In this appeal by assessee question is whether salary receivable by non-resident in United States is taxable in India because for that period assessee was in India. 2. assessee is resident of United States. On 24-11-1981 he entered into services of American company by name Fish International Engineers Inc. His employment was to start from 1-12-1981. He was recruited specially for project in India in which Fish International Engineers Inc. was interested. project in India is called ' Deepak Fertilisers '. assessee was to proceed to India as employee of American company for work in Indian project. He came to India on 1-12-1981. We are concerned with financial year 1981- 8 2 corresponding to assessment year 1982-83. He was in India up to end of financial year. During this period, he was receiving salary as per agreement with American company in America only. In India, he was given accommodation in hotel in Bombay from 2-12-1981 to 14-1-1982 and expenses for stay in hotel amounted to Rs. 56,310. This amount was reimbursed by Indian company Deepak Fertilisers and Petrochemicals Corpn. Ltd. which was referred to earlier as ' Deepak Fertilisers '. We may mention here that this company had entered into technical agreement with American company and assessee had been sent to India as part of that collaboration agreement. hotel expenses of Rs. 56,310 was reimbursed by Indian company to him as part of this collaboration agreement. 3. From 14-1-1981, assessee was provided accommodation by Indian company in its guest house and he was allowed living allowance of Rs. 210 per day. total living allowance paid to him amounted to Rs. 15,960. 4. Apart from these payments, he had also received from Indian company Rs. 5,230 by way of reimbursement of various types of expenditure incurred by him like medical expenses, food, provision, conveyance and other miscellaneous expenses. 5. We may also mention here that as per collaboration agreement between Indian and American companies, any tax liability in respect of technicians sent by American company was to be borne by Indian company. 6. For assessment year 1982-83, assessee filed nil return. However, ITO brought to tax entire salary received by him in America as well as living expenses including hotel bills and reimbursements and he also brought to tax notional value of entire free accommodation given to him in Indian company's guest house. These totalled to Rs. 2,84,254. He also added tax payable by Indian company as per collaboration agreement as it amounted to Rs. 1,64,725. Thus, he was assessed on total income of Rs. 4,48,979. We may mention word in explanation about tax payable amounting to Rs. 1,64,724. It appears that after contract period was over, assessee had to leave India. In order to get certificates which will enable him to do so ITO suggested that tax payable thereon may be deposited. tax payable on rough working made at suggestion of ITO was Rs. 1,64,725. This was paid by Indian company. This has been taken by ITO as part of income. 7. Against assessment, assessee appealed to Commissioner (Appeals). Before him, assessee had relied on decision of Gujarat High Court in case of CIT v. S.G. Pgnatak [1980] 124 ITR 391. Commissioner pointed out that by Finance Act, 1983 retrospective amendment has been made and Explanation has been inserted which states that if salary income is payable for services rendered in India, it will be regarded as income earned in India. Therefore, decision of Gujarat High Court no longer was applicable. He upheld inclusion of salary paid abroad. 8. He next considered whether payment of living expenses could be taxed. Here also reliance had been placed on Gujarat High Court's decision. He pointed out that reimbursement can be treated as profit in lieu of salary within meaning of section 17(3) of Income-tax Act, 1961 (' Act '). This definition is very wide and it would cover all payments received by assessee from his employer. He also relied on decision of Madras High Court in case of CIT v. Jenkin Thomas [1975] 101 ITR 511. He further held that living allowance is not exempt under section 10(14) of Act. For this purpose, he relied on Explanation to that section which effectively, according to him, denies exemption for such allowances. value of notional income by way of rent-free accommodation was also found to be validly included. 9. Finally he considered whether tax payable by Indian company was income liable to tax in hands of assessee. Reliance had been placed on fact that tax was paid by Indian company and that company was n o t employer. However, Commissioner relying on Bombay High Court's decision in case of Emil Webber v. CIT [1978] 114 ITR 515 held that s u c h payment of taxes is also income. In result, he rejected assessee's appeal. 10. assessee is on further appeal before us. Shri Khare for assessee first submitted that salary receivable in United States as per service contract entered in United States does not accrue or arise in India under section 5(2) of Act. It cannot be deemed to accrue or arise in India under section 9(1)(ii) of Act either. He submitted that decision of Gujarat High Court in case of S. G. Pgnatale was still good law. No doubt, Finance Act, 1983 has introduced with retrospective effect Explanation but he submitted that even if Explanation is applicable, this amount cannot be brought to tax. Merely because assessee rendered services in India, that income cannot be said to be earned in India. Explanation, he submitted it might perhaps apply if he was specifically assigned to India. He submitted that his assignment was with American company and it was part of his job that he came down to India. He submitted that general law regarding accrual of income by way of salary is situs of contract for services. That being in America, it cannot be said to have arisen in India. 11. With reference to living allowance, he submitted that these were not income at all. reimbursement has not come to his pocket. There was no contract at all between him and Indian company. Therefore, it cannot be considered as income accruing to him. Assuming that it is income, he submitted that provisions of section 10(14) would clearly be applicable. Explanation to section 10(14) also will not be applicable because that Explanation can be invoiced only if place where he ordinarily performed his duties, since he was employed by American company, it cannot be said India place he ordinarily performed his duties. He further submitted that Commissioner finding that section 17(3) would apply was not correct. Since there was no employer and employee relationship between him and Indian company. With regard to notional perquisite of free house, he relied on same arguments as living allowances. 12. Finally, with regard to tax paid by Indian company, he pointed out that this tax payment was after accounting year was over. Therefore, it cannot be treated as income of this accounting year at least. 13. Shri Kamat, senior departmental representative took us through budgetary provisions explanations for introduction of Explanation to section 9(1)(ii). He submitted that Gujarat High Court's decision had not laid down correct law and in any case, it will no longer hold good after amendment. He further submitted that situs of contract was not relevant at all because this was case of deemed income. Situs of contract will be relevant only where there is no deeming provisions. With regard to submission of Shri Khare that even if assessee had not worked in India, he will be entitled to salary, Shri Kamat referred to employment agreement by which assessee was specifically recruited for purpose of serving in India. He further pointed out that American company itself regarded payment as foreign salary. 14. We have considered submissions. first issue will be decided is whether salary payable by American company and credited to assessee's account in America is taxable in India. Shri Khare had placed great reliance on decision of Gujarat High Court in case of S. G. Pgnatale. There are no other High Courts' decisions on this point. Normally, we should have adopted ratio laid down in that decision. However, as Commissioner (Appeals) has pointed out section has been amended by Finance Act, 1983 with retrospective effect from 1-4-1979 and Explanation has been added. This Explanation reads as follows: " 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; " In view of this amendment, it is necessary for us to see how far decision of Gujarat High Court is neutralised. Shri Khare had contended that retrospective amendment and insertion of Explanation has misfired and has not, according to him, made any change in law. In order to appreciate his argument, we have to go in detail to Gujarat High Court's decision. Their Lordships were trying to discover meaning of expression ' earned in India ' used in section 9(1)(ii). They found that this expression has two meanings and this is brought out clearly in Supreme Court's decision in E. D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR 27. One meaning is narrower meaning in sense of rendering services, etc., and wider meaning in sense of equating it with accrued and treating only that income as earned by assessee to which assessee has contributed to its accruing or arising by rendering services or otherwise but he must have created debt in his favour. After pointing out that there are two meanings, their Lordships proceeded to observe as follows: " . . . Thus, wider meaning of word ' earned ' as indicating something which is due owning and entitlement to sum of money consideration for which services have been rendered by assessee, is clear concept indicated by Corpus Juris Secundum. We may also indicate that contract between language used in clause (ii) and in clause (iii) of section 9(1) supports distinction between two meanings which Supreme Court has pointed out. In clause (ii) Legislature has referred to income which falls under head ' Salaries ' if it is earned in India. In clause (iii) income chargeable under head ' Salaries ' payable by Government to citizen of India for service outside India has been referred to. Therefore, if Legislature wanted to indicate that word ' earned ' in context of salaries was to have narrower meaning then it would have specifically said so by referring in clause (ii) to rendering of services at particular situs and in clause (iii) it is specifically said that salaries covered by clause (iii) would be salaries payable by Government to citizen of India for services outside India. If Legislature wanted that word ' earned ' in clause (ii) of section 9(1) should Legislature wanted that word ' earned ' in clause (ii) of section 9(1) should have narrower meaning, nothing would have been easier than to use words. ' services in India ' or ' services rendered in India ', thus clearly indicating that out of two meanings of word ' earned ' it wanted narrower meaning to be adopted . . . ." On perusal of this extract it would be seen that in opinion of High Court, salary paid abroad to non-resident would be taxable in India if they had used words ' services in India ' or ' services rendered in India '. How we find it was absence of such expressions in section 9(1)(ii) that led High Court to hold that salary was not taxable in India. Now this lacuna pointed out by High Court has been made good; by insertion of Explanation in section. This Explanation extracted earlier uses expression ' services rendered in India '. Thus, lacuna having been made good decision of Gujarat High Court will no longer be applicable for assessment year we are concerned with. We, therefore, hold that even applying ratio laid down by Gujarat High Court in light of subsequent amendment, salary credited to assessee in America would be taxable in India. 15. We next take second issue, i.e., whether amount reimbursed by t h e Indian company would be income taxable. Here also, assessee's contention had been that living allowance represented by hotel bills would not be taxable on basis of Gujarat High Court's decision. In that case, department attempted to bring such reimbursement as perquisite. High Court held that it was not perquisite. High Court had held that allowance which depended upon circumstances and changes from place to place would amount to reimbursement rather than personal advantage. It is because of this reason High Court held that expression ' perquisite ' would not cover reimbursement. 16. Now we have already pointed out that expression ' salary earned in India ' is now enlarged by insertion of Explanation. term ' salary ' found in section 9(1)(ii) is not referable to salary simplicitor. It would embrace salaries, perquisites and any payment in lieu of salaries. section itself shows that income which falls under head ' Salaries ' would be comprehended in this term. It would, therefore, unnecessary for us to point out whether reimbursement has to be taxed as salary or perquisite or profit in lieu of salary. It is certainly receipt for assessee since he has been reimbursed in cash. He is entitled to it because he has worked in India. Therefore, this is clearly taxable receipt. Shri Khare had submitted that reimbursement has not reached pocket of assessee and, therefore, it could not be income. We are unable to accept this submission. Since it is question of reimbursement, it would show that assessee had earlier incurred expenditure and reimbursement goes to fill-up hole created by initial expenditure. Neither are we concerned about question whether reimbursement is by Indian company or American company. So long as it i s part of salary and assessee is rendering services in India only Explanation would apply and it would be taxable. 17. This would take us to question whether daily allowance would be exempt under section 10(14). Commissioner (Appeals) had held against assessee relying on Explanation to section 10(14). He had pointed out that assessee was deputed for work in India and he had remained here from 1-12-1981 to 28-2-1983. During this period, place of his duties or employment will be in India. As per terms of his deputation, he was to be provided rent-free accommodation. Therefore, place where he ordinarily resides was in India and daily allowance granted to meet his personal expenditure at place where duties of his office were ordinarily performed. It would not be exempt under section 10(14). Now Explanation to section 10(14) takes away exemption in respect of special allowance or benefit which had been specifically granted to meet expenses wholly, necessarily and exclusively incurred for performance of duties of office. Explanation will be effective if such allowance was granted to meet his personal expenses at place where duties of his office are ordinarily performed. In reading section 10(14) together with Explanation it would be seen that ordinarily special allowance and benefits which had been granted to meet expenses incurred while on duty will be exempt provided duty is at place other than place where assessee ordinarily performs his services. Commissioner (Appeals) pointed out that assessee was employed by American company and deputed to India and, therefore, India was place of his ordinarily duty place. To this extent, Commissioner is right. But, question is which place in India was place where assessee ordinarily performs his duties. If he was stationed at Bombay and he has to perform some duties outside Bombay at project site then daily allowances given while at project site will not be considered as daily allowance given at place of his duty. same could be put vice versa also. If duties were at project site and he had come to Bombay in course of his duties then daily allowance would be eligible for exemption under section 10(14). 18. With this principle in mind we may look into facts of case. assessee on his arrival was put up in hotel in Bombay from 2-12-1981 to 14-1- 1982. Since he was Construction Superintendent employed in construction of project, his ordinarily place of duty must be at construction site. Therefore, when he was in Bombay, he was not in his place of duty. Therefore, he would be entitled to exemption of allowance. He had stayed in hotel showed that he stayed there for temporary period. This also re-enforces our finding that his place of duty was not Bombay. 19. After 14-1-1982, he seemed to have been accommodated in guest house. In our opinion reasoning in above paragraph would apply to expenditure in respect of guest house also. We are unable to sustain addition of Rs. 11,620 as value of rent-free accommodation. Since he had been only in guest house it cannot be equated with providing with rent-free accommodation. 20. This takes us to last point of dispute, i.e., whether tax paid by Indian company could be considered as income. On this point, there could be no two opinions and it is concluded by decision of Bombay High Court in case of Emil Webber. Bombay High Court has held that tax paid by Indian company would be income assessable under head ' Income from other sources '. We are also unable to accept contention that since tax was paid after accounting year was over, it cannot be treated as income of this year. What we have to see is point of time when right accrues in favour of assessee. Now it is well settled that liability to pay income-tax accrues and arises as soon as income is earned. Therefore, Eo instante right for reimbursement of tax payable by Indian company accrues or arises to assessee. We would, therefore, uphold this part of order also. 21. In result, appeal is partly allowed. *** EARL. W. TALLENT v. INCOME TAX OFFICER