DEEPAK KUMAR TODI,KOLKATA vs. DDIT, INTERNATIONAL TAXATION, CIRCLE-1(1), KOLKATA, KOLKATA

Heard both parties. Case file perused.

The assessee’s sole substantive grievance pleaded in the instant appeal challenges correctness of both the lower authorities’ action in treating his foreign inward remittance on account of salary for services rendered in Nigeria amounting to Rs.26,46,638/- as taxable in India under the provisions of the Act. The CIT(A)’s detailed discussion confirming the Assessing Officer’s action to this effect reads as follows:-

We have given our thoughtful consideration to rival contentions. The assessee’s paper book comprising of his income tax returns, computation along with final accounts, employer certificate issued by De United Food Industries Ltd., Assessment Year: 2011-12 Deepak Kumar Todi statement showing details of remittance, copies of inward remittance, transaction advices, statement of NRE account maintained with Axis Bank and copy of the necessary certificate issued by M/s Galt Trading Pvt. Ltd; stands perused. There is no dispute about the basic relevant fact that the assessee has rendered his services in Nigeria giving rise to the tax in inward remittance in issue. The Revenue seeks to tax the same on account of three folded reasoning i.e., the said income has neither been taxed in Nigeria nor in India, the amount has been received in India and therefore taxable on receipt basis. The CIT(A) has admittedly relied upon this tribunal’s co-ordinate bench’s decision (supra). Mr. Som, vehemently contends during the course of hearing that both the lower authorities have rightly invoked receipt principle r.w.s. 5(2) of the Act in coming to the conclusion that the assessee’s remittance on account of salary for services rendered in Nigeria is taxable in India. We find no merit in either of these arguments. The assessee’s paper book reveals that the employer/payer i.e., De United Food Industries Ltd. had indeed deduced TDS amounting to Naira 250000 from his salary and bonus in Nigeria which stood credited to the said Government account. It is therefore not a case of double non taxation as argued at the Revenue’s behest. It thereafter transpires that the hon’ble jurisdictional high court’s decision in the case of Utanka Roy vs. DIT(supra) holds that the salary income for services rendered outside India has to be considered as income accrued and received out of India is not taxable in India vide following detailed discussion:- “6. I have considered the rival contentions of the parties and the materials made available on records. 7. The petitioner is an Indian citizen. He is an income tax assessee. He has filed a return for the assessment year 2011-2012 with the Income Tax authorities. The petitioner claims to be an engineer and to be engaged as such by a foreign company. The petitioner claims that, he has worked as an engineer with the foreign company for 286 days during the assessment year. He has filed income tax return for the assessment year disclosing an income of Rs. 5,63,850/-. He has thereafter received an assessment cum intimation notice under Section 143(1) of the Income Tax Act, 1961. He has applied under Section 264 of the Income Tax Act, 1961 against such intimation under Section 143(1). In course of hearing of the proceedings under Section 264, the petitioner has claimed that, he has received Rs. 27,92,417/- from his employer during the assessment year in question instead of the sum of Rs. 5,63,850/-.

The contention on behalf of the petitioner that, in the present facts, the petitioner is exempt from payment of income tax requires consideration.

Scope of total income is laid down in Section 5 of the Income Tax Act, 1961. Sub-Section (1) deals with income to a person who is resident in India while Sub-Section (2) deals with income of a person who is a non- resident. The petitioner is a non-resident Indian. He is guided by Section 5(2) of the Act of 1961. Section 5(2) of the Act of 1961 is as follows:— "(2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-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. Explanation 1.- Income accruing or arising outside India shall not be deemed to be received I India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2.- For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India."

Explanation 1 to Sub-Section 2 states that, income accruing or arising outside India shall not be deemed to be received in India within the meaning of such section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2 clarifies that income will not be treated to be received in India solely on the basis that such income was received or deemed to be received in India. Therefore, it has to be found out where the income to the person concerned had accrued. For the purpose of finding out the place of accrual of the income, the place where the services have been rendered becomes material. In fact, the place where the income gave rise is Assessment Year: 2011-12 Deepak Kumar Todi required to be considered to arrive at a finding whether the income was in India or outside India.

In Prahlad Vijendra Rao (supra) an income derived by a person working outside India for 225 days has been held not to have accrued in India.

In Avtar Singh Wadhwan (supra) it has been held that, the relevant test to be applied to decide whether the income accrued to a non- resident in India or outside is concerned, is to find the place where the services were rendered, in order to consider where the income accrued. The source of the income was not relevant for the purposes of ascertaining whether the income had accrued in India or outside India.

The question whether the petitioner has rendered services in India or not is a question of fact. It is not disputed that the petitioner as a marine engineer had rendered services outside India for the period of 286 days. He has received his remuneration for such work from a foreign company. Consequently, the income received by the petitioner for services rendered outside India has to be considered as income received out of India and treated as such.

There is anomaly in the quantum of income received by the petitioner during the period. In his income tax return he has initially stated that his income to be Rs. 5,63,850/- while in the proceedings under Section 264, he claims to have received a sum of Rs. 27,92,417/-.

In view of the finding that, the petitioner has received the remuneration from a foreign company for services rendered outside India, the quantum that he claims to have received, namely, Rs. 27,92,417/- has to be considered as such.”

We adopt the above detailed reasonings mutatis mutandis conclude in this view of the matter that both the lower authorities have erred in taxing the assessee’s foreign inward remittance on account of salary for services rendered in Nigeria to be taxable in India on receipt basis. The impugned addition stands deleted accordingly.