ORDER
M.V. Nayar, A.M.
1. The Department is in appeal against the order of CIT(A)-V New Delhi in appeal No. 429/94-95 dt. 11th Sept., 1995. The grounds of appeal are as given below :
“The learned CIT(A) has erred in law as well as on facts in coming to the conclusion that the assessee was employed in a business carried on in India specially when he was an employee of M/s Cray Research UK Ltd. and was drawing his salary in sterling pound in UK.
The learned CIT(A) has erred in facts allowing exemption under Section 10(6)(viia) on the basis of a letter from Ministry of Science & Technology which was subject to fulfilment of all other terms and conditions of Section 10(6)(viia) which have not been fulfilled.”
2. The assessee Mr. E. Stantone is a technician who was employed with M/s Cray Research India Ltd. during the period relevant to asst. yr. 1992-93. The AO asked the assessee to furnish the exemption obtained under Section 10(6)(viia) from the Central Government for a period exceeding 24 months. The assessee was also given a show cause as to why tax perquisite should not be grossed up under Section 195A as the tax had been paid by the employer. According to the AO the Mowing reply was given by the assessee in this regard ;
“Please refer to your letter No. Dy. CIT/Spl.R-9/93-94/714 for asst. yr. 1992-93, In this respect, we have to state that we had applied for the approval to the Central Government for exemption under Section 10(6)(viia) of the IT Act, 1961 within 6 months of his arrival in India on 25th Oct. 1989 and thereafter for the extension on 1st May, 1991. However, the only approval granted was vide their letter dt. 19th Aug., 1992, after a lot of personal visits etc. thereafter we have checked up with the Deptt. of Science and Technology and we were informed that the approval granted was for the initial application as well as for the extension.”
3. The AO examined the contention of the assessee. He also felt that exemption could be granted if all the conditions stipulated in the section were satisfied, According to him, the exemption under Section 10(6)(viia) was available where the individual rendered services as technician in the employment of Government or local authority and such institution or body established in India for research, etc., was approved by the prescribed authority or in a business carried on in India for which the Central Government may waive the condition relating to sub-clause in the case of individual who is employed in India for designing, erection and examination of machinery or plant, etc. Further proviso to sub-section mentions that nothing shall relate to a period exceeding 24 months commencing from the date of his arrival in India unless approval of the central Government was obtained before the first day of October of the relevant assessment year. The AO also noted that the section had undergone a change w.e.f. 1st June, 1992, whereby the approval of the Government was not required but for accounting year 1991-92 such approval was essential. The assessee had not furnished the approval for extension of the contract beyond 24 months and, therefore, according to him, the exemption could not be granted. The AO also felt that the assessee had not furnished the details of actual receipt of salary or tax deducted at source nor full details of the person deducting the same and, therefore, according to him, the salary of the assessee had been paid either by the employer or M/s Cray Research (India) Ltd. and, therefore, had to be treated as a perquisite under Section 17(2)(iv). He, therefore, proceeded to gross up the tax as per provisions of Section 195A.
4. The CIT(A) deleted the additions made by the AO. Against this, the Department is now in appeal before us.
5. Smt. V.J. Yadav, Sr. Departmental Representative appeared for the Department. She relied on the order of the AO.
6. Shri Pawan Kumar and Shri Piyush Kaushik FCA, appeared for the assessee. Before us, it was stated by the Authorised Representative of the assessee, that the assessee came to India for maintenance of super computer and this activity was covered by the definition of technician under Expln. (iii) to Section 10(6)(viia) as per notification issued by the Government. The assessee filed an extract from the notification in support. As regards the approval for extension beyond 24 months, it was stated that the certificate issued by the Government was a composite one as it was granted after the application for approval as well application for extension had been filed by the assessee. The concerned Government department while issuing the approval had with them both the applications at the relevant time when they issued the approval. Such approval was granted on 19th Aug., 1992, which is within the stipulated time of 1st October of relevant assessment year, i.e., 1st Oct., 1992. It was further stated that the concerned department was no longer functioning now as approval was no. more necessary after 30th June, 1992 relevant to asst. yr. 1993-94 whereas the AO passed its order in September, 1994 and by that time it was not possible to obtain any clarification. An extract from Taxman’s IT guide 1995 was also filed according to which :
“Section 10(6)(viia): Foreign technician
“Exemption need not await Government approval. Where a foreign technician is clearly eligible to the exemption conferred under Section 10(6)(viia), and his employer has complied with all the statutory requirements, the benefit of the exemption cannot be denied because of delay on the part of the Central Government in according approval. The approval once accorded has to relate back to the date of the application CIT v. Radomir Dielatovic (1994) 206 ITR 320 (Bom): (1994) 73 Taxman 610 (Bom).”
7. It was further argued that Cray Research India Ltd. was a foreign company having its project office in India and, therefore, to that extent it could be said that it had a permanent establishment. Thus, it was carrying on business in India. The assessee was its employee and was engaged in the activity which was notified as exempt. The approval had been granted after the request for extension and, therefore, there was no case for computing tax on tax as the assessee was entitled to the exemption.
8. We have considered the rival submissions. As per copy of Notification No. S.O. 235(E) dt. 25th March, 1992, shown to us, other fields notified for the purpose of Expln. (iii) to Section 10(6)(viia) are; field of information technology including computer architecture systems, platforms and associated technology, software development process and tools. Further as per dates given by the assessee the initial application for Government approval was made on 25th Oct., 1989. Thereafter assessee’s application was filed for extension on 1st May, 1991. The approval was granted on 19th Aug., 1992. It is, therefore, clear that approval was granted before 1st October, of the relevant assessment year and covered both the periods, i.e., initial as well extended period. Further, the assessee is entitled to exemption under Section 10(6)(viia) by virtue of the Notification No. S.O. 235 of March, 1992 of the Government covering field of information technology. It must be stated that the individual is rendering services as technician in the employment in a business carried on in India by M/s Cray Research India Ltd. There is, therefore, no reason to gross up his salary, The addition made in this regard is therefore, deleted. The order of CIT(A) is confirmed and the appeal of the Department is dismissed.
9. In the result, the appeal of the Department is dismissed.