Sen, J. - (1.) The facts found and/or admitted in these proceedings are shortly as follows : The Fertilizer Corporation of India, a Government of India undertaking incorporated under the Companies Act, 1956 (hereinafter referred to as "the Corporation"), embarked on a project designated Durgapur Fertilizer Project, where it was decided to erect an ammonia plant in Durgapur, West Bengal. With that object the Corporation entered into agreements in writing with two Italian technical concerns, namely, Montecatini Edition S.P.A., Milano (Italy) and Ansaldo S.P.A., Genova (Italy) (hereinafter referred to as "Ansaldo"), inter alia, for obtaining technical know-how and guidance and for supply of various technical equipments, machinery and instruments as also services of technical personnel. In the agreement by and between the Corporation and Ansaldo dated the 31st August, 1966, it was, inter alia, stipulated as follows : "3.20.....Ansaldo would make available at the plant site competent technicians and manufacturers' specialist erectors for supervision of site fabrication and erection and commissioning of certain major equipment/ machinery. .....Ansaldo would tentatively make available the following personnel: Engineer 1 Technical Assistant 1 Foreman/Chief Erector 11 -------------------------------------------------------------------------------- 13 -------------------------------------------------------------------------------- 5.1. All prices and fees mentioned.....and fees mutually agreed upon would be free of any taxes and/or levies of any kind that might 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/or levies of the kind that might be levied on the income of the foreign personnel assigned to the project in India. Should any of the aforementioned taxes and/or levies be assessed upon Ansaldo or its foreign personnel by any Indian authority under any existing or future Indian laws or regulations, the total cost of all such levies would be paid by the Corporation. Provided, however, that such liability of the Corporation to pay taxes of the aforementioned foreign personnel would only arise if the requisite exemption for payment of income-tax asked for by Ansaldo but would not be granted by the Government of India under provisions of the Income-tax Act. The Corporation would render all possible assistance in the matter of obtaining such exemptions. However, all taxes, dues, customs duties and charges to be paid by Ansaldo in Italy as levied by the Italian Government authorities would be borne by Ansaldo. (Clause 1. Exhibit 2) (a) The Corporation would pay to Ansaldo the following rates for each day of absence from the usual place of work in Italy of the Ansaldo personnel engaged in the work : for a Chief Engineer 35,000 (thirty-five thousand) Italian lire plus 70 (seventy) rupees, for an engineer or equivalent 29,800 (twenty-nine thousand and eight hundred) Italian lire plus 70 (seventy) rupees. for a technical assistant 21,000 (twenty-one thousand) Italian lire plus 60 (sixty) rupees. for a foreman or chief erector 21,000 (twenty-one thousand) Italian lire plus 55 (fifty-five) rupees. The payment of the rupee portion shall commence from the date of arrival in India to and inclusive of the date of departure from India. (b) Provide at site free of charge furnished residential accommodation with air-conditioning; the scale of furnishing will be agreed upon mutually. (Clause 4. Exhibit 2) (c) The parties would determine, for each month, the estimated amounts, in Italian and in Indian currencies, due to Ansaldo under the above provision. The estimated monthly amounts so calculated would be paid to Ansaldo before the first day of each month as advance payments against the cost and expenses to be incurred by Ansaldo. Full settlement of the payments received and bills issued would be made within one month after the end of the work. Payments would be made in Italian lire in Geneva (Italy) for the Italian lire portion and in rupees, as Ansaldo will direct each time, in India for the rupees portion. (Clause 7. Exhibit 2) (d) The Corporation would render all possible assistance in obtaining the appropriate exemption from any Indian tax, which might be levied on Ansaldo's foreign personnel stationed at site in India in connection with the contract. In case such exemption for payment of tax asked for by Ansaldo would not be granted by the Government of India under the provisions of Income-tax Act, the taxes would be to the account o.f the Corporation. 2.6. For the services of the personnel referred to in 3.20 which would include both the personnel of Ansaldo and their sub-contractors and of any third party who would be entrusted by Ansaldo with performance of any of their obligations under the contract, the Corporation would comply with the above terms and conditions."
(2.) Pursuant to the aforesaid, Ansaldo deputed N. Sciandra, the assessee, an Italian technician, to work on the said project. The assessee reached India for the assignment on the 4th March, 1969. His engagement was approved by the Government of India under Section 10(6)(vii) of the I.T. Act, 1961, initially for a period of 15 months. Such approval was later extended by another 10 months.
(3.) In the assessment year 1971-72, the relevant previous year ending on 31st March, 1971, the assessee was assessed to income-tax. Two certificates, respectively, dated the 25th September and the 14th November, 1970, issued by the Corporation certifying that the assessee had been engaged by the Corporation in connection with the Durgapur Fertilizer Project and also certifying his remuneration were filed in the assessment proceedings. The certificate dated the 14th November, 1970, was, inter alia, as follows : "Certified that Mr. N. Sciandra, a foreign engineer from Italy, has been engaged by us in connection with the erection and supervision of Durgapur Fertilizer Project, since 5-3-69 to 12-12-70 (the probable date of his departure from India) is as under.....";