Under section 10(5-B) of Income Tax Act, the tax to be borne is not treated as a perquisite. Under this provision any non-resident who renders service as a technician can be paid remuneration on which tax would be borne by the employer, which would be exempt. The important condition is that the individual must be a technician and he must not have been resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India.

A technician is defined to mean a person having specialised knowledge and experience in constructional or manufacturing operations or in mining or generation of electricity or any other form of power or inagriculture, animal husbandry, dairy farming, deep-sea fishing or ship building. Other persons who are deemed to be technicians are those who have specialised knowledge or information in evaluation of diamonds, cookery and in information technology.

Questions have been raised before the Authority for Advance Rulings (AAR) in the case of individuals who are to be paid remuneration by Indian employers in respect of which tax is proposed to be borne by the employers.

In one such case, Advance Ruling F No 20 of 1995 (1999) 104 Taxman 168), an Indian company, which was a hundred percent subsidiary of an English company, in order to manufacture highly specialised products relating to paint and chemical industry, proposed to set up two factories and a technical laboratory in support thereof. The English company, without charging any technical know-how fee, deputed its experts for the purpose.

The applicant, a British national, was one of them deputed by the English company as managing director of the Indiancompany to oversee the project with overall responsibilities for establishment of factory as well as for management and administration of manufacture and sales once production started. Thus, the applicant came to India for the very first time.

The applicant was a post-graduate in business administration as well as in chemistry from Oxford and Harvard Universities and had over 20 years of wide technical, commercial and manufacturing experience in the paint industry. He was earlier in-charge of setting up a similar factory elsewhere. The applicant sought for advance ruling under section 245-Q as to whether he was a technician within the meaning of section 10(5-B) and thereby entitled to exemption of salary income paid by the company.

The AAR in its ruling observed that the applicant was a post-graduate in business administration and was also the managing director of the Indian company. During his employment in India for three to five years, he had the overall responsibility not only for the establishment ofthe factory but also for the management and administration of the manufacture and sales once production started.

The AAR ruled that the mere fact that the applicant might also be attending to some administrative functions would not be sufficient to dis-entitle him from claiming the exemption under section 10(5-B).

The applicant had specialised knowledge and experience in constructional and manufacturing operations relevant to the nature of the business which was being set up by the English company in India and that it was the specialised knowledge and experience in such operations that was being utilised by the Indian company in its Indian business.

In another case, Advance Ruling P No 21 of 1996 ((1999) 104 Taxman 174), an English company in view of its expanding business of manufacturing very high quality paints the world over, incorporated its Indian subsidiary and started construction for setting up of manufacturing units in India in the year under consideration. The applicant, a British nationalwas deputed by the English company as commercial manager of the Indian company getting salary, perquisites, etc, as settled in contract.

Thus, the applicant came to India for first time in the year under consideration. The applicant claimed that he had over 20 years work experience, of which he had been with the English company for over 10 years and that over the years, the applicant had played an important role in explaining the technical strength of the products of the English company and, in addition, had understood the technical needs of of the customers and acted as an interface between the customers and production facilities of the English company.

The AAR in its ruling observed that the nature of experience which he got with the English company was - (i) role in explaining the technical strengths of the producers to customers; (ii) understanding of the technical needs of the customers and acting as an interface between the customers and the production facilities; (iii) development andimplementation of after sales service procedures and methods.

Neither the experience in the above fields nor the nature of responsibilities which the applicant was supposed to perform while in employment with the Indian company were related to actual manufacturing process. In other words, the significant role connected with manufacturing operations was absent. In any event, since the manufacture of the products was yet to commence, it could not be said that the applicant was employed in a capacity in which his experience was actually being utilised in manufacturing operations.

Therefore, it was observed that the applicant did not appear to be a technician under section 10(5-B), particularly when actual participation of the applicant in the manufacturing operations was missing. Hence, the applicant was not a technician within section 10(5-B) and was not entitled to exemption.

In the third case, Amir Zai Sangin vs CIT (1999) 104 Taxman 179), "Telia" a Swedish telecommunication firm along with othersincorporated an Indian company for expansion of its business. The applicant, a non-resident, was appointed as technological project manager, to set up and implement the digital cellular telecommunication network project of the Indian company. The applicant not only had academic qualifications but also had a long practical experience in the field of telecommunications.

As per the contract, "Telia" was to provide the applicant salary with allowances and perquisites and also meet all income tax liabilities in India. The applicant came to India for the first time in the financial year 1995-96. The applicant sought advance ruling as to whether he was a qualified technician.

The AAR in its ruling held that in the present case, while all the other conditions were fulfiled, the only contested issue was as to whether the applicant qualified as a technician within the meaning of section 10(5-B).The definitions referred to by the department did not exclude the field of cellular telephones from the purview of theexpression "information technology" as they also referred to the process of dissemination of information through the medium of computers.

The working of the system as explained showed that the cellular network was a medium for dissemination through a system of computers and was essentially a computer network. In the light of this information, the AAR held that the expression "information technology" as elaborated in the notification of July 27, 1993 also covered the area of cellular network. Therefore, the applicant fulfiled the definition of the expression "technician" in section 10(5-B) and was entitled to the exemption under section 10(5-B).

The aforesaid rulings of the AAR throw considerable light on the meaning of the word "technician" and these rulings would have persuasive value through they would not be binding in the case of other applicants. The important point is that the aforesaid section 10(5-B) is not confined to a foreign citizen and the benefit would also be available to Indians who havebeen non-resident during the four years immediately preceding the year of their return to India.

The author is a Supreme Court advocate