that case the Fertilizer Corporation of India entered into an agreement with an Italian company for erecting an ammonia plant in Durgapur. The name of the Italian company was Ansaldo. For deputing its technicians the Italian company prescribed certain rates just like in this case. There also it is contended by the revenue that the assessee, a technician deputed by the Italian company had earned income under the head 'salaries' and it was immaterial whether he was paid sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were all to be considered either as technical know-how fee or as royalty agreed to be paid by BHEL to the three foreign collaborators. In such a situation, according to us, s. 9(1)(vii) which is already extracted above would come into operation." Further down in the same para we have held as follows :--- " What is meant by fees for technical services is already defined in Explanation 8 to s.9(1)(vii) and it included the provision of services of technical or other personnel. Therefore, it is clear that if under an agreement term technical or other personnel were deputed by a foreign collaborator and the payments stipulated for such deputation was agreed upon under the terms of the agreement such payment should also be considered as fee for technical services. As already stated the agreements with the three foreign collaborators were entered into prior to 1-4-1976 and they were also ratified by the Government of India. Hence whatever amount that is payable under the terms of those agreements cannot be considered as income which accrued or arose in India." We also held that the payments made do not come under the Explanation to section 9(1)(ii). In para 19 we have given reasons fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not apply and therefore the foreign technicians to whom the foreign collaborators had sent to India and whose stay did not exceed 90 days in the previous year are entitled to exemption from income-tax." 14. According to me the important thing to be noted in this case is that the foreign technicians were sent by their masters to the industrial sites of BHEL in India. The Indian company is not obliged to pay towards their salary, whether it is monthly, weekly or otherwise. But they have to pay to the collaborators the per day rates which were agreed upon as per the stipulations of the collaboration agreements depending on the number of days' stay of each of the foreign technicians in India. The payment may vary from one to the other category of technicians. The obligation of the BHEL under the agreements to make rupee payments for the foreign technicians is not brought to tax or is not treated as part of the total emoluments earned by each of the four technicians in India. The Income-tax Officer exempted such living allowance. The amount of fee charged by the collaborator in foreign currency towards the services rendered by its technicians to BHEL is sought to be charged by the ..... 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