BUJNIEWICX ZENON Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) One Zdzizlaw Skakuz, a Polish national was assessed in the status of an Indian resident for the assessment years 1970-71, 1971-72, 1972 73 and 1973-74. The assessee was an employee of a Polish firm called Z.P.M. & H.Cegielski, Poznan (Poland). Under two contract of agreements dated 17/12/1965, and 20/11/1970, entered into by the Hindustan Shipyard Ltd., Visakhapatnam, with the above mentioned Polish firm, the assessee was deputed to India to supervise the work of installation and erection of machinery in the new ships of M/s. Hindustan Shipyard Ltd. Visakhapatnam. Under the terms of those contracts, the Hindustan Shipyard took the responsibility to pay income-tax which was due and payable by the assessee on the total income which he had earned during the period of his stay in India during the above-mentioned assessment years. Clause 17 of the agreement dated 20/11/1970, provides as under - "should the income-tax authorities levy any income-tax on such personnel stationed in India, such income-tax will be paid by the Hindustan Shipyard. The Hindustan Shipyard undertakes to take up and follow up themselves necessary formalities. But the technical personnel stationed in India will file necessary returns and supply necessary information, if required by the income-tax authorities". Clause 6 of the agreement dated 17/12/1965, is similarly worded as clause 17Of the agreement dated 20/11/1970.

(2.) Now, the assessee had received his salary from his Polish employer and his allowances were also paid by the Polish firm. The Income-tax Officer assessed the assessee for the assessment year 1970-7 1/04/1973, and for the assessment years 1971-72, 1972-73 and 1973-74 on April 19, 1973. In doing so, he treated the taxes which have been borne by the Hindustan Shipyard Limited, Visakhapatnam, under the aforementioned contracts with the Polish firm as the income of the assessee from other sources falling under section 56 of the Income-tax Act. But, subsequently, the Income-tax Officer felt that charging only the first stage of tax as tax perquisites under the head "Other sources", was incorrect and it should be grossed up. Accordingly, the officer amended the original assessment orders in the purported exercise of his jurisdiction under section 154 of the Income-tax Act, 1961 and brought to tax the perquisites after grossing them up.

(3.) Both the original orders of assessment made by the Income-tax Officer and the subsequent orders of rectification made by the Income-tax Officer were appealed against by the assessee to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner by his order dated 14/03/1974, directed that "the appeals relating to original assessment orders are to be modified by deleting the amounts exempt under section 10(14) of the Income-tax Act including the tax perquisite, as discussed above, and the appeals relating to orders under section 154 are anulled".