G.B Patnaik, J.:— The order of the Income-tax Officer dated May 2, 1990, under section 115A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), annexed as annexure-14 to the writ application, is under challenge in this writ application. The payment made by the Indian company to the foreign company in consideration of the assistance rendered by the seller or its sub-contractors as provided under article V.1(a) and 2 of the agreement at the rate of 350 U.S dollars per man-day of time spent by the experts of the seller is the subject-matter of dispute. The Income-tax Officer has held the remittance to be “fees for technical services” and has required the petitioner to deduct tax at the prescribed percentage before remittance. The petitioner's contention, however, is that the remittance thus made would be chargeable under the head “Salaries” or, alternatively, it would come within the exclusion part of section 9(1)(vii) of the Act and, therefore, no tax is liable to be paid on the same. By the impugned order, the Income-tax Officer having rejected the stand of the petitioner and having come to the conclusion that the payment is in the nature of income by way of fees for technical services under section 9(1)(vii), the petitioner has moved this court. The Income-tax Officer, by the impugned order, has recorded the following conclusions:

“To sum up, the following conclusions emerge from the aforementioned discussion:—

(i) That the payments made to the seller for the services rendered by its experts cannot be treated as salary.

(ii) That section 10(6)(vi) and section 10(6)(viia) are not applicable to exempt either fully or in part any portion of payment.

(iii) That the payment is in the nature of income by way of ‘fees for technical services’.”

2. The brief facts are that the petitioner is a public limited company within the meaning of the Companies Act, 1956. It is engaged in the manufacture of polyester staple fibre at its plant at Laxminagar, Boulpur, in the district of Dhenkanal.

3. The petitioner-company entered into an agreement with Messrs. Chemtex Fibre Inc., U.S.A, in August, 1983 and, under the agreement, the said foreign company permitted the petitioner the right to use the Dupont technical information for the setting up of a plant for production of polyester staple fibre. Under the agreement, the foreign company agreed to provide in U.S.A to the Indian company (for short, “the petitioner”), complete and accurate Dupont technical instruction for design and construction of the plant. Under article V.1(a) of the agreement, the foreign company undertook the obligation of assisting the Indian company in obtaining a satisfactory plant by providing technical assistance for sixty man-months in transit or in India by representatives of the foreign company on mutual consultation with the Indian company. No fees would be charged for work done by the technical personnel in India concerning design and up to placing of orders for plant and machinery, but the Indian company would, however, pay for air travel and provide boarding and lodging for the technical personnel in India. The said agreement also provided that the foreign company shall train the employees of the Indian company in U.S.A Payments to be made by the Indian company, the buyer, are enumerated in article VI of the agreement and under clause 1 of article VI, the total consideration was fixed at 29,50,000 U.S dollars payable in three instalments as contained in the said clause and this consideration amount was for transfer of Dupont technical information, know-how and technology for the building of the plant according to the licence; for the use by the buyer of the Dupont technical information and any patent rights according to the licence; for the training of buyer's employees as provided in article V.1; and for technical information and licence related to Dupont's TPA and waste recovery process and all other services/assistance provided in the agreement for which fee is not specified. In addition to the aforesaid lump sum consideration amount, it was also provided that, in consideration for the assistance et cetera, prescribed in articles V.1(a) and V. 2, the buyer will pay to the seller or its sub-contractor 350 U.S dollars per man-day of time spent by the experts of the seller including days off while away from home base except for personnel sent for inspection of locally fabricated proprietary items. It is this payment sought to be made by the buyer-petitioner to the seller, Messrs. Chemtex Fibres Inc., which is the subject-matter of the present dispute. The Income-tax Officer has found the said payment to be one in the nature of fees for technical services, whereas the petitioner contends that it is either a salary or it comes within the exclusion part of section 9(1)(vii) of the Income-tax Act and thereby is not liable to be taxed. The question that arises for consideration, therefore, is as to what is the nature of payment thus made.

4. Dr. Pal appearing for the petitioner argues with vehemence that the payment in question must be held to be “salary” of those technical experts who are sent by the seller, namely, Messrs. Chemtex Fibre Inc., U.S.A, and the Income-tax Officer committed an error in rejecting the said contention solely on the ground that there is no relationship of master and servant between Messrs. Chemtex and those technical experts.

5. Learned standing counsel appearing for the Income-tax Department, on the other hand, contends that, if the terms and conditions of the agreement with regard to the aforesaid payment are examined, by no stretch of imagination, it can be held to be “salary” and, therefore, rightly the said contention of the petitioner has been negatived by the Income-tax Officer.

6. Under the Income-tax Act, section 14 indicates different heads of income and one such head of income is “Salary”. Section 15 enumerates income which is chargeable to income-tax under the head “Salaries”. The impugned payment to be made to Messrs. Chemtex by the petitioner under article VI of the agreement as a consideration for the assistance to be provided by the seller under article V.1(a) of the agreement cannot be held to be “salary” under section 15 of the Income-tax Act. Dr. Pal, however, submits that it would be “salary” under section 10(6)(vii) and the Income-tax Officer committed an error in holding that it is not so. Section 10 enumerates incomes which do not form part of total income. Sub-section (6) of section 10 deals with the case of an individual who is not a citizen of India. Section 10(6)(vii) provides the remuneration due to or received by such individual who is not a citizen of India chargeable under the head “Salary” for services rendered as a technician in the employment of the Government or of a local authority or of any corporation set up under any special law or in any business carried on in India, if he was not resident in any of the four financial years immediately preceding the financial year in which he arrived in India to the extent mentioned therein. According to Dr. Pal, the payment in question is the remuneration due to the non-resident technicians who are not citizens of India for services rendered by them as technicians in the business which is obviously carried on in India and, therefore, it would be chargeable under the head “Salary”. If the agreement in question is examined, it appears that the payment is made to the seller and not to the non-resident technicians who come to India to render some technical advice. It is not known as to what is the term of the contract between the seller and those non-resident technicians who come for some days to render some technical advice. The payment of 350 U.S dollars per man-day spent by the experts of the seller including days off while away from the home base is in consideration of the assistance which the seller is required to provide under article V.1(a) of the agreement which is not in any way concerned with design and placing of orders for major plant and machinery. This being the position, such payment made by the buyer-petitioner to the seller, Messrs. Chemtex, cannot be held to be chargeable under the head “Salary” so far as Messrs. Chemtex is concerned. We, therefore, do not find any infirmity in the conclusion of the Income-tax Officer in negativing the petitioner's contention on that score.

7. Dr. Pal appearing for the petitioner further urges that, in view of the provisions contained in section 10(6)(viia) of the Act, the technical experts having rendered services as technicians in a business carried on in India, and they having satisfied the pre-conditions contained in section 10(6)(viia)(1) and (2), inasmuch as they are not residents in India in any of the four financial years immediately preceding the financial year in which they arrived in India and the contract of their service in India is approved by the Central Government, the remuneration for such services due to or received by them which is chargeable under the head “Salary” to the extent mentioned therein is exempt from income-tax. According to Dr. Pal, the buyer made an application under section 10(6) of the Act seeking approval of the Government of India and, pursuant to such application, the Government of India in the Ministry of Industries, Department of Chemicals and Petro-Chemicals, approved the engagement of technicians for the period indicated therein and, therefore, the payment made to those technicians having been exempted from payment of tax by virtue of the authority granting the approval, the Income-tax Officer committed an error in ignoring the same and directing payment of tax. We are unable to accept this submission of Dr. Pal appearing for the petitioner. The approval was sought for by the buyer in respect of specific individual foreign technicians and column 10 of the said application indicated the details of salary, allowances, etcetera chargeable under the head “Salary” proposed to be given to the said employees in India. Pursuant to such application, the Government of India has accorded approval, but the payment sought to be made for which the permission of the income-tax authority had been sought for is not the payment to any technical expert but is a payment to Messrs. Chemtex made under article VI for the services rendered under article V.1(a) of the agreement. This payment is not being made to any foreign individual technician and, therefore, the approval of the Government of India will not assist either the buyer or the seller in any manner. We are, therefore, of the opinion that the amount in question will not come under section 10(6)(viia) of the Income-tax Act as the payment is not being made to any individual technical expert but, on the other hand, is being made to the seller. Dr. Pal's contention on this score, therefore, cannot be accepted.

8. Next comes the question whether though the payment in question can come within the concept of “income by way of fees for technical services” under section 9(1)(vii), it would come within the exclusion part of Explanation 2 to section 9(1)(vii). Dr. Pal for the petitioner contends that though the payment in question consideration for rendering technical services, the said consideration being for the construction undertaken by the recipient, it would be excluded under Explanation 2 to section 9(1)(vii) and, therefore, it will not be chargeable to income-tax. The Income-tax Officer, in paragraph 5 of the impugned order, has held that the payment in question having been made for provision of services by technical and other personnel, it, would attract the provisions of section 9(1)(vii) and, accordingly, he has directed deduction of tax on the same. Explanation 2 to section 9(1)(vii) clearly provides that, for the purposes of clause (vii), “fees for technical services” means any consideration for the rendering of managerial, technical or consultancy services, but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”. We have already held that the income is not chargeable under the head “Salary”. Dr. Pal, however, argues with emphasis that a bare reading of clauses V and VI of the agreement would unequivocally indicate that the payment of 350 U.S dollars towards technical services of technicians is a consideration connected with the construction work of the project and, accordingly, it would be excluded from the chargeable income, in view of Explanation 2 to section 9(1)(vii). Whether the payment would come within the exclusion part or not will have to be established by the person who claims the exclusion in question. Either the petitioner or the seller, namely, Messrs. Chemtex will have to establish the nature of technical services rendered by those technicians for which the payment is required to be made and whether such technical service was in connection with the construction, assembly or any like project taken by Messrs. Chemtex. Whether the exclusion part of Explanation 2 would at all be attracted to the facts and circumstances of the present case would depend upon the nature of work for which those technicians had come to India and the particular nature of the work they did in India. Since no materials have been adduced before the Income-tax Officer in that regard and, consequently, the matter has not been considered from the said angle, it would be meet and proper for us to remit the matter to the Income-tax Officer with a direction that he would give liberty to the petitioner to adduce relevant evidence with regard to the nature of services rendered by the foreign technicians for which the payment in question is sought to be made and to find out whether it would come within the exclusion part of Explanation 2 to section 9(1)(vii) of the Income-tax Act. The Income-tax Officer, after giving opportunity to the petitioner and on consideration of the materials to be produced before him, would hear and decide the same in accordance with law.

9. In view of our aforesaid conclusions, the impugned order is set aside and the matter is remitted to the Income-tax Officer for redisposal in accordance with law bearing in mind the observations made by us in this judgment. We make no order as to costs.

K.C Jagadeb Roy, J.:— I agree.