KUNTI VERMAN Vs. CENTRAL BOARD OF DIRECT TAXES

JUDGEMENT

(1.) . The petitioner is the wife of late Dr. Lal C. Verman, who had entered into an agreement with the General Electric Company (TEMPO), a company incorporated in New York, dated August 25, 1974, as modified subsequently by supplementary agreements dated November 4, 1977, and June 27, 1975. By that agreement Dr. Verman, who was the original petitioner, was retained by the company for the period commencing from August 25, 1974 to August 24, 1975. As per the terms of the agreement, Dr. Verman was required to perform his services at the rate of 138 dollars plus 17% per. day for each days work during the term of the agreement payable at the end of each month. He was to advice and act as a consultant to the company on problems relating to formulation of detailed plans and programmes for the development, staffing and equipment of the Korean Standard System. Petitioner's husband made an application to the Government of India for approval of the agreement under section 80-RRA of the Income Tax Act, 1961 (for short 'the Act'). This application was rejected by the Government of India by its letter dated February 28, 1976 for twin reasons, namely, (a) the relationship between the applicant and the foreign party was not that of an employer and an employee as the status of the former, under the contract was that of an independent contractor; and (b) "the concession under section 80-RRA was announced in the Lok Sabha on February 28, 1975, by introduction of the Finance Bill, 1975, while the retainership agreement was entered into on August 25, 1974", i.e., prior to coming into force of the said provision, and, therefore, the concession was not available to the petitioner. Feeling aggrieved by the rejection of his application, the petitioner's husband filed the present writ petition in which after his death his wife Smt. Kunti Verman has been substituted as the petitioner.

(2.) Learned counsel appearing for the petitioner submitted that the view taken by the Government of India is not in consonance with the decision of the Supreme Court rendered in Central Board of Direct Taxes and others v. Aditya V. Birla, (1988) 170 I.T.R. 137, whereby it affirmed the decisions of the Bombay High Court in Aditya V. Birla v. Central Board of Direct Taxes, (1986) 157 I.T.R. 47C. and in Central Board of Direct Taxes v. Aditya V. Biria, (1988) 170 I.T.R. 136. Learned counsel pointed out that section 80-RRA of the Act talks of payment of "remuneration" for rendering services outside India and while it uses the words "employer" and "remuneration" it does not use the words "employee" or "salary". He submitted that this goes on to show that the word "remuneration" cannot be restricted to mean "salary" alone.

(3.) The other argument of the learned counsel for the petitioner is that since section 80-RRA came into force from April 1, 1975, it was effective for the assessment year 1975-76, i.e., for the previous year ending on March 31, 1975, and was, therefore, applicable, Learned counsel for the respondents, however, contends otherwise and has argued that the reasons advanced by the Government of India for rejecting the application of the petitioner's husband are correct in law.