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Facts
The Assessee initially filed its return as 'resident' and offered global income. However, upon processing, foreign tax credit was disallowed. A rectification application was rejected, with the AO determining the Assessee as 'non-resident' and disallowing relief under Section 90/91.
Held
The Tribunal observed that the Assessee's residential status was inconsistent between the return filing and appellate proceedings. The CIT(A) also did not make definitive findings on the residential status. Therefore, the Tribunal restored the issue to the AO for de novo adjudication.
Key Issues
Whether the Assessee's residential status was correctly determined and whether foreign income and taxes should be considered accordingly, and if the CIT(A) adequately addressed these issues.
Sections Cited
250, 154, 143(1), 90, 91, 5
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
order : 28.05.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member:
1. 1. The present appeal preferred by the Assessee is directed against the order, dated 27/08/2024, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had partly allowed the appeal against the Rectification Order, dated 11/03/2019, passed under Section 154 of the Act for the Assessment Year 2012-2013.
2. The Assessee has raised following grounds of appeal :
“1. The Ld. CIT(A) erred in not giving any finding on the issues Assessment Year 2012-2013 raised and sending the matter back to the Ld. AO.
The Ld. CIT(A) erred in not directing reduction of foreign income of the Appellant of Rs.13,00,374/-. It is submitted that the said foreign income ought to be reduced from the total income, as the Appellant is undisputedly a non-resident.
3. Without prejudice to the above, the Ld. CIT(A) ought to have granted relief u/s 90/91 of the Act to the tune of Rs.4,98,134/-.
4. The Ld. AO has erred in disturbing the return of income filed in the intimation dated 13.11.2013.”
The relevant facts in brief are that the Assessee, an individual, filed its return of income for the Assessment Year 2011-2012 on 25/02/2019 disclosing status as ‘resident’ and offering to tax his global income. The Assessee also claimed credit of foreign taxes as tax deducted at source. While processing the return of income under Section 143(1) of the Act, the income earned by the Assessee outside India was taken into consideration but the credit of foreign taxes paid was disallowed.
Being aggrieved, the Assessee preferred a rectification application under Section 154 of the Act. While rejecting the aforesaid application, by way of Rectification Order, dated 11/03/2019, the Assessing Officer concluded that the Assessee was a ‘non-resident’ during the relevant previous year and therefore, the relief claimed by the Assessee in terms of Section 90/91 of the Act could not be extended to the Assessee.
In appeal preferred by the Assessee against the above Rectification Order, dated 11/03/2019, the Assessee filed written submissions. The relevant extract of order passed by CIT(A) reproducing the written submissions filed by the Assessee on 20/08/2024 reads as under: “6.1. Further on 20.08.2024, the appellant submitted as under: With reference to the abovementioned appeal, I wish to 2 Assessment Year 2012-2013 state the following for your kind consideration; Ground no. 1:- Ld AO has not given corresponding effect of the reduction in the income earned abroad. Submission:
1. 1. I was working with Hexaware Technologies Ltd. During F.Y. 2011-12. During the year, I was transferred to USA for the purpose of employment, in its American Arm, Hexaware Technologies, Inc., USA.
2. As my stay in India was less than 182 days, my residential status was 'Non-Resident' during the year. Details of my stay in and outside India are as below: Financial Arrival in Departure No. Residential Year India from India of Status days stay in India 2011-12 18.04.2011 15.05.2011 27 NRI 05.06.2011 05.08.2011 62 NRI 18.10.2011 27.11.2011 41 NRI Total 130 3. My consultant being unaware about the fact that I was NRI for F.Y. 2011-12, filed the ITR as "Ordinary Resident" for A.Y. 2012-13 on 30-07-2012 electronically calculating Net Total Income of Rs. 27,43,740/- (includes Indian salary as well as salary earned abroad).
4. Total tax liability was Rs. 6,82,927/- which was duly discharged by way of TDS amounting to Rs.7,25,940/- (which included both tax deducted by Indian employer and its American arm) and Advance Tax Rs. 6,489/- claiming a total refund of Rs. 49,500/- 5. Intimation u/s 143(1) was received dtd. 18-11-2013 in which the foreign salary income was considered; however, credit for the taxes paid in the USA was not given. Hence, the demand for Rs. 5,66,280/- was raised which includes tax of Rs. 4,57,891/- and interest of Rs. 1,08,389/- 6. Application for rectification u/s 154 was filed on 26- 02-2019. The request was considered and accordingly, the rectification order u/s 154 was passed by Ld AO on 11.03.2019 stating:
3 Assessment Year 2012-2013 "With respect to your application for rectification u/s 154 of Income Tax Act, 1961 for A.Y. 2012-13 filed in this office on 25.02.2019, it transpires that you have not claimed relief u/s 90/91 in your return of income. Further it is also evident that during the year, you were non-resident and hence, relief of claim made u/s 90/91 of Income Tax Act, 1961 is not allowable. Since relief u/s 90/91 of Income Tax Act, 1961 is only allowable to a resident, therefore, application filed in this regard stands rejected and the total income determined u/s 143(1) of the Act on 18.11.2013 remains unchanged."
The first paragraph of the rectification order u/s 154 clearly accepts that my status was "nonresident", but, in the subsequent paragraph, the order has considered the same income as considered in the intimation u/s 143(1) which was a mistake apparent on record.
8. As the return for A.Y. 2012-13 was filed considering the assessee as resident; the income earned in India as well as abroad was subjected to tax.
As per Section 5 of the Income Tax Act, 1961, only the Indian income of a non resident is taxable and not the global income.
10. As I was Non-resident in India for F.Y. 2011-12, only Indian income is taxable in India. Hence, Income earned outside India as well as the taxes paid on the same should be ignored while computing the taxable income in India.
However, Ld AO accepted the part of the facts and ignored the effect on the taxable income and tax thereon. In view of above, you are requested to direct the Ld. AO to calculate taxable income without considering income earned outside India as well as taxes on the same. Without prejudice to above; it is submitted as under: 12. If at all; the argument of the Ld AO is that the deduction or exemption can be claimed only by filing revised return; then it is submitted that the appellate authority or tribunal has power to entertain fresh claim though it is not claimed in original or revised return. In this respect, reliance is placed on 4 Assessment Year 2012-2013 following decisions:”
After taking into consideration the various submissions made by the Assessing Officer (including the written submissions, dated 20/08/2024), the CIT(A) disposed off the appeal preferred by the Assessee vide Order, dated 27/08/2024, concluding as under:
“7. On perusal of the submissions filed by the appellant during the appeal proceedings, it is found that the AO had made disallowed the relief u/s 90/91 of the Act due to the fact that the appellant was a Non Resident during the said financial year but the AO has also considered the foreign income while computing the total income of the appellant without giving credit to the taxes paid by the appellant abroad. The contention of the appellant that credit of taxes paid abroad need to be given appears to be valid and further even if the AO considered that relief u/s 90/91 cannot be given to the appellant being non resident during the said FY, then computation of total income should also have included only Indian income whereas the AO included the foreign income also while determining total income of the appellant. Nevertheless, keeping in view the submissions made by the appellant above, the AO is directed to verify and then give credit to the taxes paid by the appellant abroad.
8. In the result, the appeal is partly allowed.”
7. Not being satisfied by the order passed by the learned CIT(A), the Assessee has preferred the present appeal before the Tribunal on the grounds reproduced in Paragraph 2 above.
We have heard both the sides, perused the material on records and given thoughtful consideration to the submissions advanced.
9. It is the contention of the Assessee that in the return of income, the Assessee had incorrectly disclosed status as ‘resident’ and had incorrectly offered to tax income earned outside India. This aspect came to the knowledge of the Assessee on rejection of the rectification application filed by the Assessee by the Assessing Officer vide Rectification Order, dated 11/03/2019, passed under 5 Assessment Year 2012-2013 Section 154 of the Act. By way of the aforesaid order, the Assessing Officer had determined the status of the Assessee to be ‘non- resident’. Therefore, Assessee furnished details of his actual stay in India during the relevant previous year before the CIT(A), and submitted that his aggregate stay in India was only 137 days. Therefore, the Assessee was non-resident in India during the relevant previous year. The Assessee also furnished copy of the passport in support of the aforesaid submission. We find that in appeal preferred by the Assessee against the Rectification Order, the CIT(A) did not return any findings regarding residential status of the Assessee but granted partial relief to the Assessee by directing the Assessing Officer to verify the records and then grant credit of taxes paid by the Assessee outside India. Now the Assessee claims that the its residential status should be taken as ‘non-resident’ and income earned outside India be excluded from the scope of income taxable during the relevant previous year in India. We note that the details pertaining to stay of Assessee in India were not available with the Assessing Officer and were placed for the first time in appeal before the CIT(A). We have already noted hereinabove that the CIT(A) did not return any findings regarding residential status of the Assessee. While in the return of income the Assessee had disclosed his status as ‘resident’, in the appellate proceedings, the Assessee has claimed to be ‘non-resident’ in India. At the same time we note that in the Rectification Order dated, 11/03/2019, the Assessing Officer has determined the Assessee to be ‘non-resident’ and said order continuous to hold good. Given the aforesaid facts, to put quietus to the issue, we deemed it appropriate and in the interest of justice to restore the issue back to the file of the Assessing Officer for denovo adjudication. The Assessing Officer is directed to determine the residential status of the Assessee afresh after taking into consideration the details/documents to be furnished by the Assessee pertaining to his actual stay in India during the relevant previous year and bring to tax the income in the hands of the 6 Assessment Year 2012-2013 Assessee keeping in view the residential status so determined. Accordingly, we set aside the Order, dated 27/08/2024, passed by the CIT(A) with the directions to the Assessing Officer to adjudicate the issue afresh after granting the Assessee a reasonable opportunity of being heard. In terms of the aforesaid, Ground No.1 and Ground No.2 raised by the Assessee are allowed for statistical purposes, while Ground No.3 and 4 are dismissed.
In result, the present appeal preferred by the Assessee is treated as allowed for statistical purposes.