TMI Blog1988 (2) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... activities. It appears that in the year 1981 the Indian Company thought of starting its Nylon-6 Project. For the start up service and for technical supervision and consultation for the said project the Indian Company stood in need of the services of certain foreign technicians. The Indian Company, therefore, entered into an agreement with a Swiss Company known as 'Inventa' (henceforth referred to as the " Foreign Company ") which agreed to lend the services of five of its technical employees to the Indian Company. The terms and conditions as agreed to between the Indian Company and the Foreign Company are not placed before us but from the service contract entered into by the Foreign Company with its employees, whose services were to be deputed to the Indian Company, stated that the deputation shall be in force for a maximum period of six months and that during the period of the stay in India of the employees of the Foreign Company the retention remuneration would be payable to them outside India by the Foreign Company. For their stay in India with the Indian Company, the deputationists were told that they would receive a certain amount, say Rs. 200 per day, as a reimbursement to me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain reiterated that the living allowance was not taxable in view of the said decision of the Gujarat High Court. In another statement accompanying the income-tax returns, they further reiterated the said position and in note No. 3, given in the said statement, it was mentioned that the foreign technicians were entitled for exemption u/s 10(6)(vii)(a) of the Act for which necessary application had already been made by the Indian Company to the Government of India vide Letter No. F A/PM/LS/NYC/904/81 dated June 6, 1981. 6. It appears that the ITO had taken up the assessment of the foreign technicians in January or February 1985. Such proceedings further appear to have been attended to by the Indian Company as is evident from its letters dated 19th March, 1985 and 25th March, 1985. Now what happened was like this that taking clue from the mention of the fact in the statements attached to the returns that the Indian Company had applied for exemption u/s 10(6)(vii)(a) of the Act in respect of the assessees, the ITO issued a notice u/s 163(2) of the Act to the Indian Company intimating that he proposed to treat it as an Agent of the five non-resident assessees, who had rendered serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability against the nonresident foreign assessees, the same was to be reimbursed by the assessee-company and, therefore, the Department was not to remain at a loss. It was on the above three grounds that the proposed action of the ITO u/s 163 of the Act was opposed by the Indian Company. The ITO, however, did not feel satisfied with the main contention of the Indian Company that there was no necessity of appointing it as agent of the five foreign technicians who had rendered service for it and had earned income from the Indian Company. He accordingly passed his order u/s 163(3) of the Act on 16th March, 1985. 7. In appeal to the CIT (A), Baroda, the Indian Company again appears to have reiterated the same points as had been agitated by it in its written reply to the notice issued u/s 163(2) of the Act. The learned CIT (A), however, did not agree with its submission that the Indian Company was not required to be appointed as statutory agent of the foreign technicians. He, therefore, dismissed the appeals giving rise to the present appeals before us. 8. Before us, Mr. B. C. Shah, Chartered Accountant, appearing for the appellant, the Indian Company, has raised two-fold argumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e merit of the order itself. 12. Mr. Shah further urged that the ITO had erred in passing a common order in respect of all the foreign technicians and that he should have passed separate orders in respect of each of the foreign technicians for each assessment year. In this behalf Mr. Shah relied upon the decision of the Supreme Court in the case of H. L. Sud, ITO v. Tata Engg. Locomotive Co. Ltd. [1969] 71 ITR 457. 13. We find no force in this argument also. The requirement of section 163(2) is that no order appointing any Indian person as an agent for a non-resident assessee should be passed without giving him an opportunity of being heard. This requirement was satisfied as soon as the ITO had issued notice u/s 163(2) of the Act to the appellant. Now, since the facts relating to the case of the foreign technicians were quite similar and such foreign technicians had, admittedly, rendered services to the appellant, the learned ITO could have disposed of the matter of appointment of the appellant as agent for all those foreign technicians for the assessment year 1982-83 by a common order. The ratio of the decision of the Supreme Court in the case of Tata Engg. Locomotive Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned D.R., further submitted that living allowance very well fell within the purview of the definition of 'salary' for the purposes of section 10(14) as it stood amended on the relevant date and for that the foreign technicians could be assessed through their agents, i.e., the appellant. He further submitted that the ITO had invoked his jurisdiction u/s 163 and for the purpose of disposal of the present appeals it is in fact the scope of section 163(1)(c) which is required to be taken into consideration. He summed up that the decision of the Supreme Court in the case of Raghava Reddi has rightly been relied upon by the ITO and that the Calcutta decision as cited by the learned representative for the appellant was not at all applicable to the facts and circumstances of the cases under consideration. 16. In the present cases, we are required to consider the scope of section 163. It needs no stress that a person may be appointed the agent of non-resident u/s 163 either before the commencement of the relevant assessment year or during the course of such proceedings against the assessee. The necessity of appointing the agent of a non-resident before the commencement of the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (3) of sec. 17 of the Act. Then, the term "total income" has been defined in section 2(45) as meaning the total amount of income referred to in section 5 and computed in the manner laid down in the Act. Sec. 5 deals with the scope of 'total income' and, inter alia, says that subject to the provisions of the Act the total income of any previous year of a person, who is a resident, includes all income from whatever source derived which (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year ; or (c) accrues or arises to him outside India during such year. This necessarily takes us to section 9(1), which is relevant for our purpose. 18. Section 9(1)(ii), with its Explanation reads as under :-- " 9. (1) The following incomes shall be deemed to accrue or arise in India--- (i) (ii) income which falls under the head " Salaries " if it is earned in India : (Explanation : For the removal of doubts, it is hereby declared that income of the nature referred to in this clause payable for service rendered in India shall be regarded as income earned in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 'income' as contemplated by the Act. 20. In S.G. Pgnatale's case the Indian Company and the foreign company had entered into an agreement for provision of services by foreign company. The employees of the foreign company had rendered services in India and their salaries were payable by the foreign company outside India. It was on those facts that it was held that the salaries earned by the foreign employees were not assessable as salary earned in India. It was further held that a living allowance graded according to place of employment and other factors was not a perquisite and as such, not assessable. The question whether the living allowance earned by the foreign technicians in the present case was assessable income or not is a question to be considered in the assessment proceedings and is not to be answered in the present appeals which had arisen from an order u/s 163. What is necessary for the application of section 163 is simply this that a foreign national had earned income in India which is being sought to be assessed upon him by appointing a person in India as his agent. We had discussed above that the payment made to the foreign technicians could be said to be in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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