CENTRAL BOARD OF DIRECT TAXES AND 0THERS versus ADITYA V. BIRLA

Citation: [1988] 2 S.C.R. 115 · Decided: 27-11-1987 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Dismissed
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Judgment (excerpt)

\ 
CENTRAL BOARD OF DIRECT TAXES AND 01HERS 
v. 
ADITYA V. BIRLA 
NOVEMBER 27, 1987 
A 
[SABYASACHI MUKHARJI AND S. RANGANA1HAN, JJ.] 
B 
Income Tax Act, 1961-Construction of Section 80 RRA thereof. 
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The respondent, Aditya V. Birla, described to be a technician 
· with experience in the business of manufacturing and selling Stapple 
Fibres, and the Thai Rayon Company, Thailand, engaged in the 
business of manufacturing and selling Stapple Fibres, entered into an c 
agreement wherein the respondent was stated to be approached by the 
Thai Company to make his services available to the Company as his 
'employer', in Bangkok, on certain terms and conditions, for which 
the Company would pay him remuneration receivable at Bangkok. 
The agreement was for a .period of three years and was subject to the 
approval of the Governments of India and Thailand, etc. The res-
pondent applied to the Government of India for its approval of his 
employment with the Thai Company under the agreement; for the 
purpose of securing the benefits conferred by section 80 RRA of the 
Income Tax Act, 1961. The Government declined to accord its 
approval to the respondent's employment with the Thai Company on 
the terms and conditions contained in the agreement, for the purpose 
of section 80 RRA, on the ground that the section, according to its 
view, contemplates rendering service outside India in the status of an 
'employee', whereas the status of the respondent under the foreign 
employer was that of a 'consultant' and not an 'employee', and that, 
therefore, the remuneration contemplated under section 80 RRA 
would be applicable to the case of the respondent and the benefit of the 
section could not be given to him. 
D 
E 
F 
The respondent moved the High Court for relief against the 
decision of the Government. A learned Single Judge of the High Court 
quashed the order of the Government and directed it to reconsider the 
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case of the respondent. The Letters Patent Appeal against the order of 
the Single Judge was dismissed by the Division Bench of the High 
Court. The appellant then moved this Court against the order of the 
High Court by Special Leave. 
Dismissing the appeal, the Court, 
115 
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116 
SUPREME COURT REPORTS 
[ 1988] 2 S.C.R. 
).
A 
HELD: An analysis of section 80 RRA reveals that, in the case 
of the respondent, in order to be entitled to the deductions at the rate 
enumerated in the section, the sum must be (i) remuneration, (ii) 
'f 
received by him in the foreign currency, (iii) from any employer 
(being a foreign employer or an Indian Concern) for any service 
rendered by him outside India. Further the terms and conditions of his 
B service outside India must be approved by the Government of India. 
Furthermore, in his case the deduction of the section would not be 
T
allowed in respect of the remuneration if the service related to any 
period after the expiry of 36 months. He was not employed beyond the 
period of 36 mot_nths.bI~dispthutably, thet su".'dc?nc
1
~rnedfl~ the _cas~, fee, 
-~ 
was remunera ion, 
e1ng 
e amoun pa1 
m 1eu o 
services ren· 
C dered. The sum in question was received in foreign currency for 
services rendered outside India. [ l20D-F] 
In the context of the Income Tax Act, the expression 'employee' 
will include a consultant or a technidan employed by a foreign 
company. The amplitude of the expressions 'employee' and 'employer' 
D covers the case of the consultant or the technician. There is nothing in 
the scheme of the section to warrant any exception, as contended for 
by the revenue. [l22E; l2IBI ', 
The High Court was right in dismissing the appeal. [ l23E] 
E 
Aiyar 'The Lexicon, 1940 Ed. at page 387, Shri Chintaman Rao 
and Anr. v. The State of Madhya Pradesh. [1958] S.C.R. 1340 at 
1346; Ellis v. Ellis and Co., [1905] l K.B. 324; Stroud's Judicial 
Dictionary, 4th Edition, Vol. 2 at page 893 and Morren v. Swinton 
and Pendlebury B.C., [1965] I W.L.R. 576, referred to. 
F 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3947 
(NT) of 1987. 
From the Judgment and Order dated 27.8.1986 of the Bombay 
High Court in Appeal No. 676 of 1986. 
G 
B.B. Ahuja, C.V. Subba Rao and Ms. A Subhashini, for the 
Appellants. 
N.A. Palkhiwala, S.P. Mehta, Ms. A. Vasantji and Praveen 
Kumar for the Respondent. 
H 
The Judgment of the Court was delivered by 
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CENTRAL BOARD OF DIRECT TAXES v. ADIITA [MUKHARJI, l.] 
117 
SABYASACHI MUKHARJI, J. Special leave granted. 
This is an appeal fr
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