Mohini Bhussry - Mr. Balu Doraisamy is a resident of Singapore. He is employed with Compaq Computers India (P.) Ltd. (CCIPL) as Managing Director. Earlier he was with Compaq Computers Asia (P.) Ltd. (CCAPL) which is a subsidiary company of Compaq Group of Computers Corporation (COMPAQ), a US-based company. It manufactures several ranges of notebook computers, which are subsequently distributed worldwide.

The Indian subsidiary was set up to market and distribute Compaq’s products in India. As a Managing Director, his responsibilities include overseeing the day-to-day operations of the company, accountability to the customers for the technical performance of the products and the financial performance and well-being as well as security of the employees of the company. It was also stated that his services are also utilised for checking the feasibility of new technologies in India, which would help in cost cutting and providing custom made computers and solutions.

2. The applicant has sought a ruling under section 10(5B) of the Income-tax Act, 1961 (‘the Act’) on the following questions :

(a)Whether the applicant will qualify as a ‘Technician’ in accordance with section 10(5B); and accordingly;

(b)Whether, the taxes paid by Compaq Computer Asia (P.) Ltd., Singapore on behalf 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.

3. The eligibility criterion under section 10(5B) requires the applicant to be a technician, thereby meaning a person having specialised knowledge and experience in the fields referred to in the said section or such other field as the Central Government may specify by notification in the Official Gazette and who is employed in India in a capacity in which such specialised knowledge and experience are actually utilised. It is also essential that the applicant must not be resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India.

4. Coming to the facts of the case, the applicant holds a master’s degree in Mathematics as well as masters in Computer science. According to the jurisdictional Commissioner, he appears to have vast experience in the field of information technology. He also satisfied the residence criteria as per the duration of his stay in India.

5. During the course of hearing, it was argued on behalf of the department that the applicant’s abilities are not being utilised in the business activities in India as the manufacturing operations are carried out by the parent company outside India. On the other hand, it was argued on behalf of the applicant that he is actually utilising the knowledge, information and experience in the field of information technology while serving in the subsidiary set up in India and has claimed that actually some part of the manufacturing process is carried out in India as evidenced by the expenses debited under the head ‘Excise duty’, plant and machinery, fuel expenses, raw-material, etc., which are integral part of the manufacturing account. Further, it is claimed that CCIPL has now become a totally integrated provider of information technology requirements and offers complete information technology solutions, ranging from the sale of PCs and high-end servers to providing high value added network solutions. CCIPL has assembly operation in Bangalore and Pondicherry. It has set up a financial services related ‘proof of concept centres’ at Mumbai. It has a Technology and Benchmark testing centre at Bangalore. Reliance was also placed upon the earlier rulings of the authority in the case of Arthur E. Newell, Monte Harris & Overseas Operations Inc. (Neal Conner) to claim that he is entitled to the benefit of the exemption under section 10(5B).

6. On the basis of the arguments, advanced on both sides, we are of the opinion that the answer to both the questions should be in the affirmative as under :