S.L.Saraf, J. - (1.) THE petitioner is a technician and was working with Kraft Work Union (Siemens), Germany, and drawing his salary of DM 3,882 per month in Germany. THE said salary was received by him in Germany from his employer. Bharat Heavy Electricals Limited (BHEL) sought the services of a technical liasion officer to provide technical guidance for 4/500 M. W. nuclear turbines and for the manufacture of turbines of higher rating in India from Siemens, Germany. For getting the services of foreign technicians, a reference was made by BHEL to the Government of India, Ministry of Industries, vide letter dated May 25, 1,989. THE Ministry of Industries, Government of India, informed the Bharat Heavy Electricals Limited about the approval of the Government for engaging the services of the petitioner, an employee of the aforesaid Siemens Company at Germany, for a period of 1.5 years in India on terms of payment of daily allowance of Rs. 500 per day in India. On the basis of the said approval, the petitioner came to India for rendering services to BIIEL on deputation. THE petitioner during the assessment years 1990-91 and 1991-92, received a sum of Rs. 1,11,264 only as daily allowances and did not receive any other sum. However, under mistaken advice, the petitioner filed a return showing the income from salary received by the petitioner at Germany from Siemens. In the said return, the petitioner claimed exemption of daily allowance to the extent of Rs. 1,11,264 and deposited a sum of Rs. 2,51,240 on account of income-tax under Section 10(14)(i) of the Income-tax Act, 1961 (hereinafter referred to as "the Act").
(2.) THE Assistant Commissioner of Income-tax also wrongly assessed the income of the petitioner as shown in the return and adjusted the amount of income-tax paid by BHEL to the extent of Rs. 2,51,240. After the assessment was completed and the mistake was realised, the petitioner filed a revision application before the Commissioner of Income-tax under Section 264 of the Act. Before the Commissioner it was contended that the salary was not received in India but had been received from Siemens in Germany and, inasmuch as, the petitioner was an employee of Siemens, Germany, he was not liable to pay any tax in India. It was contended that no income towards salary was received by the petitioner from BHEL in India but only an amount of Rs. 1,11,264 was received as daily allowance, which was not taxable under Section 10(14)(i) of the Act. It was contended that the amount of tax paid by BHEL was also not liable to be paid inasmuch as, there was no relation of employer and employee between BHEL and the petitioner. As such, BHEL could not have paid Rs. 2,51,240 towards tax on behalf of the petitioner. THE petitioner prayed that the assessment orders passed on November 27, 1992, for the assessment years 1990-91 and 1991-92 and the order passed by the Commissioner of Income-tax on February 18, 1994, for the said assessment years be set aside and cancelled. It has further been prayed that the amount of tax deposited for the assessment years 1990-91 and 1991-92 be refunded. I have heard learned counsel for the parties. It appears that without appreciating the provisions contained in the proviso to Section 5(1)(c) read with Sub-sections (1) and (6) of Section 6 of the Act, the Commissioner held that the petitioner's salary received in Germany was taxable. Admittedly, the petitioner had stayed in India for 266 days during the assessment year 1990-91 and 360 days in the assessment year 1991-92.
(3.) MR. Rajesh Kumar, arguing on behalf of the petitioner, submitted that though the petitioner was a resident in India for the purposes of Section 6(1) of the Act, inasmuch as, he had stayed in India for more than 182 days, he was not "ordinarily resident" in India in the previous year in view of Section 6(6) of the Act. According to him, the proviso to Section 5(l)(c) makes it abundantly clear that if a person is "not ordinarily resident" in India and his income arises outside India, such an income cannot-be included for the purposes of making assessment in India. To appreciate the arguments of MR. Agarwal, I set out the relevant provisions which read as follows : "5. (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which-- ... (c) accrues or arises to him outside India during such year : Provided that, in the case of a person not ordinarily resident in India within the meaning of Sub-section (6) of Section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India. For the purposes of this Act- (1) an individual is said to be resident in India in any previous year, if he- (a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more ; or ... (6) A person is said to be 'not ordinarily resident' in India in any previous year if such person is- (a) an individual who has not been resident in India in nine out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been' in India for a period of, to or periods amounting in all to, seven hundred and thirty days or more ; or . . . Considering the aforesaid provisions of law, I find that a person is "not ordinarily resident" in India if in nine out of the ten preceding years he had stayed outside India. Admittedly, it is nobody's case that the petitioner had stayed in India during the preceding nine years. In that view of the matter, I have no doubt in my mind that the petitioner is "not ordinarily resident" in India and will be governed by the proviso to Section 5(1)(c) of the Act. The aforesaid proviso makes it abundantly clear that the income of a person not ordinarily resident India within the meaning of Section 6(6) of the Act, being accrued outside India, shall not be taxed and would not come within the scope of the total income within the charging Section 4 of the Income-tax Act. In that view of the matter, I hold that the petitioner's salary received by him in Germany was not taxable in India and the same could not be included in the total income to be assessed in India. Secondly, the petitioner has urged that daily allowance received by the petitioner to the tune of Rs. 1,11,264 was not taxable in the hands of the petitioner under Section 10(14) of the Act. Sub-Clauses (i) and (ii) of Clause (14) of Section 10 of the Act read as follows : "In computing the total income of a previous year of any person, any income falling within any of the following Clauses shall not be included-. . . (14) (i) any such special allowance or benefit, not being in the nature of a perquisite within the meaning of Clause (2) of Section 17, specifically granted to meet expenses wholly, necessarily, and exclusively incurred in the performance of the duties of an office or employment of profit, as may be prescribed, to the extent to which such expenses are actually incurred for that purpose ; (ii) any such allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides, or to compensate him for the increased cost of living, as may be prescribed and to the extent as may be prescribed : Provided that nothing in Sub-clause (ii) shall apply to any allowance in the nature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence." 6. According to the petitioner pursuant to the said provisions of the Act a notification was also issued by the Government of India being Notification No. S. 0. 145(E), dated February 21, 1989, which reads as under (see [1989] 176 ITR (St.) 132) : "In exercise of the powers conferred by Sub-clause (i) of Clause (14) of Section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby specifies the following special allowances, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, for the purposes of the said Sub-clause, namely :-- (a) any allowance (by whatever name called) granted to meet the cost of travel on tour or on transfer. Explanation.--For the purposes of this Clause, 'allowance granted to meet the cost of travel on transfer' includes any sum paid in connection with transfer, packing and transportation of personal effects on such transfer ; (b) any allowance, whether granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty." ;