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TMI Blog1989 (7) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... n concern was assessable in the hands of the foreign technician in terms of section 15, read with sections 5 and 9(1)(ii) of the Income-tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the income of the assessee was assessable to tax in India as per the certificate of salary issued by the Italian concern? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the entire amount of Italian lire paid by the FCI Ltd. to the Italian concern in Italy towards salary and allowances of the assessee-technician in terms of the agreement between the FCI Ltd. and the Italian concern was salary earned in India within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Technimont) which deputed them to work with the FCI. Under the agreement, the salaries of the assessees were to be paid by the FCI in Italian lire to the said Italian concern but the daily allowances were to be paid directly to the assessees in Indian rupees. Apart from the aforesaid remuneration to be made available to the assessees they were also provided these facilities: (1) Free of charge furnished residential accommodation at the site; (2) furnished office accommodation free of charge at the site; (3) free of cost transport facilities for official work; and (4) free medical aid for the personnel and their families to the extent available at FCI medical centre at site. According to the assessees all of them were employees of Techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Cross-objections were also filed by the assessees. The Tribunal also held that the assessees were employees of the foreign company and not of the FCI and therefore the salary certificate issued by the foreign company was taken into consideration for income-tax purposes. The daily allowance paid to the assessees was held to be not exemptable under section 10(14) of the Act and the value of the rent free furnished accommodation was also held to be liable to tax. On the question of salary, the Tribunal took the view that the same had been earned in India and as such was taxable under the provisions of section 9(1)(ii) read with the Explanation inserted in the Act by the Finance Act, 1983. Let us first deal with the question whether the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sum of money consideration for which services had been rendered by an assessee." In this connection reference was also made to section 9(1)(iii) of the Act wherein salary payable by the Government to a citizen of India for service outside India was also deemed to be an income accruing or arising in India. The absence of the words "service rendered in India" in section 9(1)(ii) was held to indicate that the Legislature wanted to give a wider meaning to the word "earned". As in the Gujarat case no debt was created in favour of the assessees and as the wider meaning of the word "earned" requires creation of such a debt it was held that the sum payable directly to the foreign company could not be a part of salary taxable under the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside India, section 9(1)(ii) did not apply. When the aforesaid decision was brought to the notice of the Tribunal it referred to the Explanation added to section 9(1)(ii) of the Act by the Finance Act, 1983. We may read the Explanation. "Explanation.--For the removal of doubts, it is hereby declared that income of the nature referred to in this clause payable for service rendered in India shall be regarded as income earned in India." This Explanation though inserted in the Act in 1983 was made effective from April 1, 1979. As the assessments in the present cases though relatable to the assessment year 1976-77 were completed after April 1, 1979, the Tribunal was of the view that the above Explanation would apply to the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placing reliance on the Explanation to hold that the salaries earned by the assessees would be taxable in India. This takes us to the question as to whether the daily allowances paid in Indian currency could have been taxed in India. As to this the case of the assessees was that the same was exempt under the provisions of section 10(14) of the Act. Under this provision any special allowance specifically granted to meet expenses wholly, necessarily and exclusively incurred for the purpose of the duties of an office or employment is exempt from tax to the extent such expenses are actually incurred for that purpose. This aspect of the case has also been dealt with by the Gujarat High Court in S.G. Pgnatale's case [1980] 124 ITR 391 and a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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