U.T. SHAH, J.M. ORDER only point involved in cross appeals is whether salary/living allowance received by assessee is exigible to tax. 2 . assessee is individual and is in permanent employment of M/s Snamrogetti, S.P.A. Milano, Italy (S.P.). assessment year is 1980-81 and relevant previous year is financial year ended on 31st March, 1980. 3 . In 1976, (19th Oct., 1976) S.P. had entered into agreements with Gujarat State Fertilizers Company Limited, Baroda, (GSFC) for construction of urea plant in Bharuch. Under said agreement S.P. was to provide its technical know-how and basic and detailed engineering data to GSFC to enable latter to construct and operate plant for production of urea in latter's new fertilizer project to be undertaken by new company, namely Gujarat Narmada Fertilizer Company Limited (GNFC), from Italy or elsewhere outside India, requisite machinery and other equipments for said urea plant for GNFC. In addition to know-how agreement and supply contract, S.P. had also entered into "Services Agreement" with GSFC in 1976 under which S.P. undertook obligation to provide to GSFC for specified consideration payable to S.P. in U.S. Dollar. S.P.'s expatriate technician having specialised knowledge in construction, erection and operation of urea plant and process of manufacture of urea and related functions or operations, for rendering advisory and technical services in matter, to GSFC. said services agreement specifically provided (Article-4) that personnel to be provided by S.P. to GSFC shall only be those eligible for income-tax exemption under (Indian) IT Act, 1961. Thereafter, on formation of GSFC, tripartite agreement was executed between S.P., GSFC and GNFC on 21st Feb., 1978 under which terms and conditions of various agreements entered into between S.P. and GSFC were accepted by GNFC. 4 . During relevant previous year, assessee was paid living allowances in India amounting to Rs. 48,720 and salary of Rs. 1,30,693 abroad by his employer, namely, S.P. It may be mentioned that in assessment order, ITO has wrongly stated figures of Rs. 48,865 and Rs. 1,32,000 respectively. 5. In course of assessment proceedings, assessee took up stand that as salary was paid to him abroad, it was not earned in India within meaning of s. 9(1)(ii) of Act, and hence, same was not eligible to tax. He also took up stand that since living allowances was given to him as reimbursement rather than personal advantage, same should not be treated as perquisite within meaning of s. 17 of Act, and brought to tax. assessee also claimed exemption, in respect of living allowances under s. 10 (14) of Act. In other words, assessee took up stand that income either in form of salary paid abroad or living allowance reimbursed in India, was not exigible to tax. assessee further took up stand that even assuming for sake of argument that salary living allowances was exigible to tax same would be exempt under s. 10(6)(viia) of Act. 6. In assessment framed under s. 144(3)/144B of Act, ITO did not accept assessee's stand that salary of Rs. 1,30,693 was not exigible to tax, as according to him, after decision of Hon'ble Gujarat High Court in case of CIT vs. S.C. Pgnatale (1980) CTR (Guj) 337 : (1980) 124 ITR 391 (Guj) Explanation was inserted in s. 9(1)(ii) retrospectively from 1st April, 1979, by Finance Act, 1983, to effect that "income of nature referred to in this clause payable for service rendered in India shall be regarded as income earned in India. ITO also held that living allowances received by assessee were perquisite within meaning of s. 17 of Act and were not exempt from taxation under s. 10(14) of Act, as claimed by assessee. ITO further held that tax payable on income in India would become perquisite as GNFC was liable to pay such taxes. In this view of matter, he grossed up total income to Rs. 5,15,303 on net income form salary and perquisite of Rs. 1,98,085 received by assessee. ITO did not accept assessee's claim for exemption under s. 10(6)(viia) of Act, on ground that assessee was employee of S.P. which is not carrying on business in India. 7. Being aggrieved by order of ITO, assessee went up in appeal before Commissioner (A) and once again pressed all contentions which were put forward before ITO. assessee had also filed written submissions before Commissioner (A), elaborating his case. 8 . Commissioner (A), however, upheld action of ITO holding that after amendment made in s. 9(1)(ii), assessee would not get any benefit of aforesaid decision of Hon'ble Gujarat High Court in respect of salary. As regards living allowances received by assessee, Commissioner (A) was of view that said decision of Hon'ble Gujarat High Court would support his stand. As regards assessee's claim for exemption under s. 10(6)(viiia) of Act, Commissioner (A) simply observed that : "On careful consideration of submissions, I feel that interpretation is not at all correct and is required to be rejected." 9 . Having been not satisfied with order of Commissioner (A), assessee has come up in appeal with grievance that even after insertion of Explanation in s. 9(1)(ii) of Act, ratio laid down in aforesaid reported case would still support his contention. assessee's other grievance is that Commissioner (A) has not appreciated his case regarding exemption claimed under s. 10(6)(viia) of Act. Yet another grievance of assessee is that benefits by way of free residential accommodation and free provision of gas and electricity etc., would not be taxable in his hands as perquisites within meaning of s. 17 of Act. revenue, in its cross appeal, has made grievance that Commissioner (A) was not justified in holding that living allowances received by assessee would be exempt from tax under s. 10(14) of Act. 10. At outset, ld. counsel for assessee submitted that he would like to seriously argue ground No. 2 taken up in assessee's appeal, which reads as under: "For that, without prejudice to foregoing grounds, ld. CIT (A) has erred in law in holding that appellant was not entitled to exemption from tax provided for in s. 10(6) (viia) of IT Act, 1961, in respect of salary income for services rendered by him to Gujarat State Fertilizers Co. Ltd. as technician under terms of employment duly approved by Government of India. He has misconstrued provisions of said section in taking view that appellant was not entitled to benefit of tax exemption under section because he was employee of M/s Snamprogetti and not of Gujarat State Fertilizer Co. Ltd., to which services were rendered by him". 11. Inviting our attention to letter dt. 13th Aug., 1979, issued by Ministry of Petroleum, Chemicals and Fertilizers, of Government of India, ld. counsel for assessee highlighted fact that Government of India had approved for purpose of exemption for payment of income-tax appointment of assessee for period of 14 months. relevant portion of said letter reads as under: "Ref: Your letters No. F & L/EIT/GOI/79 dt. 7th April, 1979, 21st June, 1979 and 19th April, 1979 Sir, I am directed to refer to your letter(s) quoted above on subject noted above and to say that Government of India approved for purpose of exemption from payment of income-tax appointment of following person(s) as technician(s) in your company in connection with. S. Seconded For Expected Name Designation Nationality No by period dt. of arrival 1 2 3 4 5 6 7 Mr. Apn. M/s Snan 24 3. UGO Technician Italian upon receipt of Progetti mths CARCANO labour permit Mr. Welding 14 4. BATTELLI do do do Insp mths ERNESTO Mr. Techni- 12 5. SKET do do do cian mths VINKO grant of actual exemption from income-tax, will however be subject to fulfilment of all other conditions laid down in this regard in s. 10(6)(vii)(a) of IT Act, 1961 as amended from time to time and also subject to condition that payment of per diem charges are in accordance with provisions of their contract (including escalations). It may be noted that exemption of salary and or allowance of technician(s) from income tax will upto amount of Rs. 4,000 pm. only including value of perquisites, etc. whether paid in India or outside India. 3. It may be noted that this approval of contract of service(s) of technicians mentioned above is with reference to matter of exemption from payment of income tax on salary/allowances payable to him/them and cannot b e assumed to convey acceptance of government to remittance of foreign exchange etc. Such matter will have to be cleared with different authorities concerned." 12. ld. counsel for assessee submitted that even though detailed submissions in writing were filed before Commissioner (A) in this regard, Commissioner (A) was not justified in brushing aside same in just one sentence (reproduced above). According to ld. counsel for assessee, s. 10(9)(viia) of Act consists of two parts, namely, (i) technician who is in employment of (a) Government (b) Local authority (c) any Corporation set up under any special law (d) any institution or body established in India for carrying on scientific research, and (ii) technician who renders services in employment "in any business carried in India." In this connection, ld. counsel for assessee further submitted that if Parliament had intended that remuneration received by foreign technician for rendering services in India shall be exempt from tax only where such technician is in employment of person carrying on any business in India, it would have used in second part of aforesaid provision, as in first part thereof, words "or in employment of person carrying on any business in India. In absence of such words, learned counsel for assessee went on to argue that there is no warrant whatsoever in reading in s. 10(6)(viia) of Act, condition that foreign technician must be in employment of person carrying on any business in India in order that his salary income may qualify for exemption from tax. ld. counsel for assessee therefore, urged that assessee's stand for exemption under s. 10(6)(viia) of Act, in respect of salary, should be accepted. Relying on aforesaid decision of Hon'ble Gujarat High Court, ld. counsel for assessee further submitted that since salary received by assessee was nothing but "retention allowance", same cannot be taxed by invoking provisions of s. 9(1)(ii) of Act. As regards taxability of living allowances, ld. counsel for assessee submitted that Commissioner (A) was fully justified in relying on aforesaid decision of Hon'ble Gujarat High Court which fully covers this point. 13. ld. representative for Department, on other hand strongly relied on order of ITO and submitted that IT authorities were fully justified in holding that salary received by assessee was exigible to tax. In this connection, he invited our attention to s. 10(6)(viia) of Act, and submitted that expression "in any business carried on in India" relates to employer of assessee. According to ld. representative for department, "employment" is essence of matter and therefore, since S.P, was not carrying on business in India, assessee would not be entitled to exemption under s. 10(6)(viia) of Act. He also submitted that since there was no contract between assessee and GSFC/GNFC, it is difficult to hold that assessee was employee of concern which is carrying on business in India. Inviting our attention to aforesaid letter dt. 13th Aug., 1979 of Ministry of Petroleum, Chemicals and Fertilizers, Government of India, he highlighted fact that S.P. had just seconded proposal of assessee to work as technician in India. This fact by itself, according him, would not make assessee "employee" of concern carrying on business in India. He further submitted that letter issued by Ministry of Petroleum, Chemicals & Fertilizers, Government of India, has nowhere stated that exemption under s. 10(6)(viia) would be granted to assessee by ITO. In this connection he stated certain procedure for appointment of person by United Nations or sending officer of Government of India on deputation to other countries, with view to impress upon us that assessee was not "employee" either of GSFC/GNFC or S.P. at time when he rendered services in India. He, therefore, urged that stand taken on behalf of assessee that salary income received by him would be exempt under s. 10(6) (viia) of Act, should be rejected. As regard applicability of provisions of s. 9(1)(ii) of Act, he strongly relied on orders of IT authorities. He further submitted that Commissioner (A) was not justified in accepting assessee's claim that living allowances received in India were exempt from tax under s. 10 (14) of Act. 14. ld. counsel for assessee, in his reply, submitted that analogy of employment under United Nations Organisation or under agreements between two Sovereign States has no application to commercial agreement entered into between two entities carrying on business at different places. 15. We have carefully considered rival submissions of parties and material placed before us and we find considerable force in submissions made on behalf of assessee in respect of exemption claimed under s. 10 (6)(viia) of Act. 15.1. According to us, salary income of assessee could be brought to tax by virtue of s. 9(1)(ii) of Act, material portion of which, reads as under: "9. (1) following incomes shall be deemed to accrue or arise in India (i) (ii) income which falls under head "Salaries", if it is earned in India. Explanation : For removal of doubts, it is hereby declared that income of nature referred to in this clause payable for service rendered in India shall be regarded as income earned in India." Prior to insertion of Explanation w.e.f. 1st April, 1979 by Finance Act, 1983, Salary received abroad by expatriate employee was held to be not taxable in case of Pgnatale (supra). However, in instant case, as year involved is 1980-81, we are of opinion that in view of aforesaid Explanation, salary income of assessee would be liable to tax unless it is exempt under any of clauses of s. 10 of Act. 15.2 relevant portion of s. 10 of Act, read as under: 10. In computing total income of any person, any income falling within any of following clauses shall not be included (6) in case of individual who is not citizen of India (viia) where such individual renders services as technician in employment (commencing from late after 31st day of March, 1971) of government or of local authority or of any corporation set up under any special law or of any such institution or body established in India for carrying on scientific research as is approved from purposes of this sub-clause by prescribed authority or in any business carried on in India and following condition are fulfilled, namely, that (1) individual was not resident in India in any of four financial years immediately preceding financial year in which he arrived in India, and (2) contract of his service in India is approved by Central Government, application for such approval having been made to that government before commencement of such service or within six months of such commencement, remuneration for such services due to or received by him, which is chargeable under head "Salaries," to extent mentioned below, namely (A) such remuneration due to or received by him during period of twenty-four months commencing from date of his arrival in India, in so far as such remuneration does not exceed amount calculated at rate of four thousand rupees per month, and where tax on excess, if any of such remuneration for period aforesaid over amount so calculated is paid to Central Government by employer (which tax, in case of employer), being company may be paid notwithstanding anything contained in s. 200 of Companies Act, 1956 (1 of 1956) also tax so paid by employer, and Explanations for purposes of this sub-clause, "technician" means person having specialised knowledge and experience in (i) constructional or manufacturing operations, or in mining or in generation of electricity or any other form of power, or who is employed in India in capacity in which such specialised knowledge and experience and actually utilised. 15.3. Now it is not in dispute that assessee fulfils both conditions stipulated in aforesaid sections. Again, it is not in dispute that assessee was in India for less than 24 months, with this background, let us analyse initial portion of said section. initial portion of said section, according to us, consists of two parts, viz. Where such individual renders services as technician: 1st Part In employment of (i) Government or (ii) local authority or (iii) any corporation set up under any special law or (iv) any such institution/body established in India for carrying on scientific research as is approved for purposes of this sub-clause by prescribed authority OR 2nd Part-in any business carried on in India Explanation to Section. 10(6)(viia) defines "technician" to mean person having specialised knowledge and experience who is employed in India in capacity in which such specialised knowledge and experience are actually utilised. It is not in dispute that assessee is having specialised knowledge and experience in constructional or manufacturing operations. 15.4. On proper reading of aforesaid provisions, we are of view that in order to claim exemption under s. 10(6)(viia) of Act, technician, like assessee in present case, need not be in employment in strict sence of term. Such technician would still be entitled to exemption if he utilises specialised knowledge and experience in any business carried on in India. According to us, expression "who is employed in India" means engaged in India for rendering specialised knowledge and experience to any business carried on in India. Therefore, fact that S.P. was carrying on business in India or assessee was not employee of GSFC/GNFC would not be of any consequence in claiming exemption under s. 10(6)(viia) of Act. It is undisputed fact that assessee having specialised knowledge and experience had actually used same in constructional or manufacturing operation of GNFC which carries on business in India. In this view of matter, we have no hesitation in accepting submissions made on behalf of assessee that salary including perquisites received by him would be exempt from tax under s. 10(6)(viia) of Act. 1 5 . 5 . As records taxability of living allowance received by assessee, same is fully covered by aforesaid decision in case of Pgnatale, in favour of assessee. In this view of matter, we do not see any merit in appeal filed by Revenue. 16 . In result, appeal filed by assessee is allowed and that of Revenue is dismissed. *** E. BATTELLI v. INCOME TAX OFFICER