TMI Blog1994 (8) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing process of the product. As International Liaison Engineer for the U. S. company he had participated in the erection and commissioning of a number of the company's projects which include projects at Chicago and Santacruz in U. S. A. and a project in China. The U. S. company promoted a company named Wrigley's (India) Private Limited (W. I. P. L.) and this company is said to have been incorporated in India on October 5, 1993. The U. S. company is a major shareholder with 85 per cent. equity holding in W. I. P. L. The Indian company was formed for carrying on the business of manufacture and marketing of high quality chewing gums and other related confectionery products. Since the proposed Indian project is for high and superior quality products requiring specialised equipment and production process to be carried out in very hygienic conditions, the entire plant and machinery of W. I. P. L. is proposed to be designed and supplied by the U. S. company. Also proposed is a transfer of technology for the manufacturing process of chewing gum and other related confectionery products. It was, therefore, considered necessary for the Indian company to engage a highly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e employer for a period not exceeding forty-eight months commencing from the date of his arrival in India : Provided that the Central Government may, if it considers it necessary or expedient in the public interest so to do, waive the condition relating to non-residence in India as specified in this clause in the case of any individual who is employed in India for designing, erection or commissioning of machinery or plant or supervising activities connected with such designing, erection or commissioning : Explanation. _ For the purposes of this clause, 'technician' means a person having specialised knowledge and experience in _ (i) constructional or manufacturing operations, or in mining or in the generation of electricity or any other form of power, or (ii) agriculture, animal husbandry, dairy farming, deep sea fishing or ship building, or (iii) such other field as the Central Government may, having regard to availability of Indians having specialised knowledge and experience therein, the needs of the country and other relevant circumstances, by notification in the Official Gazette, specify, who is employed in India in a capacity in which such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only a non-resident can make an application under Chapter XIX-B, it does not say in specific terms that he should be a non-resident as on the date of the application. In fact, it could not say so, for, as will be seen from the definitions set out earlier, conceptually, residence or non-residence for the purposes of the Act has to be determined with reference to a previous year (which is, generally, a financial year) and not with reference to a particular date. The plea, therefore, of the length of stay of the applicant in India between April 1, 1993, and December 16, 1993, being less than 182 days is neither here nor there. What is important is the status of the applicant in regard to a relevant previous year. Having regard to the fact that the applicant arrived in India on May 12, 1993, and seeks exemption in respect of his salary income assessable in the assessment years 1994-95 to 1998-99, one may think, at first blush, that the non-resident status of the applicant has to be determined for each of the previous years relevant to these assessment years. But this would not be correct as the exemption under section 10(5B) is not restricted to non-residents. Non-residential status ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date on which the source of income newly comes into existence and ending with the said financial year. The proviso, which is applicable here, substantially restricts the scope of the previous year with which we are concerned in the case of the applicant. As already stated, though the applicant came to India on May 12, 1993, and seems to have intermittently stayed in India for periods aggregating to 159 days till December 16, 1993, that period of stay was attributable to his employment with the U. S. company. At that time, he was not employed by W. I. P. L. nor had he any source of income in India. It has been stated _ this has to be accepted as correct for the purpose of this application _ that he took up employment with W. I. P. L. only with effect from February 1, 1994. In view of this emphatic statement, the relevant previous year will only be the period from February 1, 1994, till March 31, 1994. Since the stay of the applicant in India during the said period is less than 182 days, he has to be treated as a non-resident. In other words, the applicant is a non-resident whether we consider the financial year 1992-93 or the financial year 1993-94. The application is, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on behalf of the applicant that W. I. P. L. is still at the stage of setting up its factory and installing its plant and machinery relating to the production of confectioneries but the manufacture and sale of confectioneries has not yet started. The question which arises is whether, having regard to the fact that W. I. P. L. has not yet commenced its business, the benefit of the exemption under section 10(5B) can be granted to the applicant. It may be mentioned here that though section 10(5B) has been inserted only by the Finance Act, 1993, with effect from April 1, 1994, this category of exemption had been in the tax statutes all along. In the Indian Income- tax Act, 1922, the exemption was provided by section 4(3)(xiva) inserted with effect from April 1, 1955, and it has been continued in the 1961 Act in sections 10(6)(vi), (vii), (viia)(I) and (viia)(II). Though the provision has undergone several modifications as to the definition of technician as well as the quantum and period for which the exemption was available, the basic requirement that the technician must have been employed in a business carried on in India has been there right from the beginning. It is necessary, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the business would be vital. The exemption is granted by way of a tax concession to foreign technicians to encourage them to come to India and lend their expert knowledge and assistance to Indian industry for developing and modernising its plant and machinery. This is one aspect which has to be kept in mind. Secondly, the definition of technicians also includes a person who has specialised knowledge and experience in constructional or manufacturing operations. While, normally speaking, manufacturing operations are those which are carried out in the course of the carrying on of a business, constructional operation is a wider expression. Construction of a building, plant or other equipment may also, no doubt be undertaken in the course of the carrying on of a business and with a view to extend the same but constructional operations are mostly undertaken at a stage prior to the setting up of the business. The inclusion of this word in the definition of word technician lends support to the view that even persons who assist with their expert knowledge in the putting up of buildings and plants whether it be at the stage of setting up a business or later, would be eligible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technicians. The object is to promote industrial development in India and to facilitate the acquisition of foreign expertise, knowledge and assistance for the setting up of industries in India. With the increase in the frontiers of knowledge inside the country in these matters, the scope of the exemption has been gradually reduced over the years but the basic idea of granting a concession in respect of foreign technicians who help to set up or manage Indian industries by reason of their specialised knowledge and experience has continued throughout. It is, therefore, necessary that a liberal interpretation should be given regarding the scope of this exemption and it should not be denied to a person who is really a foreign technician unless there is a clear indication in the Act that it should be not available in any particular situation. If the provisions of section 10(5B) are looked at from the above points of view, it will be appreciated that the emphasis in the words business carried on in India is not on the words carried on but on the words in India . What the Legislature intends to emphasise by the use of these words is not to restrict the stage at which the foreign t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned earlier, the exemption has been in existence for about 40 years now. At earlier stages, one of the conditions precedent for grant of the exemption was prior approval of the contract with the technician by the Government. No policy of denying such approval, or precedents where exemption has been denied to such technicians on the ground that their experience had been utilised at the stage of setting up a business has been brought to the notice of the Authority. The conditions on fulfilment of which the exemption is granted are set out earlier. It has been held that the applicant is a technician. The facts stated in the petition show that he has not been a resident in India in any of the four financial years preceding the financial year 1993-94. He has arrived in India after April 1, 1993, as required by the section. The applicant is, therefore, entitled to the exemption granted under section 10(5B), viz., that if any tax has been paid by his employer (W. I. P. L.) on the salaries paid to him for the services rendered by him as a foreign technician such tax would not be included in his total income for a period of forty-eight months from the date of his arrival in India. Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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