Loading judgment…
Facts
The assessee, a non-resident for AY 2015-16, was employed by an Indian company but deputed for a short-term foreign assignment in the Philippines, earning salary for services rendered abroad. He claimed exemption for this foreign-sourced salary, but the Assessing Officer and CIT(A) added it to his taxable income, deeming it to accrue in India because the employer was Indian and payment originated from India. The assessee appealed against this addition.
Held
The Tribunal condoned the delay in filing the appeal, noting that the assessee was a non-resident as he stayed in India for only 29 days. It held that salary accrues at the place where services are rendered, not based on the employer's location or payment source. Consequently, the foreign assignment salary earned in the Philippines by the non-resident assessee cannot be treated as income accruing in India and the addition made by the AO was deleted.
Key Issues
Whether salary earned by a non-resident assessee for services rendered entirely outside India for an Indian employer accrues in India and is taxable, and whether the place of rendering services or the employer's location/payment source determines the accrual of salary for tax purposes.
Sections Cited
143(2), 142(1), 5(2)(b), 6(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH KOLKATA
Before: Shri Manjunatha G & Shri Sonjoy Sarma
Assessment Year: 2015-16 Debashis Das………………………………………................................……….…Appellant Uttara Tritiya Housing Complex, Action Area-II, New Town, Near City Center-2, W.B– 700156. [PAN: AIXPD81639Q] vs. ACIT, International Taxaion-1(1), Kolkata ..l..….…..….......……..…...…..…..Respondent Appearances by: Shri Nishant Thakkar, AR, appeared on behalf of the assessee. Shri Sallong Yaden, Addl. CIT-DR, appeared on behalf of the revenue. Date of concluding the hearing : September 17, 2025 Date of pronouncing the order : December 08, 2025 ORDER
Per Sonjoy Sarma, Judicial Member:
This appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi for Assessment Year 2015–16. The Ld. CIT(A) sustained the addition made by the Assessing Officer in respect of salary income earned by the assessee during his short-term foreign assignment in the Philippines.
The appeal has been filed by the assessee with a delay of 366 days. The assessee has filed an affidavit for condonation of the delay. After considering the reasons cited in the affidavit for condonation of delay, we find that the reasons are valid and consequently, the delay in filing the appeal is hereby condoned and we proceed to dispose of the appeal on merits.
Debashis Das 3. Brief fact of the of the case are that the assessee filed his return of income for AY 2015–16 declaring total income of ₹86,82,640 and claiming refund of ₹13,310. Subsequently, a revised return was filed declaring total income of ₹86,90,530 and claiming refund of ₹59,490. The case was selected for scrutiny under CASS and notices under Sections 143(2) and 142(1) were issued, to which the assessee responded by submitting the required information and evidences. During the relevant previous year (FY 2014–15), the assessee was employed with IBM India Pvt. Ltd., an Indian company. The assessee was deputed on a short-term foreign assignment to the Philippines and stayed outside India during the year, except for 29 days. In the return of income, the assessee declared salary income of ₹86,90,530 as taxable in India but claimed relief/exclusion of ₹1,14,07,883 relating to salary earned for services rendered outside India during his foreign assignment. The claim was made under Section 5(2)(b) read with the provisions relating to non- resident taxation. The Assessing Officer held that the assessee was employed with IBM India Pvt. Ltd., an Indian employer, and salary was paid from India. According to the AO, income arising from an employment contract with an Indian employer accrues in India irrespective of the place where services are rendered. He therefore treated the entire foreign assignment salary as “income accruing in India” and added ₹1,14,07,883 to the taxable income of the assessee, assessing total income at ₹2,00,98,413.
Aggrieved by the order of the Ld. AO assessee preferred an appeal before the CIT (A) where the appeal of the assessee was dismissed by upholding the assessment order.
The assessee is now in appeal before this Tribunal. The learned AR submitted that the assessee stayed in India for only 29 days during the relevant year, and therefore, as per Section 6(1), he qualified as a non- resident. It was contended that a non-resident is taxable in India only on Debashis Das income received or deemed to be received in India, and income accruing or arising or deemed to accrue or arise in India. It was argued that the assessee rendered services entirely outside India, and salary for such services accrues at the place of rendering of services, namely, the Philippines. Even if payments were routed from India, the place of accrual remains outside India. The ld. AR placed reliance on DCIT v. Sudipta Maity reported in [2018] 96 taxman.com 336 (Kolkata-Trib), where salary for services rendered abroad by a non-resident employee of an Indian company was held not taxable in India. Judicial principle that accrual of salary is determined by the place of services rendered, not the location of employer or payment. It was argued that both AO and CIT(A) erred in treating the assessee as resident and treating salary as accrued in India merely because the employer is Indian.
On the other hand the Ld. DR supported the orders of the lower authorities. He submitted that the employer being an Indian company, salary paid from India must be regarded as income accruing in India and therefore the assessee is not entitled to relief under Section 5(2)(b) of the Act.
We have considered the rival submissions and examined the material available on record. The core issue is the taxability of salary earned by a non-resident for services rendered outside India. It is undisputed that the assessee stayed in India only 29 days during the relevant previous year. Under Section 6(1) of the Act , any individual staying in India for less than 182 days in a year is a non-resident. The assessee is therefore a non-resident for the relevant year. Under Section 5(2), a non-resident is taxable only on income received in India, or income accruing/arising in India. It is a settled position of law that salary accrues at the place where the services are rendered. This principle is upheld in several decisions including DCIT v. Sudipta Maity, where the Tribunal held that a non-resident employee deputed outside Debashis Das India is taxable only on Indian-sourced salary relating to services rendered in India. In the present case, no material has been brought by the AO to show that the services for which salary of ₹1,14,07,883 was received were rendered in India. On the contrary, it is an admitted fact that the assessee was working in the Philippines during the relevant period. Merely because the employer is an Indian company and salary may have been disbursed from India, the source of accrual cannot be shifted to India. The situs of employment and rendering of services determines accrual. Accordingly, salary relating to services rendered in the Philippines by a non-resident employee cannot be treated as “income accruing or arising in India” within the meaning of Section 5(2)(b). The AO and CIT(A) therefore erred in denying the assessee the rightful exclusion of the foreign assignment salary. In view of the above analysis and respectfully following the decision in DCIT v. Sudipta Maity (supra)., we hold that the addition of ₹1,14,07,883 made by the AO towards salary earned outside India is not sustainable. Accordingly. the AO is directed to delete the addition and allow the refund of ₹59,490 claimed by the assessee.
In the result, the appeal of the assessee is allowed. Kolkata, the 8th December, 2025.