SRI MADHUSUDAN PRABHU KOTHA,BANGALORE vs. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-4(3)(1), BANGALORE

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ITA 1248/BANG/2018Status: DisposedITAT Bangalore17 November 2021AY 2012-135 pages
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What did the Tribunal hold?

The Tribunal held that as the assessee is a resident, his global income, including salary earned outside India, is taxable in India as per Section 5(1)(c) of the Income Tax Act. However, the issues regarding foreign tax credit, deductions under Chapter VIA, and interest under Sections 234B and 234C were restored to the AO for fresh examination.

What were the facts?

The assessee, a resident of India, earned salary income in the UK and claimed foreign tax credit. The Assessing Officer (AO) restricted the credit, and the CIT(A) confirmed the AO's order. The assessee appealed, arguing UK salary income should not be taxed in India.

What were the issues?

Whether salary income earned outside India by a resident assessee is taxable in India, and the correct calculation of foreign tax credit and eligibility for deductions.

Which sections of the Income-tax Act were involved?

Section 5(1)(c),Section 90,Section 91,Section 234B,Section 234C

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Income Tax Appellate Tribunal, “A’’BENCH: BANGALORE

Before: SHRI N.V. VASUDEVAN & SHRI B.R. BASKARAN

For Appellant: Smt. Sheetal Borkar, A.R
For Respondent: Shri Swaroop Mannava, D.R
Hearing: 17.11.2021Pronounced: 17.11.2021

PER B.R. BASKARAN, ACCOUNTANT MEMBER:

1.

The assessee has filed this appeal challenging the order dated 29.12.2017 passed by Ld. CIT(A)-4, Bengaluru and it relates to the assessment year 2012-13. The grounds of appeal urged by the assessee read as under:-

1. “The CIT(A) erred in passing the order in the manner he did.

2. The learned CIT(A) ought to have appreciated the submissions made and evidence produced by the appellant and to refrain from including the UK salary income for taxation. 3. The learned CIT(A) ought to have given the deduction for S.82CC, 80CCC, 80CCD, 80CCF of the Act.

Sri Madhusudan Prabhu Kotha, Bangalore

Page 2 of 5 4. The learned CIT(A) ought to have given deduction for self- assessment tax paid u/s 140A of the Act. 5. The learned CIT(A) erred in levying the interest u/s 234B and 234C of the Act. 6. Without prejudice, the additions are excessive, arbitrary and unreasonable and ought to be reduced substantially. 7. For these and other grounds that may be urged at the time of hearing of the appeal the Appellant prays that the appeal may be allowed.”

2.

The Ld. A.R. submitted that the assessee is an employee working in DB Group Services (UK) Ltd. (London, UK). The assessee has declared salary income of Rs.66,58,236/-, out of which a sum of Rs.22,54,178/- was earned in UK. The assessee had paid income tax of Rs.3,37,922/- in UK and claimed the same as Foreign tax credit in his return of income u/s 90 to 91 of the Income-tax Act,1961 ['the Act' for short]. However, the A.O. restricted the foreign tax credit to Rs.3,33,201/-.

3.

Before Ld. CIT(A), the assessee contended that the salary income earned in UK is not taxable in India, since the salary income has accrued outside India. The Ld. CIT(A), however, rejected the above said contention of the assessee observing that the ground raised before him was related to foreign tax credit only. He also observed that the difference in foreign tax credit between that claimed by the assessee and that allowed by the A.O. has arisen on account of difference in exchange rate only. Accordingly, he confirmed the order passed by the A.O. Aggrieved, the assessee has filed this appeal before us.

4.

The Ld. A.R. submitted that the assessee has earned salary income outside India and hence salary income has accrued outside India. Accordingly she contended that the salary income should not have been taxed in India. However, we notice that from the assessment order that the status of assessee under the Act is Sri Madhusudan Prabhu Kotha, Bangalore

Page 3 of 5 “Resident and ordinarily resident”. As per section 5(1) of the Income Tax Act describes scope of income for resident assessees. It reads as under:- 5(1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which-

(a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrues or arises to him outside India during such year: Provided that, in the case of a person not ordinarily resident in India within the meaning of sub- section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India.

It can be seen that under sec.5(1)(c) of the Act, income accrued outside India is also taxable in the hands of resident assessees. Hence the contention of the Ld A.R is liable to be rejected. The Ld A.R placed her reliance on the decision rendered by Hon’ble Madras High Court in the case of CIT vs. A.P. Kalyanakrishnan (195 ITR 534)(Mad). We perused the above said decision and we notice that the same has been rendered for an assessee who is a “resident but not ordinarily resident”. The scope of total income prescribed for such kind of assessees is different and hence the assessee cannot place his reliance on the above said decision. In the case of resident assessees, entire global income is assessable to tax in India. Hence, we are unable to appreciate the contentions of Ld A.R and accordingly hold that salary income earned in UK is liable to tax in India.

5.

The Ld. A.R. further submitted that foreign tax credit has not been properly allowed credit by A.O. We notice that the A.O. has Sri Madhusudan Prabhu Kotha, Bangalore

Page 4 of 5 allowed credit of Rs.3,33,201/- as against the claim of Rs.3,37,922/-The Ld. CIT(A) has observed that the difference has arisen on account of exchange rate applied by the A.O. The Ld. A.R. submitted that the correct exchange rate has not been applied by the A.O. and accordingly submitted that this matter requires fresh examination. Accordingly, we restore this issue to the file of the A.O. for examining the claim of the assessee in accordance with law.

6.

The Ld. A.R. further submitted that the A.O. has not granted deduction for self-assessment tax paid by the assessee and also did not grant deduction properly under Chapter VIA of the Act. The Ld. A.R. further submitted that if the above said deductions are allowed and self-assessment tax is granted credit, then the interest u/s 234B of the Act will undergo revision. Accordingly, she prayed that all these matters may be restored to the file of the A.O. We find merit in the submissions of the Ld. A.R. Accordingly, we restore all these issues to the file of the A.O. for examining the claims of the assessee and for taking appropriate decision in accordance with law.

7.

In the result, the appeal filed by the assessee is treated as partly allowed for statistical purposes. Order pronounced in the open court on 17th Nov, 2021.

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