Commissioner of Income Tax vs Marco Brandolin

R. Jayasimha Babu, J.—The assesses is an employee of an Italian company--Italviscose Eastern Trading S. P. A. Milan, which had entered

into an agreement with South India Viscose Limited in connection with the expansion project of the latter company''s pulp plant. Under the terms

of that agreement out of the sums paid by the Indian company to the Italian company, the employee of the Italian company was to receive the

amounts specified in that agreement, the rate being 75,000 Italian lira per day payable in an Italian bank. No payments were made by the Indian

company to the assessee directly. The Indian company was only to provide the boarding and lodging facilities and allowance for his day-to-day

expenses while in India.

The Indian company, as required by Section 195 of the Income Tax Act, at the time of making payments to the Italian company deducted tax

thereon, and remitted the same to the Government. The Income Tax Officer construed that the remittance as indicating the payment of tax-free

salary to the assessee. On that basis, he grossed up the salary and demanded tax from the assessee on the amounts so grossed up. The

Commissioner of Income Tax (Appeals) set aside that order. The Tribunal having upheld the order of the Commissioner, the Revenue has brought

this reference before us.

On the facts as found by the Tribunal, it is amply clear that the assessee was not an employee of the Indian company, and he had not been paid

any salary by the Indian company. He was a technician, who had been sent by his Italian employer pursuant to an agreement between that

employer and the Indian company with regard to the expansion of the pulp plant of the Indian company. The Indian company under the terms of

that agreement was only required to pay the Italian company the amounts specified in the agreement. The payment of the technicians'' salary was to

be made by the Italian company in Italy. The Indian company was required to, and did comply with Section 195 of the Income Tax Act by

deducting the tax at source on all the amounts paid by it to the Italian company. These facts did not in the least warrant the view taken by the

Income Tax Officer that the Indian company had paid a tax-free salary by having remitted the tax-free salary to the technician sent by the Italian

company. The view taken by the Income Tax Officer was perverse, and was rightly reversed in appeal by the Commissioner, and that reversal

again rightly upheld by the Tribunal.

We see no merit whatsoever in this reference, The question referred to us, as to whether the Tribunal was right in law in holding that there could

be no grossing up of income on tax basis, and that the Income Tax Officer erred in law in treating the tax paid by the company as perquisites

taxable in the hands of the assessee, against the Revenue, and in favour of the assessee. The Revenue shall pay costs in the sum of Rs. 2,000.