COMMISSIONER OF INCOME TAX Vs. SAKAKIBARA YUTAKA

JUDGEMENT

(1.) We have considered the record filed by Counsel for the parties. On 21.02.2007, this Court framed following questions of law: -

(2.) The assessee individual was a permanent resident of Japan and during the year the tenure and consideration, he was employed by M/s. Suzuki Motors Corporation (Japan). By virtue of a collaboration agreement between M/s. Suzuki Motors, Japan and M/s. Maruti Udhyog Ltd. , India the assessee was deputed to India to offer guidance and technical assistance in accordance with the terms and conditions of that agreement. The salary was paid by M/s. Suzuki Motors Corporation (Japan) to the employee during this period in India and the amount was Rs. 5,86,847/-. The assessee was in addition provided accommodation in Samrat Hotel. His rent for that period was borne on to the extent of Rs. 1,80,660/-. The Assessing Officer prposed to assess the rent paid by M/s. Maruti Udhyog Ltd. at the hands of the assessee as a perquisite. Since no perquisite value was and shown by him in his return, the assessee was asked to offer his explanation. When the assessee responded stating that the M/s. Maruti Udhyog Ltd. by virtue of its agreement with M/s. Maruti Udhyog Ltd. was obliged to provide him accommodation and there was no employer and employee relationship between the assessee and M/s. Maruti Udhyog Ltd. The respondent Sakakibara Yutaka also stated that in any case the rent paid was exempt by virtue of Section 10 (14). The Assessing Officer, however, rejected the assessee's contention and held that tax was payable on the said rental amounts. He also took into consideration the daily allowance and other monetary benefits given to the assessee by Suzuki holding that in terms of Article 15 of Double Taxation Avoidance Treaty between India and Japan, the assessee was liable to tax in respect of the salary received by him in Japan for his exployment with Suzuki Motors Corporation. The assessee's appeal was partly accepted by the Commissioner of Income Tax (Appeals). As a result both the assessee and the Revenue preferred the appeals to the ITAT. The ITAT rejected the Revenue's appeal and allowed the assessee's appeal pertaining to inclusion of amount paid as daily allowance and also the rented accommodation. The reasoning adopted by the ITAT was that in terms of Section 5(1)(c) read with Section 6(6) of the Income Tax Act, 1961 the assessee was a person "not ordinarily resident" in India and that the salary earned in Japan for employment under Suzuki Motors Corporattion cannot be assessed in his hands in the assessment made in India. The Tribunal also rejected the contention of the revenue based on Article 15 on the ground that on a proper interpretation of Section 90(2) of the Act, there was no question of giving primacy to double taxation treaty. The Tribunal reasoned that since the assessee did not fall within the purview of Income Tax Act, 1961. There was therefore no question of bringing any amount paid to him by his foreign employer to taxation. The Tribunal's reasoning is to be found in the following extracts of its order: -

(3.) This Court also notices that the view adopted by the Tribunal is in tune with the decision of the Allahabad High Court in Morgenstern Werner v. CIT and Anr., 1998 233 ITR 751, which was approved by the Supreme Court in its decision reported as CIT v. Morgenstern Werner, 2003 259 ITR 486. In this view of the matter and having regard to the, undisputed facts and the fact that the status of the assessee was that of "not ordinarily resident" in India, having worked in India for 273 days in the relevant previous year and not being "resident" in India in any of the nine out of ten previous years, the order of the Tribunal impugned by the Revenue is unexceptionable. The appeal is to, therefore, fail. The substantial questions of law framed in this appeal are answered in favour of the assessee and against the Revenue. The appeal is, therefore, dismissed.