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Facts
The assessee, an employee of EY LLP India, was assigned to EY LLP United Kingdom for the period April 1, 2016, to March 31, 2017. She claimed non-resident status and that her salary, paid by EY LLP India, was not taxable in India as per the India-UK DTAA.
Held
The Tribunal held that the issue of whether the assessee rendered services in the UK and her residential status needs to be established. Due to the absence of necessary documents, the AO's addition was not fully verified.
Key Issues
Whether the salary income earned while working in the UK by a non-resident assessee is taxable in India in light of the India-UK DTAA, when essential supporting documents were not provided to the AO.
Sections Cited
192
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH, BANGALORE
Before: SHRI NARENDER KUMAR CHODHRY & SHRI WASEEM AHMED
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the NFAC, Delhi vide order dated 09/06/2023 in DIN No.ITBA/NFAC/S/250/2023-24/1053642679(1) for the assessment year 2017-18.
The only issue raised by the assessee is that the salary income of ₹19,78,810 received from EY LLP India has been wrongly taxed in India in view of the DTAA between India and the UK.
The facts of the case are that the assessee was an employee of EY LLP India. She was assigned to EY LLP United Kingdom from 1st April 2016 to 31st March 2017. As per the assessee, her residential status was non-resident for the year under consideration.
The salary was paid by EY LLP India after deducting TDS under section 192 of the Act. The assessee submitted that the deduction of tax by EY LLP India was only for administrative convenience since the payroll continued to remain in India during the foreign assignment. According to her, being a non-resident, her salary was not taxable in India in pursuance of Article 16(1) of the India–UK DTAA.
However, the AO held that the assessee failed to furnish the required documents as detailed below:
“a) Terms of assignment with documentary evidence. b) Copy of the contract between employer and assessee. c) Copy of the return filed in UK and proof of taxes paid on those incomes. d) Working on total number of days residing in India.”
In the absence of such evidence, the AO added the income of ₹19,78,810 to the total income of the assessee.
Aggrieved, the assessee filed an appeal before the learned CIT(A). The learned CIT(A) dismissed the appeal by observing that the salary was received from India and therefore taxable in India.
Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR reiterated the submissions made before the ld. CIT(A). On the other hand, the learned DR submitted that the documents and explanations filed by the assessee before the CIT(A) were not confronted to the AO. He therefore suggested that the matter be restored to the file of the AO for fresh adjudication. In rejoinder, the learned AR did not object to the matter being set aside to the AO.
We have heard both parties and perused the material on record. The facts show that the assessee was on assignment in the UK during the year under consideration. She claims that she was a non-resident and her salary is not taxable in India under Article 16(1) of the India–UK DTAA. However, the AO made the addition due to lack of supporting documents.
10.1 We note that the provisions of Article 16(1) of the India–UK DTAA deal with taxation of employment income. Salary income is generally taxable in the country where the employment is exercised unless the exceptions under the DTAA apply. Therefore, the key question is whether the assessee rendered services in the UK and whether her residential status and treaty benefits can be established.
10.2 These aspects were not fully verified by the AO due to absence of documents. Now, before us, the learned AR has expressed willingness to file the necessary evidence such as assignment letters, tax residency proof, and UK tax records. In our view, these documents are crucial to decide the matter in accordance with law and the DTAA.
10.3 Accordingly, in the interest of justice, we set aside the order of the learned CIT(A) and restore the matter to the file of the AO for fresh adjudication. The AO shall verify the evidences to be furnished by the assessee and decide the issue in accordance with the provisions of the Act and the India–UK DTAA. Needless to say, the assessee shall be given due opportunity of being heard. Hence, the ground of appeal filed by the assessee is allowed for statistical purposes.
11. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in court on 9th day of October, 2025