NANTHAKUMAR MURUGESAN,CHENNAI vs. INCOME TAX OFFICER, INTERNATIONAL TAXATION WARD 1(2), CHENNAI

ITTPA 12/CHNY/2023Status: DisposedITAT Chennai10 June 2024AY 2020-2111 pages
AI SummaryPartly Allowed

What were the facts?

These appeals by Nanthakumar Murugesan (IT(TP)A No.12/Chny/2023) and Sivakarthick Raman (IT(TP)A No.13/Chny/2023) for Assessment Year 2020-21 involve identical facts and issues. The appeals arise from orders passed by the Assessing Officer (AO) under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961. The assessee, Nanthakumar Murugesan, claimed exemption of INR 1,22,09,830, and Sivakarthick Raman claimed exemption of INR 1,57,90,190, under Article 15(1) of the India-China Double Taxation Avoidance Agreement (DTAA) read with Section 90 of the Act. This exemption was sought in respect of salary income received in India for services rendered in China to BMW Brilliance Automotive Limited (BMW China). The AO disallowed this exemption, directing the taxability of the entire salary in India.

What did the Tribunal hold?

The Tribunal held that the salary income accrued to the assessee for work performed in a foreign jurisdiction would not be taxable in India, whereas salary received for work performed in India would be taxable in India. The benefit of the DTAA would be available. The Tribunal noted that the proportionate salary for services rendered in India had already been offered to tax in India, and the balance salary had been offered to tax in China. The China tax had been paid by the foreign entity. The Tribunal found that the facts were similar to the case of Paul Xavier Antonysamy (ITA No.2233/Chny/2018), where it was held that Section 5(2) is subject to other provisions of the Act, and salary income is deemed to accrue or arise in India only if earned in India. The Tribunal also noted that the decisions relied upon by the revenue (Swaraminathan Ravichandran and Dennis Rozaria) were distinguishable. The AO was directed to re-compute the income of the assessee. The appeal was allowed in terms of this order, directing the AO to allow the benefit of exemption under Article 15(1) of the India-China DTAA. The appeal was partly allowed.

What were the issues?

1. Whether the Tribunal had to decide if the salary income earned for services rendered in China, received in India, is eligible for exemption under Article 15(1) of the India-China DTAA read with Section 90 of the Act, despite the AO's disallowance based on the employer-employee relationship with BMW India and the salary being chargeable under Section 15 and taxable in India under Section 5(2)(a) of the Act. Assessee's contentions: The assessee argued that the exemption should be allowed as the services were rendered in China to BMW China, and the salary income was received for work performed abroad. They contended that the employer-employee relationship with BMW India was incorrectly presumed for the period worked in China, and that the China tax returns were sufficient evidence of residency and tax paid abroad. They relied on judicial precedents like the decision in Paul Xavier Samy (ITA No. 2233/Chny/2018). Revenue's contentions: The revenue, through the AO, disallowed the exemption by holding that there was an employer-employee relationship with BMW India even when the assessee was working in China. They argued that salary is chargeable under Section 15 and taxable in India under Section 5(2)(a). They also relied on the judgments of Hon'ble Chennai ITAT in Shri Swaminathan Ravichandran (ITA No.299/Mds/2016) and Shri Dennis Victor Rozaria (ITA No.298/Mds/2016).

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 90,Section 15,Section 5(2)(a),Section 9(1)(ii),Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI

Before: HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM & HON’BLE SHRI MANU KUMAR GIRI, JM

For Respondent: Mr. A. Sasikumar, IRS, CIT
Hearing: 30.05.2024Pronounced: 10.06.2024

PER MANU KUM

The order continues below.

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