IN RE: P NO 26 OF 1997 Vs. STATE

JUDGEMENT

(1.) THE applicant is a company registered in the U.S.A. It has filed an application seeking exemption, under the provisions of Section 10(5B) of the Income -tax Act, 1961, concerning the extent of tax deductible at source from the salary of its employee, Mr. C, Initially two questions were raised regarding the technical qualifications of its employee as also the applicability of Section 10(513). These were later changed into a single question seeking a ruling on the issue whether the quantum of tax deductible at source can be without treating the tax borne by the applicant as a perquisite in the hands of its employee.

(2.) THE employee, Mr. C, had come to India on July 11, 1993, and his employment with the applicant -company commenced on December 17, 1995. According to learned counsel of the applicant, Mr. C had filed his returns of income for the assessment years 1994 -95 to 1996 -97. For the first two assessment years intimations had been received accepting the return of income under Section 143(1)(a). Till the date of hearing no intimation had been received in respect of the assessment year 1996 -97. It was clarified by the authorised representative of the applicant that the issue raised in the question before this Authority had not been pending in any income -tax proceedings and as such the application is admissible. The Commissioner of Income -tax, in his letter dated December 18, 1996, addressed to this Authority, agreed that Mr. C had been rendering services in a business carried on in India and that he qualifies as a technician in terms of the Explanation to Section 10(5B). Further, relying on the Notification No. S. O. 569(E), dated July 27, 1993 (see [1993] 203 ITR (St.) 56), the Commissioner recommended that since Mr. C works in the specified technical fields the applicability of Section 10(5B) in this case cannot be disputed. However, later the same Commissioner of Income -tax, in his letter dated February 11, 1997, changed his recommendation on the ground that the applicant is not competent to make an application before this Authority in respect of its employee, He pointed out that since he has not been able to locate the returns of income filed by Mr. C for the assessment years 1994 -95 and 1995 -96 he cannot offer any comments. The Commissioner submitted : "In view of full records not being available, the case hits been recommended for grant of ruling in favour of the applicant. If Mr. C has really filed returns for the assessment years 1994 -95 and 1995 -96, he may not be eligible to seek any advance ruling under Chapter XIX -B. In view of the above, the earlier report, recommending grant of a ruling in favour of the applicant may kindly be treated as withdrawn."

(3.) ON the other hand, learned counsel for the applicant furnished year -wise details of the income -tax returns filed by Mr. C as also the taxes paid for each year. He also clarified that all the conditions required under Section 10(5B) are satisfied in the present case and the applicant has come before the Authority for seeking relief as in any case the additional tax liability attributable to its share of the taxes paid by Mr. C, shall have to be borne by the employer. He further pointed out that Mr. C, who has been working as the Chief Executive Officer for the Indian company, has been a regular technician in its international cadre. He has been seconded to the Indian branch of the applicant -company to start the constructional and manufacturing operations. In fact, Mr. C had been one of the two technicians deputed by the applicant for its set up in India. Learned counsel for the applicant also spelt out the responsibilities and duties assigned to Mr. C in India. These included identification of sites, preparation of drawings, supervision of the contracts, procurement of equipment and other installations and manufacturing activities. The resume of Mr. C's technical qualifications, his work background, and the expertise in specialised fields were also submitted.