TMI Blog1986 (8) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... er 29, 1972, were approved under section 10(6)(vii) would not entitle the assessee to claim exemption of his income from being taxed inasmuch as the assessee had come to India in an earlier year, namely, 1971, and was resident in India in one of the four financial years immediately preceding the financial year involved. As such, it was held that the assessee did not qualify for exemption from income-tax in the assessment year involved. The salary of the assessee was, accordingly, assessed to income-tax and inasmuch as the Board had agreed to bear the tax payable by the assessee, the amount of tax to be paid by the Board was treated as perquisite in the hands of the assessee and was grossed up. The total income was determined at Rs. 11,33,500. Being aggrieved, the assessee through the Board preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that inasmuch the assessee had been a resident in India in one of the four financial years immediately preceding the financial year in question, he was not entitled to claim exemption from income-tax. It was contended before the Appellate Assistant Commissioner further that the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not being an employee of the Board, the Income-tax Officer and the Appellate Assistant Commissioner were wrong in grossing up the salary of the assessee on tax basis and were also wrong in treating the amount of tax as a perquisite under section 17 of the Income-tax Act, 1961. Contentions to the contrary were made on behalf of the Revenue. A letter dated April 19, 1973, from the Government of India to the Board was placed before the Tribunal to show that the services of the assessee as a technician to the Board had been approved and on that basis, tax exemption had been granted to the assessee, An earlier decision of the Tribunal in the case of N. Sciandra where the facts were more or less similar to those in the instant case was cited. The Tribunal considered the agreement between the Board and Fuji Electric Co. Ltd. of Japan as recorded in the letter of confirmation dated June 9, 1972, and found that the technicians who were deputed by the Japanese company referred to in the agreement as the seller, were referred to in the agreements as the seller's engineers. The agreement further recorded that the buyer, namely, the Board, had to pay supervision charges for the engineers at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as income from other sources. On an application of the Revenue under section 256(1) of the Income-tax Act, 1961, the following question has been referred, as a question of law arising out of the order of the Tribunal, for the opinion of this court: " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee remained an employee of M/s. Fuji Electric Co. Ltd. and did not become an employee of West Bengal State Electricity Board during the previous year relevant to the assessment year 1973-74 ? " At the hearing before us, the learned advocate for the Revenue contended that the assessee should be held to be an employee of the Board. He reiterated the contentions of the Revenue before the Appellate Assistant Commissioner and relied on the findings of the Appellate Assistant Commissioner. Learned advocate for the Revenue submitted further that if the assessee was not an employee of the Board, he could not have applied to the Government of India for tax exemption under section 10 of the Income-tax Act, 1961. Such application was made on the basis that he was an employee under a local authority, namely, the West Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes after grossing up. Tax on the said grossed up salary was demanded and paid. Revision petitions filed before the Commissioner were dismissed and the computation of the Income-tax Officer was upheld. On a writ petition filed before the Delhi High Court, it was held that the computation of the Income-tax Officer was wrong. On an interpretation of the agreement it was held that it had to be determined what was the taxable salary of the assessee if the same was not tax free. On this amount so determined, tax had to be calculated and only this amount of tax the company, as the employer, had to pay. Any additional tax levied as result of the addition of the tax payable by the company had to be paid by the assessee as there was no agreement that the company would pay a tax on tax. It was directed that after adjusting the tax payable on the full amount of the salary of the assessee, the additional amounts paid by the company should be refundable. Learned advocate for the assessee contended on the other hand that the question referred was not concerned with either the grossing up of the salary or the payment or the computation of income-tax. He submitted that the only question to be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionship of employer and employee had not been established between the Corporation and the assessee. In the instant case it is not the case of the Revenue that the agreement between the Board and the Japanese company is something different from what has been recorded in the confirmation letter. The terms and conditions recorded in the said confirmation letter, considered earlier, indicate prima facie that the assessee was not an employee of the Board but was an employee of the Japanese company. The Board no doubt issued certificate to the assessee, but the same certifies only the amount paid in rupees to the assessee. The certificate does not mention that the same has been paid by way of salary to the assessee or that the assessee was an employee of the Board. The application of the assessee for tax exemption under section 10 of the Income-tax Act, 1961, was not produced in any of the proceedings earlier, nor is it a part of the record before us. It is not possible to infer that merely because the assessee had made such an application, the assessee must have declared himself to be an employee of the Board or that a contractual relationship of employer and employee arose on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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