I am a British engineer working for an Indian joint venture on a cellular network and my employer pays my tax. Am I a technician entitled to the exemption?
Yes, on both counts. The Authority first rejected the Department's preliminary objection that the question was already pending because the applicant had filed his return after applying: what the proviso to section 245R(2) prohibits is raising before the Authority questions that were being agitated in other fora on the date of the application. It then held that the applicant was a technician in the field of information technology for section 10(5B), rejecting the argument that information technology means only computer data processing, because a cellular network is a medium for dissemination through a system of computers and is essentially a computer network. All four statutory conditions being met, the exemption was available.
Pronounced by the Authority for Advance Rulings (S. Ranganathan, J. (Chairman) and Subhash C. Jain, Member) on 1997-10-14, reported as [1998] 231 ITR 464 (AAR). It bears on section 10(5B), section 245R(2) of the Income Tax Act 1961, in Salary & Perquisites and Capital Gains Exemptions matters.
It is cited for the maintainability holding, which still works: the bar in the proviso operates on questions being agitated elsewhere when the application is made, so a return filed afterwards does not vitiate the application. The substantive half no longer has a field. Section 10(5B), which kept out of a technician's income the tax paid on his behalf by his employer, was deleted by the Finance Act 2002 from assessment year 2003-04, and the Board's own explanatory circular records the deletion. What survives of that half is the method - that a statutory description such as information technology is read by reference to what the technology actually does, rather than by reference to the label the industry uses.
Binding only on the applicant who sought it, in respect of the transaction the ruling was sought on, and on the Principal Commissioner or Commissioner and the authorities subordinate to him in respect of that applicant and that transaction — and only until the law or the facts change (section 245S). It binds nobody else. The Tribunal and the courts nonetheless treat a considered ruling as persuasive, which is why practitioners cite them.
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The applicant was a British national employed by Modicom Network Private Limited, a joint venture company incorporated in India. His employment began on 16 July 1996 and was to run for twenty-four months. He was stationed at Chandigarh on a salary of Rs 57,60,000 a year plus bonus, and his employer was to bear the tax on his remuneration. He had not been resident in India in any of the four financial years preceding the year in which he arrived. He applied to the Authority on 27 March 1997, asking whether he was a technician within section 10(5B) of the Income-tax Act 1961 and whether he was entitled to the exemption that section gave. He filed his return of income for assessment year 1997-98 on 15 June 1997, that is, after the application. The Department objected that the questions were consequently already pending before an income-tax authority within the proviso to section 245R(2), and that the application should not be allowed.
The Authority decided both questions in the applicant's favour and rejected the preliminary objection. On maintainability it held that what the clause prohibits is the attempt to raise before the Authority questions which, on the date of the application before the Authority, were being agitated in other fora; a return filed after the application does not vitiate it. On the merits it held that the applicant was a technician within section 10(5B). The Department had argued that 'information technology' in the relevant notification should be understood only in relation to computer systems and software systems, so that a cellular telecommunications network fell outside it. The Authority disagreed: a cellular network is a medium for dissemination through a system of computers and is essentially a computer network, employing specialised software and computer architecture for signal transmission, switching and billing. All four statutory conditions were satisfied - employment in a business carried on in India, non-residence in the four preceding financial years, the tax on the salary borne by the employer, and technician status - so the exemption was available.
On the preliminary point the Authority read the proviso by reference to the mischief it addresses. The purpose of the bar is to stop an applicant running the same question in two places at once, and to stop him coming to the Authority in order to escape a forum already seized of it. Neither purpose is engaged by a return filed after the application. On 27 March 1997, when the applicant came to the Authority, no assessment proceeding had raised the question whether he was a technician; the return of 15 June 1997 created no controversy on which any income-tax authority was then engaged. So the question was not one being agitated in another forum on the material date. On the merits the argument turned on the scope of a notified field. The Department wanted information technology confined to computers and software in the narrow sense, so that a person building and running a mobile telephone network fell outside it. The Authority looked at what a cellular network is rather than at how the industry describes itself. The network transmits and switches signals and generates bills, and it does all of that through computers running specialised software; it is a medium for dissemination through a system of computers, and so is essentially a computer network. The applicant's function within it was accordingly a technician's function in information technology, and the remaining conditions were not in dispute.
What the clause prohibits is the attempt to raise before the Authority questions which, on the date of the application before the Authority, were being agitated in other fora.
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Handle my notice → Ask a CA on WhatsAppYes, on both counts. The Authority first rejected the Department's preliminary objection that the question was already pending because the applicant had filed his return after applying: what the proviso to section 245R(2) prohibits is raising before the Authority questions that were being agitated in other fora on the date of the application. It then held that the applicant was a technician in the field of information technology for section 10(5B), rejecting the argument that information technology means only computer data processing, because a cellular network is a medium for dissemination through a system of computers and is essentially a computer network. All four statutory conditions being met, the exemption was available. This was decided by the Advance Ruling (S. Ranganathan, J. (Chairman) and Subhash C. Jain, Member) and bears on section 10(5B), section 245R(2) of the Income Tax Act 1961. It is reported as [1998] 231 ITR 464 (AAR). It is cited for the maintainability holding, which still works: the bar in the proviso operates on questions being agitated elsewhere when the application is made, so a return filed afterwards does not vitiate the application. The substantive half no longer has a field. Section 10(5B), which kept out of a technician's income the tax paid on his behalf by his employer, was deleted by the Finance Act 2002 from assessment year 2003-04, and the Board's own explanatory circular records the deletion. What survives of that half is the method - that a statutory description such as information technology is read by reference to what the technology actually does, rather than by reference to the label the industry uses. If it applies to you, the first step is this: Where the Department says your advance ruling application is barred, ask what was actually being agitated on the day you filed.
The applicant was a British national employed by Modicom Network Private Limited, a joint venture company incorporated in India. His employment began on 16 July 1996 and was to run for twenty-four months. He was stationed at Chandigarh on a salary of Rs 57,60,000 a year plus bonus, and his employer was to bear the tax on his remuneration. He had not been resident in India in any of the four financial years preceding the year in which he arrived. He applied to the Authority on 27 March 1997, asking whether he was a technician within section 10(5B) of the Income-tax Act 1961 and whether he was entitled to the exemption that section gave. He filed his return of income for assessment year 1997-98 on 15 June 1997, that is, after the application. The Department objected that the questions were consequently already pending before an income-tax authority within the proviso to section 245R(2), and that the application should not be allowed. The matter was decided on 1997-10-14 by the Advance Ruling (S. Ranganathan, J. (Chairman) and Subhash C. Jain, Member). On those facts the Advance Ruling held as follows. The Authority decided both questions in the applicant's favour and rejected the preliminary objection. On maintainability it held that what the clause prohibits is the attempt to raise before the Authority questions which, on the date of the application before the Authority, were being agitated in other fora; a return filed after the application does not vitiate it. On the merits it held that the applicant was a technician within section 10(5B). The Department had argued that 'information technology' in the relevant notification should be understood only in relation to computer systems and software systems, so that a cellular telecommunications network fell outside it. The Authority disagreed: a cellular network is a medium for dissemination through a system of computers and is essentially a computer network, employing specialised software and computer architecture for signal transmission, switching and billing. All four statutory conditions were satisfied - employment in a business carried on in India, non-residence in the four preceding financial years, the tax on the salary borne by the employer, and technician status - so the exemption was available.
On the preliminary point the Authority read the proviso by reference to the mischief it addresses. The purpose of the bar is to stop an applicant running the same question in two places at once, and to stop him coming to the Authority in order to escape a forum already seized of it. Neither purpose is engaged by a return filed after the application. On 27 March 1997, when the applicant came to the Authority, no assessment proceeding had raised the question whether he was a technician; the return of 15 June 1997 created no controversy on which any income-tax authority was then engaged. So the question was not one being agitated in another forum on the material date. On the merits the argument turned on the scope of a notified field. The Department wanted information technology confined to computers and software in the narrow sense, so that a person building and running a mobile telephone network fell outside it. The Authority looked at what a cellular network is rather than at how the industry describes itself. The network transmits and switches signals and generates bills, and it does all of that through computers running specialised software; it is a medium for dissemination through a system of computers, and so is essentially a computer network. The applicant's function within it was accordingly a technician's function in information technology, and the remaining conditions were not in dispute. In the words reproduced by the source cited on this page: "What the clause prohibits is the attempt to raise before the Authority questions which, on the date of the application before the Authority, were being agitated in other fora."
It was decided by the Advance Ruling on 1997-10-14 and is reported as [1998] 231 ITR 464 (AAR). Binding only on the applicant who sought it, in respect of the transaction the ruling was sought on, and on the Principal Commissioner or Commissioner and the authorities subordinate to him in respect of that applicant and that transaction — and only until the law or the facts change (section 245S). It binds nobody else. The Tribunal and the courts nonetheless treat a considered ruling as persuasive, which is why practitioners cite them. An advance ruling binds only the applicant who sought it, only for the transaction it was sought on, and only the Commissioner and the officers under him in relation to that applicant and that transaction — and only until the law or the facts change. That is section 245S, and it means the ruling is not a precedent and binds nothing in your case. You cite it because the Authority reasoned the point out, often first and most fully, and the Tribunal and the courts treat a considered ruling as persuasive. Check before you rely on one: most of these were pronounced before 2009, and a great deal of cross-border tax has been rewritten since by amendment, protocol and judgment. On section 10(5B), section 245R(2), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Authority decided both questions in the applicant's favour and rejected the preliminary objection. On maintainability it held that what the clause prohibits is the attempt to raise before the Authority questions which, on the date of the application before the Authority, were being agitated in other fora; a return filed after the application does not vitiate it. On the merits it held that the applicant was a technician within section 10(5B). The Department had argued that 'information technology' in the relevant notification should be understood only in relation to computer systems and software systems, so that a cellular telecommunications network fell outside it. The Authority disagreed: a cellular network is a medium for dissemination through a system of computers and is essentially a computer network, employing specialised software and computer architecture for signal transmission, switching and billing. All four statutory conditions were satisfied - employment in a business carried on in India, non-residence in the four preceding financial years, the tax on the salary borne by the employer, and technician status - so the exemption was available. It arises in Salary & Perquisites and Capital Gains Exemptions matters, on section 10(5B), section 245R(2) of the Income Tax Act 1961, and was decided by S. Ranganathan, J. (Chairman) and Subhash C. Jain, Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not treat a return filed after the application as fatal to it; this ruling says it is not. Do not rely on section 10(5B), which was deleted with effect from assessment year 2003-04. When a notified description has to be applied, argue from the function of the technology rather than from the name of the industry.
Superseded by amendment. The substantive holding has no field left. Section 10(5B) was deleted by the Finance Act 2002; the Board's Circular No. 8/2002 explaining that Act records that clause (5B) has been deleted, with effect from assessment year 2003-04 and subsequent years, on the footing that tax paid on an assessee's behalf is part of his total income. The maintainability holding is not affected by that: clause (i) of the proviso to section 245R(2) stands as the Authority read it, having last been substituted by the Finance Act 2000. The forum has changed, the Authority for Advance Rulings having been replaced by Boards for Advance Rulings constituted under section 245-OB and notified on 1 September 2021, with an appeal to the High Court under section 245W. I found no court decision dealing with this ruling. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The input note describes this only as a ruling on whether a return filed after the application vitiates it. That is one of the two questions, and it is the one still worth citing, but the greater part of the ruling decides the merits and holds the applicant a technician in information technology for section 10(5B). A reader coming to the page on the strength of the note alone would not expect that. I could not reach an official AAR text. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Authority decided both questions in the applicant's favour and rejected the preliminary objection. On maintainability it held that what the clause prohibits is the attempt to raise before the Authority questions which, on the date of the application before the Authority, were being agitated in other fora; a return filed after the application does not vitiate it. On the merits it held that the applicant was a technician within section 10(5B). The Department had argued that 'information technology' in the relevant notification should be understood only in relation to computer systems and software systems, so that a cellular telecommunications network fell outside it. The Authority disagreed: a cellular network is a medium for dissemination through a system of computers and is essentially a computer network, employing specialised software and computer architecture for signal transmission, switching and billing. All four statutory conditions were satisfied - employment in a business carried on in India, non-residence in the four preceding financial years, the tax on the salary borne by the employer, and technician status - so the exemption was available.
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