TMI Blog1991 (7) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... cognised by the FACT. As per clause 3.19 of the agreement, SII shall make available at the plant site competent technicians and manufactures' specialist erectors for supervision of site fabrication and erection and commissioning of such major equipment/machinery as may be mutually agreed upon. Consistent with this clause, the assessees were deputed by SII to do the work. By clause 4.2, the FACT has to pay SII at the rates given in exhibit 2 attached thereto for each day of absence of the assessees from their usual place of work in Italy for getting themselves engaged in the work the company had undertaken in connection with the installation of the ammonia plant for the FACT. As regards the liability for tax, it is provided thus in clause 5.1 of the agreement: "It is understood that all prices and fees mentioned in article 4 and subsequent prices and fees mutually agreed upon are and shall be free of any taxes and/or levies of any kind, that may be levied by any Indian authority in respect of ANSALDO's activity and/or profits arising or accruing in or out of India as a result of the performance of ANSALDO's supplies and services under the CONTRACT, including any such taxes and/o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistant Commissioner held that 30 per cent. of the direct payments during the year 1971-72 would be taxable in India. He also held that the assessee was entitled to the benefit of section 10(6)(vii). None the less, for the assessment year 1972-73, the Appellate Assistant Commissioner, a different Officer, confirmed the findings of the Income-tax Officer. Against these orders, both the assessees and the Department filed appeals before the Appellate Tribunal. The Appellate Tribunal, after considering the case of both the assessees and the Department in extenso, entered, inter alia, the following findings: (a) There is no employer-employee relationship between FACT and the assessees. (b) The assessees being third parties to the collaboration agreement, cannot enforce their right against FACT and as such they can only look up to SII for any action following a breach of their contract of employment. (c) The salary payable in Italy and in India as well as the perquisite of it getting tax-free in India is the salary income of the assessees. (d) The tax on the salary income of the assessees paid by FACT as per the terms of the collaboration agreement is a perquisite within the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ival in India in order to be eligible for exemption under section 10(6)(vii)(a)(ii)? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the method of grossing up adopted by the Income-tax Officer was the correct method? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the grossing up should include the amounts receivable in Italy? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in the finding that the income is assessable under section 17 as salary income?" From the facts found by the Tribunal, discernible from the discussion above, it is clear that the assessees are not the employees of FACT ; on the other hand, they continue to be the employees of SII. These findings of fact which remain unchallenged shall be kept in view while one searches for the answer to the questions posed in the case. We shall now deal with the question referred to us at the instance of the Department. For the answer to be in the affirmative, the assessees shall establish the ingredients enumerated in section 10(6)(vii). We shall now re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (6)(vii)). His contract of service should be approved by the Central Government before the commencement of his services or within one year of such commencement. Such foreign technicians will be entitled to the benefit of tax exemption not only during the initial period of thirty-six months but also for the next twenty four months provided their special knowledge and experience is continuously available in India during the said periods. The words "continues to remain in employment in India" in the latter part of the sub-section would make it clear that a foreign technician is entitled to complete exemption even if, within the initial period of thirty-six months, he were to change his employer more than once, however, provided his contracts of employment with such employers during that period have been approved by the Central Government before the commencement of his service with each successive employer. The position would have been different had these expressions been "continues to remain in the same employment in India". This construction, in our view, would achieve the object sought to be achieved by this enactment, namely, to attract and make available to the industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an employer and an employee. It all depends upon the contract under which the individual who receives the remuneration is employed. If it is established that the individual is employed under a contract of service it can be held that there exists the relationship of an employer and an employee. On the other hand, if the individual is engaged to do the work pursuant to a contract for employment, it cannot be said that the payment received by such an individual is a perquisite within the meaning of section 17. Applying this principle to the case on hand, it can be observed without fear of contradiction that the tax due by the assessees but paid by FACT, though forms part of the remuneration received by the assessees, cannot be charged under the head "Salaries" within the meaning of section 15. It is profitable in this connection to recall the findings discernible from the order of the Tribunal which has become final as the same stands unchallenged, that the assessees are not the employees of FACT but continue to be the employees of SII. May be that, the same can be charged to tax under section 14F read with section 56, "income from other sources". We, therefore, are of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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