TaxTMI 
TaxTMI 
1993 (11) TMI 18
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....sis of further agreement of the same date for technical services. The authorities below, i.e., the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal, rejected the said contention of the assessee. Being dissatisfied by the order passed by the Tribunal, the assessee preferred a reference application and on the basis of the said reference, the following questions are referred by the Tribunal under section 256(1) of the Income-tax Act, 1961, for our opinion: For the assessment year 1968-69 : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that Mr. Guzek was an employee of the assessee-company and that the provisions of section 40(c)(iii) were attracted? ....
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....iating the aforesaid contention, we would first refer to the agreement for supply of "know-how" dated June 3, 1966. As per the said agreement, Messrs. Mettler's Sons Limited were in possession of secret technical know-how and other technical information relating to the manufacture of the products which the assessee-company were desirous of manufacturing and for that purpose the assessee-company have requested Messrs. Mettler's Sons Limited to supply and impart to them the said "know-how" for exploitation in India. For supply of the said know how, the consideration agreed to between the parties is as under : "6. In consideration of the obligations by Mettler undertaken under this agreement, Peass would pay to Mettler in Switzerland a sum ....
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.... and when Peass makes a request in writing or if Mettler consider it necessary they shall make available to Peass in the territory the services of technical personnel well acquainted with manufacturing problems to assist Peass in connection with such problems as Peass may encounter in their manufacturing operations and to assist Peass in the supervision of the erection and installation and the starting of the plant, on the following conditions : (a) Peass shall pay the air passage of such engineers from Switzerland to India and back ; (b) Peass shall bear and pay all hotel and travelling expenses to such engineers in the territory ; (c) Peass shall pay such salary to the engineers from the day they leave till the day they return to....
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.... and for all purposes, he would be an employee of the assessee. It may be that the assessee-company cannot terminate the services of the concerned engineer of Mettler's Sons Limited, but it can certainly refuse to take the service of the said engineer and refuse to pay him any amount as salary for various reasons including misconduct of the concerned engineer. In other words, it can be said that Mr. Guzek would be either on deputation or on loan service with the assessee. Further, if Mr. Guzek was not in service, there was no necessity of stating that he was paid salary by the assessee-company. Normally, salary would be paid by a master to his employee. As against this, Mr. Mehta, learned counsel for the assessee, referred to the letter ....