D.K. Kapur, J.
1. The assessed is an individual, who for the two relevant years in question, had claimed that his income was exempt from Indian income-tax, on account of the fact that he was in receipt of salary from the United States of America Agency for International Development, America Embassy. It was further stated that his salary was being paid in connection with a Technical Co-operation Assistance Programme and Project. The accompanying certificate from the employer showed that he was assigned duties from April, 1969, to March, 1970, in India in connection with a Technical Co-operation Assistance Programme and Project as per the agreement between the Government of India and the Government of the United States of America.
2. The Income-tax Officer on an interpretation of the agreement thought that as the assessed was an Indian national, he was to be taxed and hence his prayer was disallowed. And this decision was affirmed by the Appellate Assistance Commissioner on the basis of a letter issued by the Agency for International Development dated March 8, 1971, clarifying that the agreement only appealed to U.S.A. citizens and not to Indian nationals.
3. The assessed appealed to the Tribunal which accepted his contention and held that the agreement covered all the employees of the Government of the United States of America irrespective of whether they were U.S.A. nationals or Indian nationals.
4. This has led to the reference before us which is on the following question :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessed is legally entitled to claim benefit of exemption form income-tax under s. 10(8) on the salaries received by him as an employee of the Government of the U.S.A. for the assessment years 1970-71 and 1971-72 ?'
5. The terms of the Government regarding Technical Co-operation, etc., between the Government of India and the Government of the United States of America had article IV which provided for exemption from Indian income-tax.
6. The relevant portion of that clause was as follows :
'All employees of the Government of the United States of America assigned to duties in India in connection with Co-operation Technical Assistant Programmed and Projects and accompanying members of their family shall be exempt from Indian income-taxes with respect to (1) salaries and emoluments paid to them by the Government of the United States of America, and (2) any non-indian income upon which they are obligated to pray income or social security taxes to the Government of the United States of America.'
7. The Tribunal found that the words 'All employees of the Government of the United States of America' were not restricted to the citizens of the United States but covered Indian nationals also.
8. We find it very difficult to find any other possible interpretation of these words. Learned counsel for the Commissioner contended that the words 'accompanying members of their family' showed that the reference was to American citizens only. We were unable to find out why they did not apply to Spanish, French or to any other families, the same principle would apply. For example, a citizen might come from outside India or their families members might come from outside India because they were non-residents.
9. We are not actually concerned with any accompanying family members, but with the distinct statement in the article that all employees of the United States of America employed for this purpose would be exempt from Indian income-tax in respect of their salaries, and if this is so, it would also include Indian nationals as held by the Tribunal.
10. It may further be added that section 10(8) of the Income-tax Act, 1961, provided for such an agreement being drawn up and states that if any individual is assigned to duties in India in connection with any Technical Co-operation Assistance Programmes and Projects and there is an agreement between the Government of India and the Government of a foreign State, then the remuneration received by that person directly or indirectly from the foreign State will exempt. This applies fully to the present case.
11. We, accordingly, answer the question referred to us in the affirmative, in favor of the assessed and against the Department, but leave the parties to bear their own costs.