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PETITIONER: CENTRAL BOARD OF DIRECT TAXES AND OTHERS A

       Vs.

RESPONDENT: ADITYA V. BIRLA

DATE OF JUDGMENT27/11/1987

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  1988 AIR  420            1988 SCR  (2) 115  1988 SCC  Supl.  120     JT 1987 (4)   653  1987 SCALE  (2)1296

ACT:        Income Tax Act, 1961-Construction of Section 80 RRA                           thereof.

HEADNOTE: %      The respondent,  Aditya V.  Birla, described  to  be  a technician with  experience in the business of manufacturing and selling  Stapple Fibres,  and the  Thai  Rayon  Company, Thailand, engaged  in  the  business  of  manufacturing  and selling Stapple  Fibres, entered  into an  agreement wherein the respondent  was stated  to be  approached  by  the  Thai Company to make his services available to the Company as his ’employer’, in Bangkok, on certain terms and conditions, for which the  Company would  pay him remuneration receivable at Bangkok. The  agreement was  for a period of three years and was subject  to the approval of the Governments of India and Thailand, etc.  The respondent  applied to the Government of India for  its approval  of his  employment  with  the  Thai Company under the agreement; for the purpose of securing the benefits conferred  by section 80 RRA of the Income Tax Act, 1961. The  Government declined to accord its approval to the respondent’s employment  with the  Thai Company on the terms and conditions  contained in  the agreement, for the purpose of section 80 RRA, on the ground that the section, according to its view, contemplates rendering service outside India in the status  of an  ’employee’, whereas  the  status  of  the respondent  under   the  foreign  employer  was  that  of  a ’consultant’ and not an ’employee’, and that, therefore, the remuneration contemplated  under section  80  RRA  would  be applicable to  the case of the respondent and the benefit of the section could not be given to him.      The respondent  moved the High Court for relief against the decision  of the  Government. A  learned Single Judge of the High  Court quashed  the order  of  the  Government  and directed it  to reconsider  the case  of the respondent. The Letters Patent  Appeal against the order of the Single Judge was dismissed  by the  Division Bench of the High Court. The appellant then  moved this  Court against  the order  of the High Court by Special Leave.      Dismissing the appeal, the Court,

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116 ^      HELD: An  analysis of  section 80  RRA reveals that, in the case  of the  respondent, in order to be entitled to the deductions at  the rate  enumerated in  the section, the sum must be  (i) remuneration,  (ii)  received  by  him  in  the foreign currency,  (iii) from  any employer (being a foreign employer or  an Indian  Concern) for any service rendered by him outside  India. Further  the terms and conditions of his service outside  India must be approved by the Government of India. Furthermore, in his case the deduction of the section would not  be allowed  In respect of the remuneration if the service related to any period after the expiry of 36 months. He  was  not  employed  beyond  the  period  of  36  months. Indisputably, the  sum  concerned  in  the  case,  fee,  was remuneration, being  the amount  paid in  lieu of ’services’ rendered. The  sum  in  question  was  received  in  foreign currency for services rendered outside India. [120D-F]      In the  context of  the Income  Tax Act, the expression ’employee’  will   include  a  consultant  or  a  technician employed  by   a  foreign  company.  The  amplitude  of  the expressions ’employee’  and ’employer’ I) covers the case of the consultant  or the  technician. There  is nothing in the scheme of the section to warrant any exception, as contended for by the revenue. [122E; 121B]      The  High   Court   was   right   in   dismissing   the appeal.[123E]      Aiyar ‘The  Lexicon,  1941)  Ed.  at  page  387,  .Shri Chintaman Rao  and Anr.  v. The  State  of  Madhya  Pradesh. [19581 S.C.R. 1340 at 1346; Ellis v. Ellis and Co., [19051 1 K.B. 324;  Stroud’s Judicial Dictionary, 4th Edition, Vol. 2 at page 893 and Morren v. Swinton and Pendlebury B.C.,[1965] 1 W.L.R, 576, referred to.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal  No.  3947 (NT) of 1987.      From the  Judgment and  order dated  27.8.1986  of  the Bombay High Court in Appeal No. 676 of 1986.      B.B. Ahuja,  C.V. Subba  Rao and  Ms. A Subhashini, for the Appellants .      N.A.  Palkhiwala,  S.P.  Mehta,  Ms.  A.  Vasantji  and Praveen Kumar for the Respondent.      The Judgment of the Court was delivered by 117      SABYASACHI MUKHARJI, J. Special leave granted.      This is  an appeal  from the  judgment and order of the Division Bench  of the  High Court  of  Bombay  whereby  the Division Bench  concurred with the judgment and order of the learned Single Judge of the Court. The respondent herein had entered into  an agreement  on or  about 5th  May, 1978 with Thai Rayon  Company Limited  at Thailand (hereinafter called the foreign  company). It  was engaged  in the  business  of manufacturing and  selling  Stapple  Fibres  at  Bangkok  in Thailand. The  agreement recited  that the  respondent as he was described  was a  technician holding a Bachelor’s degree from the  Massachusetts Institute  of Technology, U.S.A. and has had  several years  of experience  in  the  business  of manufacturing  and   selling  Stapple   Fibres  through  his association with  companies engaged  in similar business and the  foreign   Company  as  referred  to  in  the  agreement aforesaid as  the ’employer’  had approached  him, i.e.  the technician to  make available to the ’employer’ his services

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in Bangkok on certain terms and conditions, inter alia, that the Thai Company would pay to the respondent remuneration of $12,000 per  annum in  quarterly instalments and it would be receivable at  Bangkok. The  agreement was  for a  period of three years  with liberty  to either  party to  terminate it after six  months’ notice. It was subject to the approval of the Governments of Thailand and India and other authorities, if any.      The respondent  applied to  the Central  Government  in India for  its approval  of his  employment  with  the  Thai Company under  the agreement for the purpose of securing the benefit conferred  by section  80 RRA of the Income Tax Act, 1961 (hereinafter  called ’the  Act’). On  June 8,  1979 the Government informed  the respondent  that it  was unable  to approve the  employment with the Thai Rayon Company Limited, Bangkok, as  per the  terms and  conditions contained in the agreement dated  5th May, 1978 for the purpose of section 80 RRA of  the Act  as the  section,  according  to  Government contemplated rendering  of  service  outside  India  in  the status of  an ’employee’.  It was further stated that it was seen that  the status  of the  respondent under  the foreign employer  was   that  of   a  ’consultant’  and  not  of  an ’employee’. Therefore,  the remuneration  contemplated under section 80  RRA was  from  an  employer  and  would  not  be applicable to  the instant case of the respondent, according to the Government.      Thereafter it  appears, after  hearing the  respondent, the 118 Government by  its letter dated 17th February. 1981 observed that the  benefit of  section 80 RRA of the Act could not be given to  the respondent  for  the  reason  stated  in  that letter.      Was the  Government right  in the  view it took, is the question here?      The learned  Single Judge of the High Court quashed the communication refusing  to accord  approval and directed the Government to reconsider the application of the respondent.      There was  a Letters  Patent Appeal before the Division Bench of  the High Court. The Division Bench found no reason to interfere  with ,the view expressed by the learned Single Judge and  accordingly the  appeal was  dismissed. Aggrieved thereby the  appellant who  was the  respondent  before  the trial court has come up to this Court.      We are  concerned in  this appeal with the construction of section  b 80  RRA of  the Act.  The said  section is  as follows:           "80 RRA.  (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 and           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 fifty per cent thereof:           Provided  that   where  the   individual   renders           continuous service outside India under or for such           employer for a period exceeding thirty-six months,           no deduction  under this  section shall be allowed           in respect  of the  remuneration for  such service           relating to  any period  after the  expiry of  the           thirty-six months aforesaid.           (2) The  deduction under  this  section  shall  be

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         allowed-           (i) in  the case  of an  individual who is or was,           immediately before  under-taking such  service, in           the employment  of the  Central Government  or any           State 119           Government, only  if such  service is sponsored by           the Central Government;           (ii) in  the case of any other individual, only if           he is a technician and the terms and conditions of           his service  outside India  are approved  in  this           behalf by the Central Government or the prescribed           authority.           Explanation: For the purposes of this section-           (a) "foreign  currency"  shall  have  the  meaning           assigned to  it in the Foreign Exchange Regulation           Act, 1973 (46 of 1973):           (b) "foreign employer" means,-                (i) the Government of a foreign State; or                (ii) a foreign enterprise’ or                (iii) any  association  or  body  established                     outside India;           (c) "technician" means a person having specialised           knowledge and experience in-                (i)       constructional   or   manufacturing                     operations or  mining or  the generation                     or distribution  of electricity  or  any                     other form of power; or                (ii)  agriculture,  animal  husbandry,  dairy                     farming,  deep   sea  fishing   or  ship                     building; or                (iii) public  administration or industrial or                     business management; or                (iv) accountancy; or                (v) any  field of  natural or applied science                     including  medical   science  or  social                     science; or                (vi) any  other field  which  the  Board  may                     prescribe  in   this  behalf,   who   is                     employed in  a capacity  in  which  such                     specialised knowledge and experience are                     actually utilised." 120      The only  question involved  in this  appeal is whether any remuneration  was received  by the respondent in foreign currency from  his employer,  being a  foreign employer  for service rendered by him outside India. Mr. Ahuja counsel for the revenue  contended that  the remuneration  received by a part-time consultant  from a  foreign employer  or an Indian concern abroad cannot include remuneration paid to a person. Mr. Ahuja  further submitted  that this section was really a counter part  of section  10(6)(vii) of  the Act. He further submitted that  it should  be construed  to be  confined  to deduction to be given only in the case of remuneration given to an  employee and  not the  fees paid to a consultant or a technician. We  are unable to accept this contention. It has been specifically made clear that remuneration due should be chargeable  under  the  head  "Salaries"  for  the  services rendered as  a technician  in section 10(6)(via). Section 80 RRA  does  not  use  these  phrases.  Apparently,  advisedly therefore, it  must  follow  that  it  did  not  cover  fees received by the consultant for the services rendered outside India.      An analysis  of section 80 RRA reveals that in order to be entitled  to deductions  at the  rate enumerated  in  the

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section by  the respondent, the sum must be (i) remuneration (ii) received  by him  in foreign  currency (iii)  from  any employer (being a foreign employer or an Indian concern) for any service  rendered by him outside India. Furthermore, the terms and  conditions of  his service  outside India must be approved by  the Central  Government. Further in the case of the respondent  the deduction  of the  section would  not be allowed in  respect of  the remuneration  if  such  services related to any period after the expiry of the 36 months. The respondent was  not employed  beyond a  period of 36 months. Indisputably, the  sum concerned  in this appeal, being fee, was remuneration  in the sense being ’amount paid in lieu of services rendered’.  The sum  in question  was  received  in foreign currency.  There is  no dispute as to that. The only question  is   whether  the   sum  was  received  from  ’any employer’. The  other requirement  is that the sum should be received for  the services  rendered outside India. There is no dispute  as to  that. The  only  question  that  requires consideration in  the background  of indisputable  facts  in this case  is whether the sum received by the respondent was from ’an employer’. In other words, whether Thai Company was the employer  of the respondent. On behalf of the revenue it was submitted  by Mr.  Ahuja that  it was  only as a counter part of section 10(6)(via) and that the section should be so considered  properly.   Mr.  Palkhiwala  appearing  for  the respondent pointed  out the  object of section 80 RRA of the Act was manifest to encourage, firstly earning 121 of  foreign  exchange  by  India,  secondly,  bringing  that currency by  Indian  nationals  from  abroad  to  India  and thirdly, to  improve the  status of  the Indians  abroad and increasing the market of Indian technician. It appears to us to  be   plausible  object  in  the  present  socio-economic context. We  find that  the  amplitude  of  the  expressions "employee" and  "employer" covers the cases of consultant or technician. We  find in the scheme of the section nothing to warrant any exception as contended for by the revenue. If we read the  section with  the object of the section in view as suggested by  Mr. Palkhiwala  then there  is no  warrant  to restrict the  meaning in the manner canvassed by the revenue before us.  Mr. Ahuja,  however, drew  our attention  to the objects appearing  in clause  31 of  the Finance  Bill  1975 which later  on became the Act. We find nothing in clause 31 to suggest  a restricted meaning as canvassed by Shri Ahuja. The relevant portion of clause 31 reads as follows:           "31.  Tax   relief  in   respect  of  remuneration           received  from   foreign   employees   by   Indian           technicians, etc.  At present, Indian technicians,           etc.,  who  work  for  a  short  period  during  a           financial year  with a  foreign  Government  or  a           foreign enterprise  are liable  to Indian  tax  if           they remain  "resident in  India" for tax purposes           in that  year, on  the whole  of the  remuneration           received  by   them  from  the  foreign  employer,           without any  allowance in  respect of  expenditure           incurred by  them out  of  such  remuneration  for           meeting higher  living costs  and other  essential           expenditure in  foreign countries. To relieve this           hardship, the  Bill seeks  to make  a provision in           the Income-tax Act for allowing a deduction in the           computation of  the taxable income, of 50 per cent           of  the  remuneration  received  by  them  from  a           foreign Government  or a foreign enterprise or any           association or body established outside India".      We find nothing to warrant a restricted construction as

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canvassed by  Mr. Ahuja. We were also referred to the speech of the  Hon’ble Minister  introducing the  Bill  before  the Parliament, where the Hon’ble Minister, inter alia stated as follows:           "There are at present certain income-tax exemption           limits applying  to salaried assessees relating to           house rent allowance and leave travel concessions.           These are  being liberalised.  Indian  technicians           employed abroad are also proposed to be given some           tax relief." 122      Shri Ahuja  contended that  it was  only  to  encourage salaried employees  who were  going abroad  and the  cost of living was  so high  abroad to  encourage  them  to  get  an exemption from  tax on the salary earned abroad working as a technician that this provision was introduced. But this does not indicate that any limitation was intended to be confined only to  the salaried  employee  and  not  extended  to  any technician or  consultant employed  abroad  for  the  period stipulated in  the section. We find that there is no warrant in the  section to  restrain the  expression  "remuneration" received from a foreign employee only to the salary received by an  employee. In  our opinion, employment as a technician for the  purpose indicated  by Shri Palkhiwala could also be an object  of the Act and in such a case the fee received by consultant or  technician would also come within the purview of the section concerned. In Aiyar ’The Lexicon. 1940 Ed. at page 387  it has  been stated  that an  employer is  one who employs, one  who engages  or keeps  men in service, one who uses or  enjoys the  service of  other persons  for  pay  or salary. The  words ’employer’  or ’employee’ are used not in any technical sense.      In Shri  Chintaman Rao & Another v. The State of Madhya Pradesh, [1958]  S.C.R. 1340  at page 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 other for hire. The  employer is one who employs the services 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  other  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. Ellis & Co., [1905] 1 K.B. 324 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  Edition, Vol.  2 at page 893. The expression, however, must 123 depend upon the context of the particular provision in which the expression  appears. lt  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

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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 B.C.,  [1965]   I  W.L.R.  576.  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 person.  It follows, therefore, that it comprehends whole time servant  or part  time engagee.  It is significant that section 80 RRA 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" to only salary received by an employee  abroad. The  literal meaning  is clear, we need not bother  any more  for the  intention or the purpose. The intention, in  our opinion, is writ large. In principle also we are  unable to  find any  rationale or the reason for the distinction sought to be made on behalf of the revenue.      In the  aforesaid view  of the  matter, we  are of  the opinion that  the High  Court was  right in  dismissing  the appeal and  we find no reason to interfere with the order of the  High   Court.  The  appeal,  therefore,  fails  and  is accordingly, dismissed without any order as to costs. S.L.                                       Appeal dismissed. 124