DAVID KENNETH WHITE Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE applicant, David Kenneth White, is a British national. He is at present employed with Modicom Network (P.) Ltd. (MNP) which is a joint venture between DistaCom Communications Ltd. (DCL), Motorola Inc. and the B.K. Modi Group of Industries Ltd. in India. DCL is a Hong Kong based company, active in telecommunications joint ventures throughout Asia. Its activities are focussed in Japan, Greater China, India and South East Asia. It has been at the leading edge of telecommunications for more than two decades, introducing paging products and services and cellular services in Canada and Hong Kong. In the middle of 1995, DCL, through a consortium which included the B.K. Modi and Motorola Groups, got incorporated in India a project company MNP, under the Companies Act, 1956 with DCL holding 39 per sent shareholding therein. MNP bid for tenders issued by the Government of India for the grant of cellular licences and succeeded in obtaining two Groupe Speciale Mobile (GSM) cellular licences, one each for the States of Karnataka and Punjab. Highly sophisticated 'telecommunications network being new to India, persons experienced in planning, designing, setting up and operating such networks had to be borrowed by MNP from DCL and one of the persons whose services were obtained by MNP is the applicant, David Kenneth White.

(2.) UNDER an employment agreement dated 25 -9 -1996, MNP appointed David Kenneth White to its Chandigarh Office with a liability to be transferred to any place in India. His salary and performance bonus were fixed at Rs. 57,60,000 per annum and Rs. 18,36,000 per annum, respectively, payable every month and the applicant was also entitled to certain other perquisites under the agreement. The agreement, however, provides as follows: Now it is hereby agreed as follows - - General ****** Taxation 13. Subject to the Executive being granted a 'technician status', under section 10(5B) of the Income -tax Act, 1961, he shall be compensated on a net -of -tax basis, i.e., the company will bear his income -tax liability arising out of this Agreement. It will be the Executive's responsibility to meet all requirements under Indian tax laws, including tax compliance and the filing of tax returns. The company has retained Arthur Andersen & Company for the Executive's assistance. Any penalty and/or interest due, which is caused by the Executive's failure to provide Arthur Andersen & Co. with relevant information or failure to sign the tax returns will be the Executive's responsibility.

(3.) THE applicant's employment with MNP commenced on 16 -7 -1996 and is stated to be for a period of 24 months. It appears that the applicant had earlier been in India only for the periods between 31 -5 -1995 and 19 -2 -1996, amounting in all to 85 days. However, the applicant has not been resident in India within the meaning of section 6 of the Income -tax Act, 1961 ('the Act') either in the financial year 1995 -96 or earlier financial years. He is, therefore, entitled to maintain the present application, though he has become a resident in the financial year 1996 -97, for the reasons explained by this authority in the case of Monte Harris v. CIT : [1996] 218 ITR 413.