1987 (11) TMI 5 - SC - Income Tax

Deduction under Section 80RRA for remuneration abroad includes consultants and technicians, not limited to salary; appeal dismissed.

Interpretation of a tax deduction provision concerning remuneration paid abroad: the court construed 'remuneration' broadly and rejected limiting it to ... Deduction under section 80RRA - remuneration received in foreign currency - employer / employee relationship - technician and consultant - approval of terms and conditions by the Central Government - continuous service exceeding thirty-six monthsRemuneration received in foreign currency - employer / employee relationship - technician and consultant - deduction under section 80RRA - Whether fees received by the respondent as a part time consultant from a foreign company for services rendered outside India constituted 'remuneration' received from 'any employer' entitling him to deduction under section 80RRA. - HELD THAT: - The Court examined the wording and scheme of section 80RRA and held that the statute speaks of 'remuneration' and not of 'salary', and requires (i) remuneration, (ii) received in foreign currency, (iii) from any employer for services rendered outside India, with Central Government approval of terms. The Court rejected the Revenue's contention that the provision must be confined to salaried employees, observing that the legislative language deliberately uses the broader term 'remuneration' and that the objects of the provision - encouraging earning and repatriation of foreign exchange by Indian technicians and improving their status abroad - support an expansive construction. The Court held that the expressions 'employer' and 'employee' in the section are not to be read in a narrow or technical sense so as to exclude consultants; a person who works for others for hire or is retained and paid for services falls within the concept of being employed. The Court relied on authorities which discuss the meaning of 'employ' and 'employee' and applied those principles to conclude that a consultant or technician engaged and paid by a foreign company can be regarded as being in an employment relationship for the purposes of section 80RRA (Chintaman Rao v. State of Madhya Pradesh; Ellis v. Joseph Ellis & Co.; Morren v. Swinton and Pendlebury Borough Council). Having found that the sum in question was remuneration received in foreign currency for services rendered outside India and that the Thai company fell within the expression 'employer' in the context of section 80RRA, the Court upheld the High Court's direction to the Central Government to reconsider the respondent's application for approval of the terms of service under the section. [Paras 10, 11, 12, 13, 14]The fees paid to the respondent as a consultant were held to be 'remuneration' received from an 'employer' within section 80RRA and thus eligible for consideration under the provision; the High Court's order was upheld and the appeal dismissed.Final Conclusion: The Supreme Court dismissed the Revenue's appeal, agreeing with the High Court that the payment to the respondent as a consultant qualified as 'remuneration' from an 'employer' under section 80RRA and directing the Central Government to reconsider the respondent's application for approval under the section. Issues: Whether the deduction under Section 80RRA of the Income-tax Act, 1961 applies to remuneration received in foreign currency by an Indian technician/consultant (i.e., fees paid to a consultant) from a foreign employer for services rendered outside India.Analysis: The Court examined the language of Section 80RRA, noting that the section refers to 'remuneration' received in foreign currency from 'any employer' for services rendered outside India and prescribes conditions such as approval of terms by the Central Government and a 36-month limitation. The Court compared the terms used in Section 80RRA with related statutory language and the stated object of the provision in the Finance Bill, concluding that the statutory words were not limited to salaried employment. The Court considered established definitions and authorities on the meaning of 'employer' and 'employee', and held that the expressions are not technical and can encompass part-time engagement, consultants, or technicians whose services are utilised by a foreign enterprise. The Court rejected Revenue's submission that the section should be confined to salaried employees only, finding no textual or contextual basis for such a restriction.Conclusion: The deduction under Section 80RRA applies to remuneration received by an Indian technician/consultant from a foreign employer for services rendered outside India; fees paid to a consultant in the circumstances fall within 'remuneration' and the appeal by the Revenue is dismissed.