Authority Tribunal
Vance Robert Heffern vs Commissioner Of Income-Tax on 20 August, 1999
Equivalent citations: [2000]241ITR299(AAR)
RULINGS A.A.R. No. 447 of 1998 Decided On: 20.08.1999 Appellants: Vance Robert Heffern Vs. Respondent: Commissioner of Income-tax Hon'ble Judges:
Suhas C. Sen, J. (Chairman), Subhash C. Jain and Mohini Bhussry, Members Counsels:
For Appellant/Petitioner/Plaintiff: Arvind Sonde and Girish Naik, Chartered Accountant For Respondents/Defendant: M.K. Shah, ACIT Subject: Direct Taxation Acts/Rules/Orders:
Income Tax Act, 1961 - Sections 2(30), 6, 6(1) and 10(5B) Cases Referred:
Shane G. Montgomery, AAR No. 283 of 1996; In Re: Robert W. Smith, [1995] 212 ITR 275 (AAR); Arthur E. Newell v. CIT, [1997] 223 ITR 776 (AAR); John A. Sayre v. CIT, [1999] 236 ITR 652 (AAR) RULING Mohini Bhussry, Member
1. The applicant, Mr. Vance Robert Heffern, is a citizen of the USA. He is employed with ALLTEL Information Services International Holding Inc. ("AISIH"). The employer-company has deputed him to India as a telecom manager at ALLTEL Information (India) Private Limited (AIPL) which is a wholly owned subsidiary of ALLTEL Information Services Inc., USA ("AIS"). AIPL is engaged in the business of developing and providing telecommunication services in India. It has entered into an Operational Support Services agreement ("OSS") with Hughes Ispat Limited (HIL), an Indian company, which has been awarded a contract for rendering telecommunication services in the Maharashtra telecom circle. Under the OSS agreement, the following services would be rendered by AIPL :
Systems integration ;
Development of software ;
Maintenance of software supplies sourced from both AIS and third party vendors ;
Information services ;
Disaster recovery ; and Sub-contractor management.
2. The applicant is in India to assist AIPL in discharging its obligations under the OSS agreement.
3. The applicant has presented this application under Section 245Q(1) of the Income-tax Act, 1961, seeking a ruling of this Authority on the following questions :
(i) Whether the applicant will qualify as a "technician" in accordance with Section 10(5B) of the Act ; and accordingly,
(ii) Whether, the taxes paid by the employer of the applicant would be exempt from taxation under Section 10(5B) of the Act, for a period of forty-eight months commencing from the date of arrival in India.
4. According to the applicant, he qualifies to be regarded as a "technician" in terms of Clause (iii) of the Explanation to Section 10(5B) of the Income-tax Act, 1961, read with Notification No. 569(E) (see [1993] 203 ITR (St.) 56), dated July 27, 1993, issued thereunder and entitled to the benefit of exemption as contemplated by that section.
5. The applicant's total stay in India during the financial year 1997-98 was 38 days. He was, therefore, not resident in India during the financial year 1997-98 under Section 6 read with Section 2(30) of the Income-tax Act, 1961, which precedes the financial year 1998-99 during which the application was filed. It may also be mentioned here that though his deputation to India commenced from April 1, 1998, the applicant first arrived in India on February 11, 1998. Further, he was not resident in India within the meaning of Section 6(1) of the Income-tax Act, 1961, during any of the financial years 1993-94, 1994-95, 1995-96 and 1996-97. As per the agreement dated November 10, 1998, entered into with the applicant, the employer-company (AISIH) has undertaken to bear all Indian taxes arising on the compensation to be paid to the applicant for his services in India. An individual claiming exemption under Section 10(5B) must satisfy the following four conditions :
(i) He must be a "technician" as defined in the Explanation ;
(ii) He must be in the employment of one of the several entities set out in the clause or in any business carried out in India ;
(iii) 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 ; and
(iv) The taxes on his salary income should be paid by the employer.
6. In the present case, there is no dispute that the conditions (ii), (iii) and (iv) are fulfilled and the only issue requiring examination is as to whether the applicant qualifies as a "technician". For the purpose of Clause (5B) of Section 10, "technician" means a person having specialised knowledge and experience in any of the areas mentioned against clauses (i) to (iii) of the Explanation to that section. The further requirement is that he must be employed in India in a capacity in which such specialised knowledge and experience are actually utilised. Notification No. 569(E) (see [1993] 203 ITR (St.) 56), dated July 27, 1993, issued in terms of the aforesaid Clause (iii) specifies the field of "information technology including computer architecture systems, platforms and associated technology, software development process and tools" as being covered under Section 10(5B) of the Act. Therefore, the point for consideration before the authority is whether the applicant can be said to be a person having specialised knowledge and experience in the aforesaid field. This also involves a consideration of the nature of the operations which the applicant will carry out during the period of his assignment in India so as to judge whether his specialised knowledge and experience are actually utilised in his employment in India.
7. The applicant is an employee of AISIH which specialises, inter alia, in the provision of telecommunications related services and has the necessary resources to provide specialised personnel: Even though AIPL is also engaged in the business of developing and providing telecommunications related services, it being a newly incorporated company was in need of specialists to assist itself in carrying on its business efficiently. Therefore, AIPL entered into an agreement for deputation of specialists with AISIH as a result of which the applicant has been seconded to AIPL as telecom manager to assist AIPL in rendering services to HIL as agreed upon under the OSS agreement. The applicant has filed a detailed resume outlining his qualifications and experience. But he did not produce any certificate regarding his educational qualifications. He stated that he had not brought the certificates along with him while coming to India and it was not practically feasible to presently access the same. However, it is stated that he graduated from the Meadville Area School in 1977 and filed an affidavit as a proof of his educational qualifications. It may be stated here that the fact that the applicant has not been able to produce the certificate in support of his educational qualification will not be destructive of his case. Further, even if it is found that he does not have any technical education he cannot be held disentitled for being regarded as a "technician" within the meaning of Section 10(5B). In the case of Shane G. Montgomery (AAR No. 283 of 1996) where the educational certificates were not available, this authority has held that, if it can be established that the specialised technical knowledge and past experience of the applicant were actually utilised in India, the applicant would be entitled to the benefit of exemption contemplated under Section 10(5B). In P. No. 25 of 1996 [1999] 237 ITR 827 (AAR), where the applicant did not receive any technical education from any recognised body, this authority has taken the view that lack of formal education cannot be regarded as a disqualification for treating the applicant as a "technician" as it is of the considered view that "special knowledge may be obtained either by education or by special experience".
8. In the resume, the applicant has claimed that he has wide experience in consolidation of multi-State call center operations along with conversion and implementation of a variety of support systems. He has over 14 years of experience with ALLTEL in the field of plant operations and has held service center/call center positions which have resulted in his developing a strong foundation of technical and administrative knowledge in both wireline and wireless operations. He has held responsibilities as supervisor and manager of wireless call centre quality and development and customer service department in the ALLTEL group. A certificate issued by AIS regarding previous work experience of the applicant within the ALLTEL group has also been furnished. It will be seen that in view of his knowledge and experience he is eminently suitable for the present job. He has been deputed to India by his employer-company as the telecom manager under the contract with the Indian company, AIPL, where his knowledge and experience are being utilised as a "technician" as would be seen from his present job description below.
9. Implementation of documented work-flows and detailed descriptions of execution of telephone operations work activities.
10. Assistance in the deployment of services which include establishing telephone operating departments and transferring business process knowledge to the client.
11. Acting as liaison between the client and AIPL's technical staff to develop processes and/or functionally to meet the goals of the business.
12. Co-ordination of the gathering of requirements for business process development and billing system enhancements.
13. Providing end-user training and reference materials related to the business processes and billing system.
14. Assisting with selection and implementation of third party products to provide adequate solutions for telephone operations.
15. Providing consulting for customer care, call handling, service provisioning, service maintenance and other aspects of telephone operations.
16. The nature of the applicant's responsibilities, thus, encompasses all aspects of consulting, deployment of services, implementation of documented work flows and providing end-user training in respect of telephone operations which indeed require an extensive application of technical skills and a high degree of specialised knowledge and experience. The applicant's entitlement for being treated as a technician is beyond question.
17. The applicant's contention that he is a "technician" within the meaning of Section 10(5B) of the Income-tax Act, 1961, read with the notification dated July 27, 1993, has not been opposed by the Department. The only objection raised by the Department is that since the applicant is an employee of a foreign company he is not eligible for exemption under Section 10(5B) of the Act. The position in this behalf was considered at great length by the authority in the case of Robert W. Smith, In re [1995] 212 ITR 275 (AAR). In that case, it was held that the applicant, who is employed in any business carried on in India would also qualify as a "technician" for the purpose of the section. Similar views were expressed in Arthur E. Newell v. CIT [1997] 223 ITR 776 (AAR) and John A. Sayre v. CIT [1999] 236 ITR 652 (AAR).
18. The applicant claims to fall within the definition under consideration by virtue of Notification No. 569(E) (see [1993] 203 ITR (St.) 56), dated July 27, 1993. The Central Government has, by this notification, notified the following fields under Section 10(5B) of the Income-tax Act, 1961 :
grading and evaluation of diamonds for diamond export or import trade ;
cookery ; and information technology including computer architecture systems, platforms and associated technology, software development process and tools.
19. Longman's Dictionary of Contemporary English (new edition, 1987) defines "Information Technology" as "the science or practice of collecting, storing, using and sending out information by way of computer systems and telecommunications". The work of the applicant would involve providing technical assistance in the field of telecommunications and related services which is essentially a medium for dissemination of information through a system of computer. The applicant's claim that he qualifies as a technician under Clause (iii) of the Explanation, therefore, succeeds.
20. For the reasons discussed above, this authority is of the opinion that the applicant fulfils the conditions of Section 10(5B) and the answers to the questions raised by him should he in the affirmative. The authority, therefore, pronounces the following ruling :
ruling
1. Whether theapplicant will qualify as a "technician" in accordance with section 10(5B) of the Act ; accordingly Yes
2. Whether the taxes paid by the employer of the appli-cant would be exempt from taxation under section 10(5B) of the Act, for a period of forty eight months commencing from the date of arrival in India.
Yes