Foreign technicians' remuneration held exempt from Indian tax where employment remained with foreign enterprise and treaty conditions were met.

Foreign technicians deputed to an Indian project were treated as continuing employees of the foreign enterprise, so their remuneration was regarded as income of the foreign employer rather than taxable income in India in their hands. The statutory exemption under section 10(6)(vi) was considered satisfied, section 10(6)(viia) was held inapplicable, and Article VII of the India-Japan double taxation agreement also supported exemption because the technicians stayed in India for less than the prescribed period and the remuneration was not deductible in computing Indian taxable profits. On that basis, the remuneration was not chargeable to Indian income-tax.

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Issues: Whether the remuneration received by foreign technicians deputed to an Indian project was exempt from Indian income-tax under section 10(6)(vi), and whether the double taxation agreement between India and Japan also protected such remuneration from tax in India.

Analysis: The technicians remained employees of the foreign enterprise under the technical assistance arrangement, which showed that their services were only lent to the Indian company for the project. The remuneration paid by the Indian company was treated as income of the foreign employer and taxed in its hands under section 115A. The conditions for exemption under section 10(6)(vi) were held to be satisfied, and section 10(6)(viia) was held inapplicable. Article VII of the India-Japan double taxation agreement also supported exemption, since the technicians were present in India for less than the prescribed period and the remuneration was not deductible in computing the profits of an enterprise chargeable to tax in India.

Conclusion: The remuneration received by the foreign technicians was not taxable in India and the Revenue's challenge failed.

Ratio Decidendi: Where foreign technicians remain employees of a foreign enterprise and the statutory and treaty conditions for exemption are satisfied, their remuneration for a limited stay in India is not chargeable to Indian income-tax.

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