JUDGMENT M.C. Agarwal, J.
1. These writ petitions in the name of foreign technicians have been preferred by the Bharat Heavy Electricals Limited, Hardwar (hereinafter referred to as "the BHEL"), and are directed against the orders dated February 18, 1994, passed by the Commissioner of Income-tax, Meerut, whereby he rejected the petitions of the petitioners under Section 264 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), praying that the assessment orders framed by the Income-tax Officer, Saharanpur, be modified to the effect that the taxable income of the assessee-petitioners was nil.
2. I have heard Sri Rajesh Kumar, learned counsel for the petitioners, and Sri R. R. Agarwal, learned standing counsel for the Income-tax Department.
3. The matter in issue relates to the assessment year 1990-91 in Writ Petitions Nos. 532, 533, 534 and 535 of 1994 and to the assessment year 1989-90 in Writ Petitions Nos. 535 and 557 of 1994.
4. All the aforesaid persons were Czechoslovakian technicians in the employment of Skoda Export, Czechoslovakia. Bharat Heavy Electricals Limited, Hardwar, had entered into an agreement with the Gujarat State Electricity Board for the setting up of two 60 M.W. reversible generation units at Khadana Hydro Project. For the execution of the said contract, it had engaged the services of the said Skoda Export who deputed its technicians for the erection and commissioning of the said units. An agreement dated November 12, 1984, was executed between BHEL and Skoda Export under which certain amounts were payable by BHEL to Skoda Exporl as consideration for the technicians deputed by it. The payment was to be made per technician. In addition, BHEL also provided them rent-free accommodation. The said agreement was approved by the Government of India, vide letter dated December 18, 1984. The aforesaid technicians had come and even gone back, returns of income were filed on their behalf by BHEL declaring nil income. However, before filing the returns certain amounts were paid by way of self-assessment tax. This was done by way of precaution to avoid any penalty in case any income was found to be taxable. The assessments of all the petitioners were completed by the Assistant Commissioner of Income-tax, Circle-I, Saharanpur, in the ' status of non-resident. The Assessing Officer brought to tax amounts paid by BHEL to Skoda Export as income from other sources holding that there is no relationship of employer-employee between the petitioners and BHEL. He also brought to tax the value of accommodation and also included the income-tax paid by BHEL in respect of each petitioner treating the same to be a perquisite. The petitioners filed revision petitions under Section 264 of the Act contending that they were non-resident technicians, no salary was received by them from BHEL, that the rent-free accommodation was not a perquisite and the income-tax paid by BHEL could not be added to the income and lastly that there was a Double Taxation Avoidance Agreement (hereinafter referred to as "the DTAA"), between India and Czechoslovakia and, therefore, the income of the petitioners could not be taxed in India. The Commissioner of Income-tax accepted the contention of the petitioners that the value of the rent-free accommodation could not be taxed. However, on other points the submissions of the petitioners were rejected. They have, therefore, filed the present writ petitions.
5. It has been contended that in pursuance of the agreement between BHEL and Skoda Export, the latter raised invoices on BHEL for the technical services rendered and that the petitioners received salary from Skoda Export in Czechoslovakia and no amount was received by them from BHEL in India. It is further stated that it was under mistaken advice that BHEL deposited tax on the amount relatable to each technician, even though, the technicians have not individually received any salary or remuneration from BHEL. It has been contended that each of the petitioners was in India for a period of less than 182 days and by virtue of the DTAA they could not be taxed in India. It has also been contended that there was no relationship between the petitioners and the BHEL.
6. The respondents have filed identical counter-affidavits in all the writ petitions. It is stated that the return of income on behalf of the petitioners was filed which was signed by one S. N. Sharma, Manager (FP) BHEL, mentioning himself to be the agent of the assessee. Along with the return a computation chart of taxable income was also filed which was certified by N. P. Kohli, Senior Accounts Officer, BHEL, Hardwar. It is stated that no tax was deducted at source but income-tax was paid by self-assessment. It is contended that along with the returns of income, salary certificates were annexed which showed payment of salary to the foreign technicians by the BHEL, but during the assessment proceedings, it was stated through a letter dated June 8, 1992, that remuneration is paid to the technicians by Skoda Export, Czechoslovakia, who were not residents of India. It is averred in the counter affidavit that the Assessing Officer denied the benefit of the alleged double taxation agreement as tax had already been paid in India and the case of the assessee did not fall under the purview of the DTAA.
7. The first point that arises in these writ petitions is whether the aforementioned foreign technicians cannot be taxed in India because of the DTAA between India and Czechoslovakia. A copy of the agreement has been placed as annexure "8" to the writ petition and is not challenged.
Clauses (1) and (2) of Article 15 of the agreement stand as under (see [1987] 167 ITR (St.) 34) :
"1. Subject to the provisions of articles 16, 17, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first mentioned State if :
(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the relevant "previous year" or "year of income", as the case may be ; and
(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State ; and
(c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State."
8. A perusal of the above clauses would show that they cover salaries, wages and other similar remuneration, meaning thereby that even if there is no relationship of employer and employee between BHEL and the petitioners yet if any payment is made by the BHEL to the petitioners for personal service rendered by them it would be covered under the aforesaid clauses. Clause (2) provides that the remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State, if the conditions mentioned in Sub-clauses (a), (b) and (c) are fulfilled. Admittedly, in the cases of the present petitioners they are all residents of Czechoslovakia and have been assessed in the status of nonresident. Under Section 6(1)(a) an individual is said to be resident in India in any previous year if he is in India in that year for a period or periods amounting in all to 182 days or more, the petitioners having been treated by the Assessing Officer as non-resident. It means that none of them was in India for a period of 182 days or more. The petitioners denied having received any remuneration from BHEL and this was their contention even before the Assessing Officer, who dealt with the contention as under :
"It has also been informed in writing that BHEL, Hardwar, remits the payment to Skoda Export under agreement at the mutually agreed rates for each technician against the commercial invoice of Skoda Export. I have verified the invoices. The invoices are issued by Skoda Export to BHEL, Ranipur (Hardwar), India. The common description on such invoices is as follows :
'On the basis of contract agreement for supervisory services for erection, testing and commissioning of 2 x 62 MW units of HC Kadana signed on November 12, 1984, we charge you for technical services of experts '. "
9. This shows that what was shown by BHEL as payment to the technicians was actually payment made by it to Skoda Export for the services rendered by the petitioners and it was mistakenly shown as payment to the petitioners. In the counter affidavit, there is no specific denial of the allegation of the petitioners that no payment was made by BHEL to them and the respondents have merely placed reliance on the salary certificates attached to the returns. Therefore, the second condition contained in Sub-clause (b) aforesaid was also fulfilled. The last condition contained in sub- Clause (c) is that the remuneration should not be borne by a permanent establishment or a fixed base which the employer has in the other State. No such permanent establishment of Skoda Export is shown to exist in India nor is the remuneration shown to be borne by such permanent establishment. Therefore, the income of the foreign technicians could not be taxed in India by virtue of article 15 of the DTAA. Before the Commissioner of Income-tax, a certificate was produced showing the period of stay in India of each of the petitioners. The Commissioner has not believed it on the ground that it was not shown as to in what circumstances and for what purpose the said paper was given by some Executive Engineer of Gujarat State Electricity Board. It was not necessary for the petitioners to produce any certificate before the Commissioner of Income-tax because their status as non-resident had already been accepted by the Assessing Officer in the assessment order itself and it was not open to the Commissioner to question the residential status. The contention of the petitioners is that their remuneration was paid to them in Czechoslovakia by their non-resident employer, Skoda Export. This contention seems to be correct in view of the assertion by the petitioners and the averments made in the assessment order. However, it is admitted by the respondents, that there was no contractual relationship between the petitioners and the BHEL who was obliged to make payments to Skoda Export. Therefore, even if any payment is made by BHEL to the present petitioners it would be on behalf of the petitioners' foreign employer, Skoda Export. The result thus is that all the three conditions mentioned in Clause (2) of article 15 of the DTAA were satisfied in this case and the remuneration if any received by them could not be taxed in India. I hold accordingly.
10. As regards income-tax purporting to have been paid by BHEL on behalf of the petitioners, learned counsel for the petitioners contended that since there was no relationship of employer and employee between them and BHEL, the tax paid by the latter cannot be treated as a perquisite. Reliance is placed on N. Sciandra v. CIT [1979] 118 ITR 675 (Cal). In view of the above finding that the income is not taxable in India because of DTAA, this controversy does not survive and need not be decided.
11. On behalf of the respondents it was contended that the technicians, i.e., the petitioners, have returned to their respective countries and they are not interested in the matter and, therefore, these writ petitions by them are not maintainable. This contention is not tenable. Under Section 163 of the Act, a non-resident can be assessed through an agent. BHEL was, in terms of the agreement with Skoda Export, under obligation to pay all taxes leviable on Skoda or its technicians. It is for this reason that BHEL put itself in the position of an agent of the petitioners and paid the tax and filed the returns. The Department did not object. Therefore, it cannot now say that BHEL cannot maintain these petitions on behalf of the foreign technicians. In effect BHEL is the real assessec and the petitioner.
12. For the above reasons, the Assessing Officer as well as the Commissioner of Income-tax were not right in holding that the DTAA between India and Czechoslovakia was not applicable and the income of the petitioners was not exempt from Indian tax, These writ petitions, therefore, deserve to be allowed.
13. The writ petitions are allowed and the assessments made on the petitioners under the Income-tax Act, 1961, for the years referred to above are hereby quashed. The tax paid on behalf of the petitioners by BHEL shall be refunded to BHEL forthwith. The parties shall bear their own costs.