1988 (11) TMI 121 - AT - Income Tax

Summary

Issues Involved:
1. Taxation of retention remuneration received by foreign technicians.
2. Taxation of perquisites provided to foreign technicians.
3. Validity of assessment order in respect of GSFC as the agent of foreign technicians.
4. Applicability of Section 9(1)(i) or (ii) of the Indian Income Tax Act.
5. Exemption under Section 10(6)(viia) or Section 10(14) of the Indian Income Tax Act.
6. Charging of interest under Section 215.
7. Taxability of living allowance provided to foreign technicians.

Detailed Analysis:

1. Taxation of Retention Remuneration Received by Foreign Technicians:
The primary issue concerns the taxation of retention remuneration received by foreign technicians from Inventa in their home country. The Income Tax Officer (ITO) included the actual amounts received in Europe and the difference between the amounts paid by GSFC to Inventa and those paid by Inventa to the technicians. The Commissioner upheld the taxation of the actual amounts received but deleted the difference, reasoning that the latter had not accrued to the foreign technicians and only the actual amounts received could be taxed.

2. Taxation of Perquisites Provided to Foreign Technicians:
The ITO added various perquisites to the taxable income of the foreign technicians, including free furnished accommodation, free conveyance, travel expenses, personal use of phone/family accommodation, and extra baggage. The Commissioner confirmed the additions related to travel expenses, personal use of phone/family accommodation, and extra baggage but left the matter of grossing up for reconsideration by the ITO in light of a Supreme Court decision. The Tribunal found that the ITO was justified in making the assessment without waiting for additional information from GSFC but restored the matter of extra baggage payment to the ITO for verification.

3. Validity of Assessment Order in Respect of GSFC as the Agent of Foreign Technicians:
The assessee contended that the assessment order was invalid as it was the foreign personnel who had filed the return, not GSFC. The Tribunal rejected this contention, noting that GSFC had been recorded as the agent of the foreign technicians, a status confirmed by a previous Tribunal order.

4. Applicability of Section 9(1)(i) or (ii) of the Indian Income Tax Act:
The assessee argued that Sections 9(1)(i) or (ii) were inapplicable due to the absence of an employer-employee relationship between GSFC and the foreign personnel. The Tribunal clarified that the relevant section was indeed 9(1)(ii) and that the definition of salary under Section 17 was broad, not requiring the employer to be Indian. The Tribunal held that the Explanation to Section 9(1)(ii) was fully applicable, as it declared that income for services rendered in India should be regarded as earned in India, regardless of who paid it or where it was paid.

5. Exemption under Section 10(6)(viia) or Section 10(14) of the Indian Income Tax Act:
The Commissioner allowed the exemption under Section 10(6)(viia), relying on a previous Tribunal order. The Tribunal confirmed that the assessee was entitled to this exemption up to Rs. 24,000 per year, with the remaining balance being taxable.

6. Charging of Interest under Section 215:
The assessee's ground regarding the charging of interest under Section 215 was not decided by the Commissioner. The Tribunal restored this matter to the Commissioner for a decision according to law.

7. Taxability of Living Allowance Provided to Foreign Technicians:
The Department appealed against the Commissioner's decision to treat the living allowance as exempt. The Commissioner had observed that the accommodation charges were recovered from the living allowance, and thus, it should not be added as a perquisite. The Tribunal upheld the Commissioner's decision, noting that the living allowance was given as reimbursement rather than a personal advantage, following the Gujarat High Court decision in the case of Pgnatale. Therefore, the living allowance was not assessable, and the Department's appeals were dismissed.

Conclusion:
The Tribunal's judgment addressed multiple issues related to the taxation of foreign technicians working under an agreement between GSFC and Inventa. The Tribunal upheld the taxation of actual retention remuneration received, confirmed certain perquisites as taxable, and allowed exemptions under specific sections of the Income Tax Act. The Tribunal also clarified the applicability of relevant sections and restored certain matters to the ITO and Commissioner for further consideration. The Department's appeals regarding the taxability of living allowance were dismissed.