AMIT LAROYA,NEW DELHI vs ACIT, CIRCLE INTERNATIONAL TAXATION 2(2)(1), NEW DELHI

Income Tax Appellate Tribunal, DELHI BENCH ‘D’, NEW DELHI

Before: Dr. B. R. R. Kumar, Sh. Yogesh Kumar US

For Appellant: Adv. &

Hearing: 02.05.2024Pronounced: 28.06.2024

0IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘D’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member, Sh. Yogesh Kumar US, Judicial Member ITA No. 1667/Del/2022 : Asstt. Year: 2019-20 Amit Laroya, Vs ACIT, No. 48D, Malcha Marg, Circle-2(2)(1), New Delhi-110001 New Delhi-110002 (APPELLANT) (RESPONDENT) PAN No. AAAPL8950A Assessee by : Sh. Vishal Kalra, Adv. & Sh. Kashish Gupta, CA Revenue by : Sh. Vizay B. Vasanta, CIT-DR Date of Hearing: 02.05.2024 Date of Pronouncement: 28.06.2024 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order dated 30.05.2022 passed by the AO u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961.

Following grounds have been raised by the assessee:

“1. That on the facts and circumstances of the case and in law, the AO has erred in assessing the total income of the Appellant at INR 8,06,82,621, in pursuance to the directions issued by the DRP, as against the returned income of INR 85,23,950. 2. That on the facts and in the circumstances of the case and in law, the directions issued by the DRP are bad in law, void ab initio and liable to be quashed as the same have been passed in violation of the provisions of sub-section (8) to section 144C of the Act. 2.1 That on the facts and in the circumstances of the case and in law, the DRP has erred in directing the AO to pass a speaking order after considering the factual and legal

2 ITA No. 1667/Del/2022 Amit Laroya submissions filed by the Appellant in support of his claim of allowability of salary income earned in Korea as exempt. 3. That on the facts and circumstances of the case and in law, the AO/DRP have erred in taxing the salary income of INR 7,21,58,671 earned by the Appellant for the subject AY 2019- 20 in respect of the services rendered in Korea. 4. That on the facts and circumstances of the case and in law, the AO/DRP have erred in not appreciating that the Appellant was a non-resident of India during the subject assessment year and salary being accrued outside India is not taxable in India as per the provisions of the Act. 5 That on the facts and circumstances of the case and in law, the AO/DRP have erred in denying the exemption in respect of the salary income of INR 7,21,58,671, claimed by the Appellant under Article 15(1) of India-Korea Double Taxation Avoidance Agreement ("DTAA"), without appreciating that salary was received in respect of employment exercised in Korea. 6. Notwithstanding and without prejudice to the above that the Appellant was eligible for claiming relief under Article 15(1) of the DTAA, the AO/DRP have erred in invoking and thereafter, not granting the salary exemption by invoking the provisions of Article 15(2) of the DTAA. 6.1 Notwithstanding and without prejudice to the above, the AO/DRP have erred in not appreciating that the Appellant satisfies all the conditions laid down by Article 15(2) of the DTAA. 7. That on the facts and circumstances of the case and in law, the AO has erred in alleging that the Appellant did not submit the documentary evidence in relation to the salary income offered for taxation in Korea, not appreciating that the requisite documentary evidences in relation thereto were duly submitted during the course of assessment proceedings. 8. That on the facts and circumstances of the case and in law, the AO/DRP have erred in levying interest under section 234B of the Act. 9. That on the facts and circumstances of the case and in law, the AO/DRP have erred in levying interest under section 234D of the Act. 10. That on the facts and circumstances of the case and in law, the AO has erred in initiating penalty proceedings under section 270A of the Act.”

3 ITA No. 1667/Del/2022 Amit Laroya 3. The grounds taken up in this appeal stands adjudicated by the Co-ordinate Bench of ITAT in assessee’s own case for the earlier A.Y. 2018-19 in ITA No. 1457/Del/2022 order dated 28.11.2023. For the sake of ready reference, the said order is reproduced as under:

“This appeal of the Assessee arises out of the order of the CIT, Circle, Int. Tax. 2(2)(1) [hereinafter referred to as [‘CIT’] in Appeal dated 29/04/2022 against the order passed by DRP u/s 144C(5) of the Income Tax Act (hereinafter referred to as ‘the Act’) on 07/01/2022 for the Assessment Year 2018-19.

Though the assessee has raised several grounds of appeal before us, the only effective issue to be decided in this appeal is as to whether the salary income earned by the assessee in the sum of Rs.5,11,71,307/- is eligible for exemption in terms of Article 15(1) of India-Korea Double Taxation Avoidance Agreement (DTAA) for the exercise of employment in Korea in the facts and circumstances of the instant case.

We have heard the rival submissions and perused the material available on record. The assessee filed his return of income for the assessment year 2018-19 declaring total income of Rs.57,69,390/-. The Ld. AO on perusal of Form 26AS of the assessee observed that the assessee was in receipt of Rs.5,40,07,330/- under the head income from salary from 3M India Limited, an Indian resident company. Out of this, the assessee had declared only the sum of Rs.29,86,022/- under the head salary and claimed TDS refund of Rs.1,98,58,099/- which included TDS of Rs.1,89,69,411/- deducted on receipt of Rs.5,40,07,330/- . It is not in dispute that assessee during the year under consideration was a non-resident. The assessee as a matter of abundant caution and on a conservative basis had offered a sum of Rs.29,86,022/-being the salary proportionate to the period of

4 ITA No. 1667/Del/2022 Amit Laroya stay in India for 31 days, in the return of income. The assessee was sent on international assignment to 3M Korea from 3M India Limited effective from June, 2016 and since then he was working in Korea. During the assessment year 2018-19, as stated earlier, the assessee had stayed in India only for a short period of 31 days. The assessee offered the proportionate salary thereon amounting to Rs.29,86,022/- in the return of income filed in India. Since assessee was exercising employment in Korea, the Indian company i.e. 3 M India Limited paid the salary to the assessee and cross charged the same on the Korean Company since the assessee was only sent on deputation on an international assignment to 3M Korea. It is not in dispute that services were rendered by the assessee outside India. However, in order to ensure withholding tax compliance laid down u/s. 192 of the Act, 3 M India Limited deducted tax at source on the salary paid to the assessee. The entire salary paid was reimbursed to 3M India Limited by 3M Korea. It is not in dispute that assessee had filed his tax returns in Korea duly offering the salary income earned for services rendered in Korea. The tax residency certificate issued by the District Tax Office of Korea is on record. The income tax returns filed by the assesee in Korea are also placed on record.

The assessee claimed exemption in terms of Article 15(1) of the Act of India Korea treaty in the sum of Rs.5,11,71,307/- being the salary accrued outside India for services rendered outside India. However, Indian company while making payment of salary to the assessee had deducted tax at source in terms of section 192 of the Act. Hence, in order to claim refund of excess TDS, the assessee had filed the return in India offering regular income earned by him in India and claiming exemption for salary outside accrued India in the status of non-resident. In the said return, the salary accrued outside India for services rendered outside India were claimed as exemption in terms of Article 15(1) of India, Korea DTAA. The

5 ITA No. 1667/Del/2022 Amit Laroya main contention of the revenue as well as Ld. DR before us, is as per section 9 of the Act, all incomes which had come directly or indirectly through any source in India would be taxable in India. It is not in dispute that during the year the assessee had duly furnished the following documents before the lower authorities:-

(a) details regarding the number of days for which the assessee stayed in India from A.Y. 2014-15 to A.Y. 2019-20 to prove the fact that he is not a resident during the year under consideration.

(b) Offer letter issued by Indian employer for the assignment in Korea.

(c) the reconciliation of salary income which was reflected in Form 26AS with the income reported in tax returns filed in Korea.

(d) Copy of assessee’s passport for the period between assessment years 2014-15 to 2018-19.

(e) details of assessee’s stay in India during assessment years 2018-19 and stay between 01.04.2013 to 31.03.2016.

(f) Copy of tax residency certificate issued for the year 2017 and 2018 by the District Tax Office Korea .

(g) Copy of income tax return of the assessee

We find that the Ld. AO had reproduced Article 15 of the India Korea treaty and concluded that assessee is not eligible to claim the relief by applying Article 15(2) (b) and 15 (2) (c). The Ld. AO also observed that since remuneration was always paid by the Indian employer and control and management of the assessee was always based in India. Thus, the salary received by the assessee from Indian employer shall be deemed to accrue

6 ITA No. 1667/Del/2022 Amit Laroya or arise in India u/s. 9 (i) (ii) of the Act. We find that the said section has to be read together with the explanation thereon which clearly states that income of the nature referred to in this clause payable for-

(a) services rendered in India;

(b) the rest period or leave period which is preceded and succeeded by services rendered in India and forms part of the services contract;

shall be regarded as income earned in India.

Hence, as aforesaid explanation, it is very clear that salary payment could be stated to be earned in India only if the corresponding services are rendered in India. Since in the instant case, the services are rendered outside India which fact is not in dispute before us and hence income cannot be said to be deemed to accrue or arise in India. Further we find that Article 15 (1) of India Korea treaty states that employment income earned by individual is exempt from tax in India if the following conditions are satisfied :-

(a) If the individual is resident of Korea; and

(b) if the employment is outside India.

In the instant case, both the conditions had been satisfied and hence in any event, the salary would not be taxable in India in terms of Article 15 (1) of India Korea treaty.

The next aspect on this issue is the salary of Rs.29,86,022/- offered suo moto by the assessee in the return of income filed in India. As stated in the earlier part of this order, this income has been offered by the assessee to tax in India on a conservative basis proportionate to the period of stay of 31 days in India during the year under consideration. Be that as it may,

7 ITA No. 1667/Del/2022 Amit Laroya merely because a particular receipt has been erroneously offered to tax by the assessee in the return, it does not mean that the revenue acquires the right to tax the same in the hands of the assessee. The revenue could tax particular receipt only if the provisions of the Act enables it to do so. There is no estoppel against the statute.

In view of the aforesaid observations, we hold that the salary income earned in India is not taxable under the Act as well as under the India Korea treaty.”

Since, the matter stands covered by the order of the Co- ordinate Bench of Tribunal in assessee’s own case, in the absence of any change in the factual matrix and legal proposition, the appeal of the assessee is hereby allowed.

Order Pronounced in the Open Court on 28/06/2024.

Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 28/06/2024 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR

AMIT LAROYA,NEW DELHI vs. ACIT, CIRCLE INTERNATIONAL TAXATION 2(2)(1), NEW DELHI