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TMI Blog1994 (8) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... a of construction and commissioning of chewing gum plants as well as the manufacturing process of the product. As International Liaison Engineer for the U. S. company he had participated in the erection and commissioning of a number of the company's projects which include projects at Chicago and Santacruz in U. S. A. and a project in China. The U. S. company promoted a company named Wrigley's (India) Private Limited (W. I. P. L.) and this company is said to have been incorporated in India on October 5, 1993. The U. S. company is a major shareholder with 85 per cent. equity holding in W. I. P. L. The Indian company was formed for carrying on the business of manufacture and marketing of high quality chewing gums and other related confectionery products. Since the proposed Indian project is for high and superior quality products requiring specialised equipment and production process to be carried out in very hygienic conditions, the entire plant and machinery of W. I. P. L. is proposed to be designed and supplied by the U. S. company. Also proposed is a transfer of technology for the manufacturing process of chewing gum and other related confectionery products. It was, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 200 of the Companies Act, 1956 [1 of 1956]), the tax so paid by the employer for a period not exceeding forty-eight months commencing from the date of his arrival in India : Provided that the Central Government may, if it considers it necessary or expedient in the public interest so to do, waive the condition relating to non-residence in India as specified in this 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 clause, 'technician' means a person having specialised knowledge and experience in _ (i) constructional or manufacturing operations, or in mining or in the generation of electricity or 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 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correctness or otherwise of this claim. While section 245N stipulates that only a non-resident can make an application under Chapter XIX-B, it does not say in specific terms that he should be a non-resident as on the date of the application. In fact, it could not say so, for, as will be seen from the definitions set out earlier, conceptually, residence or non-residence for the purposes of the Act has to be determined with reference to a previous year (which is, generally, a financial year) and not with reference to a particular date. The plea, therefore, of the length of stay of the applicant in India between April 1, 1993, and December 16, 1993, being less than 182 days is neither here nor there. What is important is the status of the applicant in regard to a relevant previous year. Having regard to the fact that the applicant arrived in India on May 12, 1993, and seeks exemption in respect of his salary income assessable in the assessment years 1994-95 to 1998-99, one may think, at first blush, that the "non-resident" status of the applicant has to be determined for each of the previous years relevant to these assessment years. But this would not be correct as the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending with the said financial year." The proviso, which is applicable here, substantially restricts the scope of the previous year with which we are concerned in the case of the applicant. As already stated, though the applicant came to India on May 12, 1993, and seems to have intermittently stayed in India for periods aggregating to 159 days till December 16, 1993, that period of stay was attributable to his employment with the U. S. company. At that time, he was not employed by W. I. P. L. nor had he any source of income in India. It has been stated _ this has to be accepted as correct for the purpose of this application _ that he took up employment with W. I. P. L. only with effect from February 1, 1994. In view of this emphatic statement, the relevant previous year will only be the period from February 1, 1994, till March 31, 1994. Since the stay of the applicant in India during the said period is less than 182 days, he has to be treated as a non-resident. In other words, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is the employer in the present case, has not started its business in the manufacture and sale of chewing gum and other confectioneries. It is admitted on behalf of the applicant that W. I. P. L. is still at the stage of setting up its factory and installing its plant and machinery relating to the production of confectioneries but the manufacture and sale of confectioneries has not yet started. The question which arises is whether, having regard to the fact that W. I. P. L. has not yet commenced its business, the benefit of the exemption under section 10(5B) can be granted to the applicant. It may be mentioned here that though section 10(5B) has been inserted only by the Finance Act, 1993, with effect from April 1, 1994, this category of exemption had been in the tax statutes all along. In the Indian Income- tax Act, 1922, the exemption was provided by section 4(3)(xiva) inserted with effect from April 1, 1955, and it has been continued in the 1961 Act in sections 10(6)(vi), (vii), (viia)(I) and (viia)(II). Though the provision has undergone several modifications as to the definition of "technician" as well as the quantum and period for which the exemption was availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits and gains of a business carried on by an Indian businessman in which event the question whether the expenditure is incurred in the course of running a business or even before the commencement of the business would be vital. The exemption is granted by way of a tax concession to foreign technicians to encourage them to come to India and lend their expert knowledge and assistance to Indian industry for developing and modernising its plant and machinery. This is one aspect which has to be kept in mind. Secondly, the definition of "technicians" also includes a person who has specialised knowledge and experience in constructional or manufacturing operations. While, normally speaking, manufacturing operations are those which are carried out in the course of the carrying on of a business, constructional operation is a wider expression. Construction of a building, plant or other equipment may also, no doubt be undertaken in the course of the carrying on of a business and with a view to extend the same but constructional operations are mostly undertaken at a stage prior to the setting up of the business. The inclusion of this word in the definition of word "technician&q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the clause dealing with other businesses. The above language of the relevant statutory provisions is an unmistakable indicator of the intention of the Legislature to grant exemption liberally in respect of foreign technicians. The object is to promote industrial development in India and to facilitate the acquisition of foreign expertise, knowledge and assistance for the setting up of industries in India. With the increase in the frontiers of knowledge inside the country in these matters, the scope of the exemption has been gradually reduced over the years but the basic idea of granting a concession in respect of foreign technicians who help to set up or manage Indian industries by reason of their specialised knowledge and experience has continued throughout. It is, therefore, necessary that a liberal interpretation should be given regarding the scope of this exemption and it should not be denied to a person who is really a foreign technician unless there is a clear indication in the Act that it should be not available in any particular situation. If the provisions of section 10(5B) are looked at from the above points of view, it will be appreciated that the emphasis in the word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sale of confectionery products has not yet started. The Authority is, therefore, of the opinion that the presence of the words "business carried on in India" in section 10(5B) do not stand in the way of the applicant's eligibility for exemption. As mentioned earlier, the exemption has been in existence for about 40 years now. At earlier stages, one of the conditions precedent for grant of the exemption was prior approval of the contract with the technician by the Government. No policy of denying such approval, or precedents where exemption has been denied to such technicians on the ground that their experience had been utilised at the stage of setting up a business has been brought to the notice of the Authority. The conditions on fulfilment of which the exemption is granted are set out earlier. It has been held that the applicant is a technician. The facts stated in the petition show that he has not been a resident in India in any of the four financial years preceding the financial year 1993-94. He has arrived in India after April 1, 1993, as required by the section. The applicant is, therefore, entitled to the exemption granted under section 10(5B), viz., that i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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