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TMI Blog1993 (11) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... n Ltd., Kota. According to the said agreement, the assessee-company was to send the technicians/employees to India to assist the Indian company in the manufacture of licence products and parts. During the relevant accounting period, Messrs. Instrumentation Ltd. paid to the assessee-company a sum of Rs. 47,428 by way of "absence fee" towards the compensation for the losses incurred by the assessee-company on account of salary to be paid in Japan on the absence of its technicians/ employees from Japan. According to the terms of the agreement, the Indian company was to make the payment of the "absence fee" without deduction of any taxes and if any tax became payable in respect of such payments, the same were to be borne by the Indian company. The Inspecting Assistant Commissioner (Assessment) held that the absence fee received by the assessee-company represented income arising to it from a business connection in India and was taxable in its hands under clause (i) of sub-section (1) of section 9 of the Income-tax Act, 1961. It was further held that the tax liability of the assessee on this account which was payable by the Indian company on its behalf was includible in the gross amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the income received abroad but through or from any business connection in India. In the assessment order framed by the Inspecting Assistant Commissioner various terms of the agreements have been reproduced from which it is evident that the assessee-company has to assist the Indian company in setting up a plant in any part of the country including Palghat for manufacturing the licence products and/or licence parts (control valves and its accessories) and for this purpose the assessee-company has to supply the information regarding engineering data, technical data and secret processes, information with all the latest techniques and developments and/or benefits of the latest research in respect of the licence products and/or license parts to the extent necessary for manufacture, application, engineering, testing, service and repairs, etc. The technical documents containing know-how were required to be delivered by the Japanese company to the Indian company at Tokyo or elsewhere in Japan. The assessee-company has also to train the technicians of the Indian company in Japan so that the Indian company's employees may acquire the necessary knowhow for the manufacture of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd agree to reimburse YH the following : 1. Travelling expenses (from Tokyo International Airport to Tokyo International Airport) ; Air Flight Ticket - Tourist class travel to be performed by Air India whenever possible. Railway - Fastest Train's first class ACC. Others - Actual cost. 2. Throughout the duration of the stay of YH employee in the Republic of India IL shall provide him with free furnished accommodation of appropriate quality and free transport. 3. Living expenses to the employees at the rate of Rs. 3,500 per month. 4. Absence fee to be paid to YH (salary to be paid in Japan for losses to YH due to employee's absence) at the rate of free Yen 3,00,000 per month and a proportionate part thereof for a proportionate part of man-month. Such absence fee shall be computed from the time YH employee leaves Tokyo until such time as he returns to Tokyo. 5. IL shall bear and pay all costs, charges and expenses whatsoever including travel, hotel expenses and the like while YH employee is required to travel on duty in the Republic of India. 6. IL agrees that the payment of the above-mentioned expenses will be made to YH within thirty (30) days after receipt of deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any had control over the personnel. Both the companies had the authority to change the composition and the number. In the present case also, the foreign company was to send its trained employees to India. The employee so sent was not to be considered as employee of the Indian company and hence the decision of the case of Carborandum Co. [1977] 108 ITR 335 (SC) is not applicable. In N. Sciandra v. CIT [1979] 118 ITR 675, the Calcutta High Court found that the agreement provided that all payments had to be made by the Corporation to the Italian company and the Corporation had to pay to Ansaldo a stipulated amount on account of the services of the assessee. Apart from that, the Tribunal had not found that there was a relationship of employer and employee between the assessee and the Corporation. The certificate issued by the Corporation does not specifically state that the assessee is an employee of the Corporation. All that it states is that the assessee had been engaged by the Corporation. The certificate does not also record by whom the remuneration is payable to the assessee. No deduction on account of the salary payable to the assessee was made by the Corporation nor did the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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