1975 (7) TMI 22 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 10(6)(vii)(a)(ii) of the Income-tax Act, 1961 regarding the inclusion of income-tax paid by the employer in the taxable income of the assessee.
2. Whether a foreign technician, fulfilling certain conditions, is entitled to the concession of excluding taxes paid by the employer from their total income.
3. Determining if the foreign technician must remain under the same employer to avail the tax exemption benefits as per the latter part of section 10(6)(vii)(a)(ii).

Detailed Analysis:
The judgment delivered by the High Court of Bombay revolved around the interpretation of section 10(6)(vii)(a)(ii) of the Income-tax Act, 1961, concerning the tax treatment of income-tax paid by an employer on behalf of a foreign technician. The case involved a foreign technician, referred to as the assessee, who had worked for two different employers in India, with approvals from the Central Government. The dispute arose when the taxes paid by the second employer on behalf of the assessee were included in the total income of the assessee under the head "Salary" during assessments. The question was whether the assessee, under the latter part of section 10(6)(vii)(a)(ii), could exclude the taxes paid by the employer from their taxable income for a period of 24 months after the initial 36-month exemption period.

The court analyzed the relevant provision of section 10(6)(vii)(a)(ii) and emphasized that the assessee had fulfilled all conditions to qualify for the tax exemption as a foreign technician. The key contention was whether the requirement to "continue to remain in employment in India" meant remaining under the same employer. The Revenue argued that the assessee changing employers disqualified him from the tax exemption benefit. However, the court disagreed, stating that the provision did not specify the need to remain with the same employer, but rather emphasized continuous service in India for the specified period. The court highlighted that the legislative intent was to attract foreign technicians and provide tax benefits based on approved contracts of employment, not limited to the same employer.

The court rejected the Revenue's argument that the assessee was ineligible for the tax concession due to changing employers, as long as the conditions of the section were met, including approval of the employment contract by the Central Government. The court concluded that the assessee was entitled to the tax exemption benefits as per the latter part of section 10(6)(vii)(a)(ii), despite the change in employers. The judgment favored the assessee, answering the referred question in the affirmative and directing the Revenue to bear the costs of the reference.