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TMI Blog1985 (11) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... FC. In addition to the know-how agreement and supply contract, S.P. had also entered into 'services agreement' with GSFC in 1976 under which S.P. undertook the obligation to provide to GSFC for a specified consideration payable to S.P. in US dollars, S.P.'s expatriate technician having specialised knowledge in the construction, erection and operation of urea plant and the process of manufacture of urea and related functions or operations, for rendering advisory and technical services in the matter, to GSFC. The said services agreement specifically provided (Article 4) that the personnel to be provided by S.P. to GSFC shall only be those eligible for income-tax exemption under the (Indian) Income-tax Act, 1961 ('the Act'). Thereafter, on the formation of GNFC, a tripartite agreement was executed between S.P., GSFC and GNFC on 21-2-1978 under which the terms and conditions of various agreements entered into between S. P. and GSFC were accepted by GNFC. 4. During the relevant previous year, the assessee was paid living allowances in India amounting to Rs. 48,720 and a salary of Rs, 1,30,693 abroad by his employer, namely, S.P. It may be mentioned that in the assessment order, the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which were put forward before the ITO. The assessee had also filed written submissions before the Commissioner (Appeals), elaborating his case. 8. The Commissioner (Appeals), however, upheld the action of the ITO holding that after the amendment made in section 9(1)(ii), the assessee would not get any benefit of the aforesaid decision of the Hon'ble Gujarat High Court in respect of the salary. As regards living allowances received by the assessee, the Commissioner (Appeals) was of the view that the said decision of the Hon'ble Gujarat High Court would support his stand. As regards the assessee's claim for exemption under section 10(6)(viia), the Commissioner (Appeals) simply observed that 'on careful consideration of the submissions, I feel that the interpretation is not at all correct and is required to be rejected'. 9. Having been not satisfied with the order of the Commissioner (Appeals), the assessee has come up in appeal with a grievance that even after the insertion of the Explanation to section 9(1)(ii), the ratio laid down in the aforesaid reported case would still support his contention. The assessee's other grievance is that the Commissioner (Appeals) has not apprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Expec- No. nation ality ded per- ted by iod date of arrival --------------------------------------------------------------------------------------------------------------------------------------------------- 1 2 3 4 5 6 7 --------------------------------------------------------------------------------------------------------------------------------------------------- 3. Mr. Ugo Techni- Italian Snam- 24 App. Carcano cian progetti months upon receipt of labour permit 4. Mr. Battelli Welding Italian Snam- 14 App. Ernesto Inspector progetti months upon receipt of labour permit 5. Mr. Sket Techni- Italian Snam- 12 App. Vinko cian progetti months upon receipt of labour permit --------------------------------------------------------------------------------------------------------------------------------------------------- 2. The grant of actual exemption from income-tax, will, however, be subject to the fulfilment of all other conditions laid down in this regard in section 10(6)(vii)(a) of the Income-tax Act, 1961, as amended from time to time and also subject to the condition that payment of per diem charges are in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aforesaid decision of the Hon'ble Gujarat High Court, the learned counsel for the assessee further submitted that since the salary received by the assessee was nothing but 'a retention allowance' the same cannot be taxed by invoking the provisions of section 9(1)(ii). As regards the taxability of the living allowances, the learned counsel for the assessee submitted that the Commissioner (Appeals) was fully justified in relying on the aforesaid decision of the Hon'ble Gujarat High Court which fully covers this point. 13. The learned representative for the department, on the other hand, strongly relied on the order of the ITO and submitted that the income-tax authorities were fully justified in holding that the salary received by the assessee was exigible to tax. In this connection, he invited our attention to section 10(6)(viia) and submitted that the expression 'in any business carried on in India' relates to the employer of the assessee. According to the learned representative for the department, 'employment' is the essence of the matter and, therefore, since S.P. was not carrying on business in India, the assessee would not be entitled to exemption under section 10(6)(viia). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r arise in India--- (ii) income which falls under the head 'Salaries', if it is earned in India. 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 ;" Prior to the insertion of the Explanation with effect from 1-4-1979 by the Finance Act, 1983, the salary received abroad by an expatriate employee was held to be not taxable in the case of S.G. Pgnatale. However, in the instant case, as the year involved is 1980-81, we are of the opinion that in view of the aforesaid Explanation, the salary income of the assessee would be liable to tax unless it is exempt under any of the clauses of section 10. 15.2 The relevant portion of section 10 reads as under "10. In computing the total income of any person, any income falling within any of the following clauses shall not be included--- (1) to (5) (6) in the case of an individual who is not a citizen of India,--- (i) to (vi) (viia) where such individual renders services as a technician in the employment (commencing from a date after the 31st day of March, 1971) of the Government or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l authority, or (iii) any corporation set up under any special law, or (iv) any such institution/body established in India for carrying on scientific research as is approved for the purposes of this sub-clause by the prescribed authority or 2nd Part---in any business carried on in India Explanation to section 10(6)(viia) defines a 'technician' to mean a person having specialised knowledge and experience who is employed in India in a capacity in which such specialised knowledge and experience are actually utilised. It is not in dispute that the assessee is having specialised knowledge and experience in constructional or manufacturing operations. 15.4 On the proper reading of the aforesaid provisions, we are of the view that in order to claim exemption under section 10(6)(viia) a technician, like the assessee in the present case, need not be in the employment in the strict sense of the term. Such technician would still be entitled to exemption if he utilises specialised knowledge and experience in any business carried on in India. According to us, the expression 'who is employed in India' means engaged in India for rendering specialised knowledge and experience to any bus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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