Delhi High Court

Mahendra Raj vs Joint Secretary, Government Of ... on 30 May, 2002

Equivalent citations: (2002) 176 CTR Del 152

Author: V Sen

JUDGMENT

Vikramajit Sen, J.

The petitioner is aggrieved with the order dated 28-1-1978, passed by the respondent, whereby his representation dated 26-9-1977, was rejected. The petitioner had claimed the entitlement of deduction under section 80RRA of the Income Tax Act, which provision had been incorporated therein by the Finance (No. 2) Act, 1977 with effect from 1-4-1978. His representation was rejected for the reason that the petitioner was "working as an independent contractor acting as consultant, rather than an employee, as envisaged in section 80RRA of the Act." This was the stand of the respondents in their letter dated 27-3-1976, and it was reiterated in the impugned order dated 28-1-1978.

2. The relevant portion of the said section reads as follows:

"Section 80RRA. Deduction in respect of remuneration received for services rendered outside India.(1) Where the gross total income of an individual who is a citizen of India includes any remuneration received by him in foreign currency from any employer (being a foreign employer or an Indian concern) for any service rendered by him outside India, there shall, in accordance with the subject to the provisions of this section, be allowed, in computing the total income of the individual, a deduction from such remuneration of an amount equal to seventy-five per cent, of such remuneration, as is brought into India by, or on behalf of, the assessed in convertible foreign exchange ......."

(Emphasis, her italicised in print, supplied)

3. The facts of the case are not in dispute, and can be conveniently gathered from the following paragraph of the counter affidavit :

"The facts stated in this paragraph are admitted except that the petitioner was employed as a technician on the construction of Dormitories, Students Union Building and Gymnasium of Pahlavi University, ShirazIran and Cultural Centre KermanshahIran, The exact status of the petitioner was that of an independent contractor and not of an employee as required by section 80RRA of the Income Tax Act, 1961. It is also denied that the order of the government is arbitrary and erroneous in the facts and circumstances of the case."

4. On a bare perusal of the section it will be clear that the petitioner fell within its contemplation. What had obviously escaped the attention of the respondents, and had resulted in their erroneous interpretation of the section, was the absence of the use of the words 'employee' and/or "salary". The wording of the section, as also its palpable purpose, i.e., attracting the repatriation of funds/remunerations earned by Indian citizens abroad and thereby augmenting our foreign currency holding, make it abundantly clear that the incentive is neither restricted to the remittance of salaries alone, nor to the cases of employees only. Had this been the intendment, these words could have been used by the Act. This section also provides relief to an Indian citizen against double taxation.

5. The matter is no longer res integra because of the pronouncement of the Hon'ble Supreme Court in CBDT & Ors. v. Aditya Birla (1988) 170 ITR 137 (SC), which reads as follows:

"In Chintaman Rao v. State of Madhya Pradesh (1958) SCR 1340, at p. 1346 of the report, it was observed that the concept of employment involved three ingredients : (1) employer, (2) employee, and (3) the contract of employment. The employee is one who works for others for hire. The employer is one who employees the service of other persons. In the context of this Act, therefore, the expression 'employee' will include a consultant or a technician employed by the foreign company because he would be working for others for hire. It is true that the respondent may serve more than one master. A man may in certain circumstances serve two masters; very often he does serve many. The expression "to employ" has been considered in Ellis v. Joseph Ellis & Co. (1905) 1 KB 324 (CA) and does not mean generally to find actual employment, it rather means to retain and pay a person whether employed or not but if employed then to be employed in the work only in respect of which contract is made. 'Medical advisers may be employed at a salary to be ready in case of illness; members of theatrical establishments in case their labour should be needed; household servants in performance of their duty when their masters wish; in these and other similar cases, the requirement of actual service is distinct from the employment by the party employing' In an agreement to 'retain and employ', employ' means only to 'retain' in the service 'and is mere tautology'. See in this connection, Stroud's Judicial Dictionary, 4th Edn., Vol. 2, at p. 893. The expression, however, must depend upon the context of the particular provision in which the expression appears. It was held in England that an engineer appointed by a local authority to supervise the execution of works, but not subject to the local authority's supervision, is nevertheless an 'employee' within the meaning of section 40(1) of the Local Government Superannuation Act, 1937, in Morren v. Swinton and Pendlebury Borough Council (1965) 1 WLR 576 (B). In Chambers' 20th Century Dictionary 'employ' has been indicated to mean to occupy the time or attention of. "Employment" means an act of employing. In the Concise Oxford Dictionary 'employee' means a person employed for wages. 'Employ' means use of services of persons. It follows, therefore, that it comprehends a whole-time servant or a part-time engagee. It is significant that section 80RRA of the Act uses the expression 'remuneration' and not salary to be entitled to deduction. In the aforesaid view of the matter, we see no warrant to restrict the meaning of the expression remuneration' only to salary received by an employee abroad. The literal meaning is clear and we need not bother any more about the intention or the purpose. The intention, in our opinion, is writ large. In principle also, we are unable to find any rationable or reason for the distinction sought to be made on behalf of the revenue."

6. The Aditya BirIa's case (supra) was applied by this court in Smt. Kunti Verman v. CBDT & Anr. (1996) 220 ITR 120 (Del). The petitioner's husband had provided consultancy services and had received retainership for these services which he had rendered outside India. The learned Single Judge held in favor of the assessed.

7. In these circumstances, we are satisfied that the petition is well founded. The impugned orders dated 27-3-1976 and 28-1-1978, are, therefore, quashed holding that the petitioner is fully entitled to the benefits in section 80RRA of the Income Tax Act. There shall, however, be no orders as to costs.

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