COMMISSIONER OF INCOME TAX Vs. HILLER E

JUDGEMENT

(1.) THE question in this reference is whether the income tax paid by the assessee's employer on behalf of the assessee is liable to be included in the taxable income of the assessee and the controversy centers round the proper interpretation of S. 10(6)(vii)(a)(ii) of the IT Act, 1961, which grants some concession in respect of income tax to foreign technicians taking up employment in India, who fulfil certain conditions.

(2.) ASSESSEE , Shri E. Hiller, is a foreign technician, who first came to India in November, 1957, as an employee of Hochtief Gammon (hereinafter referred to as "M/s H. G."). By their letter dated March 4, 1958, the Government of India in the Ministry of Commerce and Industry approved the assessee's appointment with M/s H. G. for a period of three years, i.e., the financial year in which he came to India and the two following years. That period expired in November, 1960, but the assessee continued in service with M/s H. G. for another year. With effect from October 17, 1961, he became an employee of Hochtief Modern (hereinafter referred to as "M/s H. M."), a sister concern of M/s H. G., and this arrangement was also approved by the Central Government by its letter dated 6th March, 1962. Two letters dated March 4, 1958, and March 6, 1962, from the Ministry of Commerce and Industry, under which the assessee's appointment with M/s H. G. and M/s H. M. respectively was approved, have been collectively set out as annexure "A" to the statement of the case.

(3.) IN the material assessments the taxes paid by M/s H. M. to the Government on behalf of the assessee were included in the total income of the assessee under the head " Salary" and were assessed. These assessments were confirmed by the AAC. The ITO as well as the AAC took the view that since the assessee's employer had changed, the assessee would not be entitled to the concession of excluding from the total income taxes paid by the employer. The assessee carried the matter in second appeal to the Tribunal and a two fold contention was raised before the Tribunal on behalf of the assessee. In the first place, it was contended that the assessee was continuously under the same employer ever since his arrival in this country. Alternatively, it was contended that even if there was change in the employer, the concession contained in the latter part of S. 10(6)(vii)(a)(ii) would be available. On behalf of the Department it was pointed out that the assessee could not be said to have served the same employer and strong reliance was placed upon the letter dated March 6, 1962, from the Government of India, which specifically stated that the approval would not in any way entitle the assessee to the benefit of exemption from the payment of income tax. The Tribunal did not accept the assessee's contention that the assessee was continuously under the same employer but it took the view that the concession provided for in the latter part of S. 10(6)(vii)(a)(ii), namely, enjoying a tax free salary without the liability to have the salary received grossed up to include the tax paid by the employer, was available to the assessee for a period of 24 months after the initial period of 36 months in which complete exemption from tax was enjoyed. Limiting the concession to a period of 24 months, the Tribunal allowed the assessee's contention fully for 1962 63 and for 1963 64 assessment the Tribunal held that the tax paid by the employer up to November, 1962, should be excluded from the assessment. At the instance of the CIT the following question has been referred to us for our determination by the Tribunal: