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Commissioner of Income-tax Vs. Mosanobu Nakai, (by Blue Bay Fisheries Ltd.) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 35 of 1970
Judge
Reported in[1974]93ITR414(Ker)
ActsIncome Tax Act, 1961 - Sections 10(6)
AppellantCommissioner of Income-tax
RespondentMosanobu Nakai, (by Blue Bay Fisheries Ltd.)
Appellant Advocate P.K. Krishnankutty Menon,; P.A. francis and; P.K.R. Meno
Respondent Advocate S.A. Nagendran, Adv. and Ors.
Excerpt:
.....of the question of the applicability of the explanation to section 10(6)(vii) of the income-tax act, 1961, for short, the act'.we say so because the period relating to which the salary may fall under the section has not been dealt with by any of the authorities and we are not concerned with this question as this has not been referredto us. we are prepared to assume without deciding that the nature of the work done by the skipper required specialised knowledge and experience and that this specialised knowledge and experience was required by the blue bay fisheries for properly, effectively and profitably running theirbusiness. 'management techniques',we believe, qualifies both 'industrial' as well as 'business'.to give it any other meaning would unnecessarily widen the definition..........these terms:'explanation.--for the purposes of this sub-clause 'technician' means a person having specialised knowledge and experience in- (i) constructional or manufacturing, operations, or in mining or in the generation or distribution of electricity or any other form of power; or (ii) industrial or business management techniques; who is employed in india in a capacity in which such specialised knowledge and experience are actually utilised.' 3. it is admitted that nakai is employed in india and that he has some specialised knowledge and experience. if he is a technician within the explanation it is the contention of the assessee that he will be entitled to the exemption under section 10(6)(vii)(a) which exempts 'such remuneration due to or received by him during the period of six.....
Judgment:

Govindan Nair, J.

1. The Appellate Tribunal, Cochin Bench, has referred the following question to us for our decision:

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the skipper of the fishing trawler is a 'technician' as laid down in the Explanation to Section 10(6)(vii) of the Income-tax Act, 1961 ?'

2. The assessee is one Sri. Mosanobu Nakai, the skipper of a fishing trawler, a specialist in the field of fishing by using deep-sea going trawlers, a Japanese, whose services have been obtained by the Blue Bay Fisheries who have been assessed for and on behalf of the said Nakai for the year 1966-67. Nakai was being paid reasonably high salary, Rs. 3,000 per month, with other facilities as well and it has been assumed in the proceedings before the income-tax authorities that the remuneration that he received during the entire accounting period relating to the assessment year fell for consideration of the question of the applicability of the Explanation to Section 10(6)(vii) of the Income-tax Act, 1961, for short, 'the Act'. We say so because the period relating to which the salary may fall under the section has not been dealt with by any of the authorities and we are not concerned with this question as this has not been referredto us. The question, however, arises whether the said Nakai is a technician falling within the definition of that term in the Explanation to Section 10(6)(vii) of the Act. That definition is in these terms:

'Explanation.--For the purposes of this sub-clause 'technician' means a person having specialised knowledge and experience in-

(i) constructional or manufacturing, operations, or in mining or in the generation or distribution of electricity or any other form of power; or

(ii) industrial or business management techniques; who is employed in India in a capacity in which such specialised knowledge and experience are actually utilised.'

3. It is admitted that Nakai is employed in India and that he has some specialised knowledge and experience. If he is a technician within the Explanation it is the contention of the assessee that he will be entitled to the exemption under Section 10(6)(vii)(a) which exempts 'such remuneration due to or received by him during the period of six months commencing from the date of Ms arrival in India'. In order that this exemption may be attracted, the technician must have special knowledge and experience in 'industrial or business management techniques'. The section itself having limited the nature of the techniques or having qualified the word 'technician' by the introduction of the words following technician who has 'special knowledge and experience in industrial or business management techniques', it is clear that it is only the second limb of the Explanation that we have read that falls for consideration in this case and not the first. This is admitted before us. The whole case, therefore, turned on the interpretation to be placed on the words 'industrial or business management techniques' occurring in Clause (ii) in the Explanation.

4. On behalf of the assessee, it was contended by counsel that any person who has specialised knowledge and experience which is necessary for the proper working of an industry would fall within the words in the Explanation. According to his submission a specialist who is able to perform a specialised task, which may be one among the many tasks that may have to be performed in an industry will be a technician falling within the Explanation. It was further urged that the said Nakai was a specialist in this way. He has specialised knowledge and he has experience in deep-sea fishing. Though he is termed a skipper, he is still a technician because the skipper's task in a venture such as the one that has been performed by the said Nakai as skipper required specialised knowledge and experience. We are prepared to assume without deciding that the nature of the work done by the skipper required specialised knowledge and experience and that this specialised knowledge and experience was required by the Blue Bay Fisheries for properly, effectively and profitably running theirbusiness. The question still is whether such a 'technician'. will be a technician within the definition in Clause (ii) of the Explanation. This we doubt. The words 'industrial or business management techniques', we think, refer to a specialised activity of a specialised nature. 'Management techniques', we believe, qualifies both 'industrial' as well as 'business'. To give it any other meaning would unnecessarily widen the definition which from the nature of the things and the scheme of the Act, we find it difficult to give to the expression. For instance, the first limb itself does not take in all technicians who may be helpful to the industry and who possessed specialised knowledge and experience. It is only technicians having specialised knowledge and experience in 'constructional or manufacturing operations, or in mining or in the generation or distribution of electricity or any other form of power' that are included in the first limb of the Explanation. It is easy to conceive of so many other technicians who are as highly skilled and as highly experienced in other branches than constructional or manufacturing and distribution of power who are excluded, from the first limb. This clearly shows that the definition is intended only to take in some of the various technicians that may be employed in an industry or business. We must also bear in mind that the second limb is an addition that has been made to the definition that was obtaining at the time of the passing of the Act. The objects and reasons of this Act does not disclose any special reason for the amendment introduced by the introduction of the second limb to the Explanation, Nevertheless by its wording, as we indicated, it introduced a limit to its applicability. Further, it is noteworthy that this limit which is particularly attracted, perhaps solely attracted, for the purpose of Section 10(6)(vii)(a)(i) alone, grants also much more limited exemption than in other cases, namely, the remuneration for six months commencing from the date of his arrival in India. This gives an indication according to us as to the type of technician contemplated by the expression, those specially skilled and experienced in industrial or business management techniques. Evidently, this is meant for the purpose of enabling industrial establishments and business houses in getting the services of men who are experienced and skilled in managing the affairs of an industry or business, a subject which has assumed very great importance and which called for knowledge and experience of a very high order. This covers a highly specialised field and the services of such specialists are considered indispensable for running any modern industry or business. It is technicians who can help in so running an industry or business that fall within the second limb of the Explanation.

5. The Tribunal dealt with the question thus in paragraphs 2, 3 and 4 of its order.

'2. . The assessee appealed to the Appellate Assistant Commissioner and contended that the Explanation to Section 10(6)(vii) applied to the appointment in question and the salary paid to the skipper had to be excluded in computing the total income. The Appellate Assistant Commissioner held that the word 'technician' was wide enough to include a skipper performing specialised duties relating to fishing industry. He accordingly allowed the appeal and held that the salary earned by the skipper was exempt from tax.

3. The authorised representative for the department urged before us that the skipper was not a technician within the meaning of Section 10(6)(vii), that the Explanation to that section has defined a technician as a person having specialised knowledge and experience in industrial or business management techniques, and that in this case a skipper could not be considered as a person having specialised knowledge in industrial or business management techniques. On behalf of the assessee it was contended that the Government of India, Ministry of Food and Agriculture, in their letter dated May 3, 1965, while approving of the assessee's proposal to employ the Japanese skipper for the fishing vessel, had made a condition that it/was the primary duty of the Japanese skipper to train the other Indian crew in the latest techniques of fishing. He also referred to a circular issued by the Ministry of Finance as No. 33(LXXVI-5) of 1935, where it is stated as follows :

'Exemption of Foreign Techicians.--The word 'technician' must be understood in its ordinary significance, viz., as having reference to production or manufacture or other industrial arts or sciences, in contrast to the purely administrative and accounting matters of business. It is not, however, necessary that the person concerned should actually be operating a particular machine or physically engaged in a particular type of work in which he is proficient. Even if he is employed as a consultant on matters pertaining to his field of technical knowledge or practical experience he would be regarded as a technician.'

The assessee's representative also drew our attention to the condition imposed by them on the skipper that he will have to undertake the responsibility of training an Indian to qualify himself to be a competent skipper during the period of his service. He argued that in the background of these facts, the foreign skipper was really a technician having specialised knowledge and experience in industrial management techniques.

4. After having heard both sid s, we feel that the decision of the Appellate Assistant Commissioner in this case is correct. It will be recognised on all' hands that mechanised deep sea fishing employing the latest methods is an industry capable of vast potentialities. The skipper of a trawler engaged in fishing operations has to be necessarily taken as a technician having specialised knowledge in industrial or business management techniques. The expert knowledge of the skipper was to be utilised not only for operating the fishing trawler but also for training Indians in the latest methods of fishing operations. We consider that in the circumstances of this case, the Japanese skipper comes within the definition of technician as laid down by the Explanation to Section 10(6)(vii).'

6. Particular emphasis was laid by counsel for the assessee on the portion of the order which we have underlined* also and it was contended that since the skipper had to train Indians he was a technician concerned with industrial or business management technique. We are unable to accept this contention. 'Industrial or business management technique' has a different meaning as we have indicated above.

7. In this view, we have to hold that Nakai is not a technician falling within the Explanation to Section 10(6)(vii) of the Act. The question referred to us has, therefore, to be answered against the assessee and in favour of the department, that is, in the negative. We do so. We direct the parties to bear their respective costs.

8. A copy of this judgment under the seal of this court and the signatureof the Registrar will be forwarded to the Income-tax Appellate Tribunal,Cochin Bench.


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