TMI Blog2002 (5) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... enable them to render and finalise their part of obligation under the collaboration agreement and that at no time the assessee foreign technician was in employment of the Indian contracting party (BHEL) to the Agreement. These technicians had always continued to be answerable to their own foreign employers and were liable to be recalled, withdrawn, replaced and even to termination, as emerging from the agreement regarding expertise, quality and seniority of expert, and even the quantity of the personnel to come under the collaboration agreement. The foreign party to the agreement had necessarily and always to act through its own personnel/employees only through out the duration of the collaboration agreement with the Indian party for rendering its own part of the obligation under the agreement. 3. Such foreign technicians became entitled to their remuneration by rendering services only to their own foreign employers and they were paid also accordingly in their own country of origin by their own foreign employers. 4. The perquisite value of free accommodation provided by the Indian party to the agreement at site in term of the collaboration agreement, to the assessee specialist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in in ITA No. 307/Del/1995 in the case of Asstt. CIT vs. Faji Czeck Expert c/o Manager (F.P.) BHEL, Ranipur, Haridwar, the action of the CIT(A) was upheld by which penalty imposed under s. 271(1)(c) was quashed. 4. Learned Departmental Representative, on the other hand, contended that the said decision of the Allahabad High Court does not render any help to the present case as the said decision has already been considered in the impugned order and there are material changes in the facts and circumstances of the two cases. As such, the orders of the tax authorities are fully justified in the facts and circumstances as well as position of law. 5. In the aforementioned facts and circumstances, it was considered appropriate to adjourn the appeals filed by the assessees and afford an opportunity to the learned Authorised Representative to come prepared and argue the appeals on merits. 6. At the next hearing, it was conceded by the learned Authorised Representative that no doubt the said decision of the Allahabad High Court does not fully cover the issue at hand but the fact remains that the assessees are foreign technicians who were in India and rendering the services to their for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re involved. In the course of the assessment proceedings, it was contended by the learned Authorised Representative that the assessee is a foreign technician and in the year under consideration, was an employee of M/s Skoda Export of Czech Republic. It was further contended that he was deputed by his employer for technical assistance on behalf of his employer to work with BHEL, Ranipur, Haridwar, in accordance with the contract signed between BHEL and M/s Skoda Export. It was also contended that the said contract was duly approved by the Government of India. The contention was also putforth that the payment of salary was made to the assessee inCzechRepublicby his employer M/s Skoda Export and there was no payment made to the assessee as remuneration by BHEL during his stay inIndia. It was also contended that there was no employer-employee relationship between BHEL and the assessee as the relationship of the assessee was with his employer which is a foreign company based inCzechoslovakia. The contention was putforth that the amount of income-tax was paid by BHEL on behalf of the assessee on his salaries in accordance with the terms of agreement between BHEL and M/s Skoda Export. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He, further clarified that no exemption under s. 10(6)(vii)(a) of the Act could be allowed as there was no relationship of employer and employee between BHEL and the foreign technicians. Accordingly, the AO was directed to complete the assessment of these technicians including the assessee. On the basis of these instructions and keeping in view the submissions made before him on behalf of the assessee, the AO completed the assessment in the case of the assessee and the assessee s income under the head salaries as shown in the return and tax paid by BHEL on behalf of the assessee as assessee s income under the head income from other sources. Thus, completing the assessment, he charged interest under ss. 234A, 234B and 234C of the Act and also issued penalty notice under s. 271(1)(c) of the Act. 13. Aggrieved by this, the assessee filed an appeal on the following grounds before the CIT(A): "The learned AO was not justified for charging the tax on non-taxable salary, grossing up and charging of the interest under ss. 234A and 234B from the appellant-assessee." 14. On the date of hearing, a prayer for admission of additional grounds was raised which read as under: "1. That the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144 of the Act was not legal and valid. As such, it was contended that an assessment made in pursuance of such a notice was void ab initio and deserves to be quashed. 17. After considering the submissions of the assessee, challenge to notice issued under s. 148 was rejected and it was considered that the issuing of notice under s. 148 of the Act is fully justified. Regarding the contention of the assessee that the period allowed to file a return of income in response to such a notice was mentioned as within 30 days from the date of service of this notice, whereas under s. 148 such a period prescribed under s. 148 of the Act for submission of such a return is not being less than 30 days. The decisions relied upon by the learned Authorised Representative were not accepted as they pertained to the provisions of the IT Act, 1922 and were pertaining to the period before the enactment of s. 292B of the Act which came into effect w.e.f. 1st Oct., 1975. The second contention of the assessee was also not accepted. 18. As such, in the ultimate analysis, proceedings initiated under s. 148 of the Act for the year under consideration were held to be fully valid in the eyes of law. 19. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se status is resident and not ordinary resident. Therefore, it is squarely covered by cl. (2) of art. 15 thereby making salaries received by him in such an accounting year taxable in the other State , i.e.,India, the learned counsel of the assessee offered no arguments. 21. The CIT(A), as such, considering the submissions of the assessee, concluded that the action of the AO in initiating proceedings under s. 148 of the Act was fully justified. He also observed that the technicians in the year under consideration had been inIndiafor a period exceeding 183 days which in the case of the assessee was 214 days. Thus, in view of this fact, the amount of remuneration so paid to him by his employer for the work done in India, therefore, arose in India and hence, by virtue of the provisions contained in s. 9(1)(ii) of the IT Act, 1961, read with its Explanation, the same becomes taxable in India. He further concluded that this was the reason why the return of income was filed by the assessee disclosing such remuneration received by him for assessment purposes and BHEL also paid the tax liability in respect of the same. As regards the tax paid by BHEL in respect of such a remuneration rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable in India. The CIT(A) further observes that when confronted with the provisions of art. 15 with reference to the case under consideration for the assessment year under consideration, the learned Authorised Representative had no arguments to offer. Accordingly, the action of the AO was confirmed. Same was the fate of the obligation of the foreign technician to pay Indian income-tax for such remuneration derived by him in the accounting year under consideration and in view of the fact that the tax under the agreement between BHEL and M/s Skoda Export was paid by BHEL, therefore, such a tax paid by BHEL was a perquisite assessable in the hands of the foreign technician under the head income from other sources under s. 56(1) of the Act. 23. Regarding the contention about provisions of s. 10(6)(viia) of the Act, the assessee s argument was held to be not tenable by virtue of the fact that the BHEL was not the employer of the foreign technician of the assessee-firm and since there was no relationship between employer and employee, the tax paid by BHEL on the salaries of the foreign technicians does not form part of the technicians salaries in terms of s. 17(2)(iv) and has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by held as chargeable. It may also be mentioned here that if liability to pay tax on the remuneration derived by the appellant was that of BHEL, it was for the BHEL to pay such an advance-tax on the salaries and tax perquisite income of the appellant. The contention that payment of advance-tax is not applicable to the case of the salaried person, it is also not tenable in the case of the appellant as such a salary for the year under consideration has not been paid by the BHEL to the appellant, and hence provisions of s. 192 are not attracted. Provisions of s. 195 of the Act are also not applicable to his case as his salaries were paid to him by his employer, M/s Skoda Export, and not by the BHEL. Further, the provisions of s. 195 were applicable only to deduct tax at source on payments made by the BHEL to M/s Skoda Export, which TDS cannot be said as made on salaries of these specialists even though such payments made to M/s Skoda by the BHEL might have been calculated on the basis of salaries payable to them. Thus, the only provisions of the Act attracted were of advance-tax as the BHEL was responsible under this agreement to pay taxes on salaries, etc., of these specialists. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been wrongly paid, and in view of the fact that no assessment should have been made in the present facts of the case and even the income returned by the assessee itself should not be taxed, the question of grossing up does not arise. It was specifically put to the learned Authorised Representative that apart from arguing at length on the above proposition whether he would like to touch any other ground which has been raised in the present appeal, the learned Authorised Representative struck to his argument that assessment in the present case could not be made under the IT Act. Reliance was placed upon another judgment of the Hon ble Allahabad High Court in Civil Misc. Writ Petn. No. 536 of 1994 in the case of Mr. Moregenstern Werner c/o Manager (FP) Heep, BHEL, Haridwar vs. CIT and it was contended that therein, the assessee had filed his return under a mistaken advice wherein the assessee had claimed exemption on daily allowance to the extent of Rs. 1,11,264 on account of income-tax under s. 10(14)(i) of the Act. The Asstt. CIT had also wrongly assessed the income of the petitioner as shown in the return and adjusted the amount of income-tax paid by BHEL. After the assessment wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid in the present facts of the case to whom. It was further put to the learned Authorised Representative that the fact remains that the salary certificate has been duly signed and return on account of this has been filed by BHEL, and only when action under s. 148 is taken, the assessee wants to argue that grossing up is not justified. Thus, in the relevant facts of the case, it is necessary to see as to how the payments have been made. Learned Authorised Representative in response to this query placed on record agreement between BHEL and M/s Skoda Export,Fraha,Czechoslovakiawhich was entered into for supervisory services for erection, testing and commissioning of 2 x 60 MW reversible generating units at Kadana Hydro Electric Project of Gujarat Electricity Board. The said contract was entered into on12th Nov., 1984. Clause (3) of the said agreement was referred to "3.0 Terms and condition for deputing the supplier s experts: 3.1 For the technical services of the supplier s experts the payment at the following rates per calender month shall be paid by customer in rupees. Designation Year (From 1st January to 31st December) 1984 1985 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders of the tax authorities. Apart from relying upon the orders of the tax authorities, it was further submitted with respect to ground Nos. 5 and 6 that although the same were not argued by the learned Authorised Representative but reliance was specifically placed by her on the orders of tax authorities and on the basis of that, it was contended that action under s. 148 was fully justified in the facts of the case. 32. Regarding the intimation under s. 143 and s. 148, reliance was placed upon Ranchi Club vs. CIT (1995) 129 CTR (Pat) 385 : (1995) 214 ITR 643 (Pat), wherein it has been held that in view of the provisions contained in s. 147 of the IT Act, 1961, and Expln. 2(b) thereof, even if assessment for 1991-92 assessment year had not been made in terms of s. 143 and only an intimation had been sent to the assessee in response to the return filed by him, notice could be issued under s. 148. Reliance was placed upon the jurisdictional High Court s decision in the case of MTNL vs. Chairman, CBDT Anr. (2000) 162 CTR (Del) 554 : (2000) 246 ITR 173 (Del) for the proposition that so long as the ingredients of s. 147 are fulfilled, the AO is free to initiate proceedings under s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of items not claimed in the original assessment proceedings unless relatable to "escaped income". 35. Regarding the contentions of the learned Authorised Representative that the issue is covered by the decision of the Hon ble Allahabad High Court in the case of Tomasek Alexander Ors. vs. CIT, it was contended that therein the assessee had moved for revision under s. 264 of the Act before the CIT(A) whereas in the present facts of the case, the reopening was under s. 148 and as such, the route adopted in both these cases was diametrically different. It was contended that in the facts of the present case, the assessee rightly offered income for the purposes of tax and it was rightly taxed by the tax authorities. As such, in the reassessment proceedings when action has been taken relying upon the apex Court s decision in the case of Emil Webber which has been relied upon by the AO wherein facts were almost similar, as such, the ratio is fully applicable to the issue at hand and the AO has correctly applied the same. It was further submitted that on the facts of the present case, there is absolutely no dispute that tax on account of foreign technicians has been paid by BHEL. As s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me was not the employer of the assessees, the payments made by the British High Commission as per the assessees could not be deemed to be a perquisite in terms of s. 17(2)(iv) of the Act and, therefore, could not be included in the gross salary of the assessees. It was also contended that the salaries were paid in sterling inUnited Kingdom. In the facts of that case, the Tribunal found that although the services were rendered by the employees in India and the payments were made outside India under some internal arrangement, it could not detract from the applicability of the provisions of the Act that the payments made by the British High Commission were a part of the condition of service and were referrable to the holding of the office by the assessees as employees, and was a part of the emoluments; that the payments in the year in question included payment of the amount equal to the tax of the assessees. The jurisdictional High Court therein held that ss. 2(24)(iii), 15, 17(2)(iv) of the IT Act, 1961, make it clear that an amount of tax which would have been payable by an employee-assessee if paid by the employer on behalf of the assessee is to be included in the perquisite, amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appropriate persons. No challenge is posed to the same by the assessee upto this stage. On the contrary, the returns have been filed voluntarily by the assessee himself. In the present facts of the case, the assessee undisputedly filed the returns voluntarily duly accompanied with the salary certificates duly signed by the appropriate person after s. 143(1) intimation. When reopening was done under s. 147 thereupon the assessee filed a return under protest showing the same income. Aggrieved by the assessment made in pursuance to s. 147, in appeal before the CIT(A), the assessee raises only one ground pertaining to ss. 234A and 234B but on the date of hearing, additional grounds were sought to be raised when, for the first time, the assessee challenges that the income was not correctly assessed and was wrongly shown by the assessee in the return. Having given our due consideration to the peculiar facts of the case, we are of the opinion that in the present facts, it would not be fair to allow the assessee to agitate at this stage that the return was filed under a mistake. We have taken cognizance of the fact and it is a settled position of law that the provisions of s. 147 are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... metrically different. 46. In the course of the arguments, in a cursory manner, on the first date of hearing, reference by the learned Authorised Representative was made of the judgment of the Hon ble Supreme Court in the case of Daryao Ors. vs. State of U.P. AIR 1961 SC 1457 for the proposition that rule of res judicata is not merely a technical rule but is based on public policy on the basis of which it was contended that the judgment of the Allahabad High Court in Tomasek Alexander will operate. We are in full concurrence with the view relied upon by the learned Authorised Representative and, in fact, there can be no dispute over this settled proposition of law. Without even entering into the arena that res judicata does not act as a bar in income-tax cases as each year is an independent year, in the present facts of the case as was specifically brought to the notice of the learned Authorised Representative the facts as appreciated by the Hon ble Allahabad High Court which happens to be the jurisdictional High Court were diametrically different. Apart from the fact that the status of the assessee in the facts therein and the facts as before us were different, there was also a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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