AYYANNAN CHAKKARAVARTHY,CHENNAI vs. ITO INTERNATIONAL TAXATION 1(1), CHENNAI

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ITA 2409/CHNY/2017Status: DisposedITAT Chennai02 August 2018AY 2014-155 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the salary received by a non-resident sea-farer for services rendered outside India, even if credited to an NRO account in India, should not be taxed in India, following a CBDT circular.

What were the facts?

The assessee, a non-resident sea-farer, received salary of Rs. 30,00,457/- which was credited to his NRO account in India. The Assessing Officer treated this as taxable income in India, relying on Section 5 of the Income Tax Act.

What were the issues?

Whether salary received by a non-resident sea-farer in an NRO account in India for services rendered outside India is taxable in India.

Which sections of the Income-tax Act were involved?

Section 5

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Income Tax Appellate Tribunal, ‘A’ (SMC

Before: SHRI ABRAHAM P.GEORGE

Hearing: 01.08.2018Pronounced: 02.08.2018

: अपीलाथ$ क' ओर से/ Appellant by Mr.S.Sridhar, Adv. : %&यथ$ क' ओर से /Respondent by Mr.B.Sagadevan, JCIT : सुनवाई क' तार"ख/Date of Hearing 01.08.2018 घोषणा क' तार"ख /Date of Pronouncement : 02.08.2018 आदेश / O R D E R PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER:

In this appeal filed by the assessee which is directed against an order dated 11.07.2017 of Commissioner of Income Tax (A)-16, Chennai, it has altogether taken nine grounds, of which, Grounds 1, 8 & 9 are general in nature needing no adjudication.

2. Through its Ground Nos.2 to 5, assessee is aggrieved on an addition of Rs.30,00,457/- being the salary income received by him, while he was a non-resident sea-farer during the previous year relevant to the impugned Assessment Year. :- 2 -:

3.

Ld.Counsel for the assessee submitted that assessee had claimed salary of Rs.30,00,457/- credited to his Non-Resident Orindary (in short “NRO”) account in India as exempt from tax. As per the Ld.AR, assessee was employed with one M/s.Global United Shipping Pvt. Ltd., and was serving as Marine Engineer in a Ship called MV JAL VAHINI in International Waters. Further, as per the Ld.AR, assessee was outside India for 243 days and therefore, was a Non-Resident during the previous year relevant to the impugned Assessment Year. According to the Ld.AR, the salary credited to the NRO A/c was for services rendered outside India, and assessee had claimed exemption for such salary. However, as per the Ld.AR, Ld.Assessing Officer relying on Sec.5 of the Income Tax Act, 1961 (in short “the Act”) had held that income once received in India, became taxable in India irrespective of the source from which it was derived and the residential status of the assessee. As per the Ld.AR, Ld.AO took a view that the salary having been credited by the employer directly into assessee’s bank account, it came to the assessee in India and hence it was taxable in India. According to the Ld.AR, the Ld.AO had relied on a decision of Kolkatta Bench in the case of Shri Tapas Kumar Bandopadhyay Vs. DCIT (2016) 159 ITD 309. Submission of the Ld.AR was that the Ld.CIT(A) confirmed the addition without accepting the contention of the assessee that he was employed through an agent Company and such agent Company was acting as a Service Provider for a shipping Company in which assessee was carrying out his official duties. :- 3 -:

4.

Continuing his submissions, Ld.AR submitted that subsequent to the decision of the Kolkatta Bench in the case of Shri Tapas Kumar Bandopadhyay (supra), the Central Board of Direct Taxes had come out with a Circular dated 11.04.2017, wherein, it was clarified that salary received by a sea-farer in an NRI A/c maintained in India, would not be taxable in India. Thus, as per the Ld.AR, assessee should be given the benefit of the above CBDT Circular.

5.

Per contra, Ld.DR supporting the orders of the authorities below submitted that the decision of the Kolkatta Bench in the case of Shri Tapas Kumar Bandopadhyay (supra), was on very similar facts. According to him, lower authorities were, therefore, justified in making the addition for the salary.

6.

I have considered the rival contentions and perused the material placed on record carefully. It is not disputed that assessee was a Non- Resident during the previous year relevant to the impugned Assessment Year. It is also not disputed that salary was credited by the employer of the assessee to his NRO A/c in India. This salary was received by the assessee for services rendered by him in a Ship which was in International Waters, and assessee was outside India for more than 243 days. No doubt, the Kolkatta Bench of this Tribunal in the case of Shri Tapas Kumar Bandopadhyay (supra), had held that an assessee could not claim any exemption for salary received in India even if his status was that of a Non- :- 4 -:

Resident Indian, working as a sea-farer in International Waters. However, subsequent to the above decision which was pronounced on 01.06.2016, the CBDT had come out with Circular No.13/2017 on 11.04.2017, which read as under:

Subject: Clarification regarding Liability to income-tax in India for a non-resident seafarer receiving remuneration in NRE (Non Resident External) account maintained with an Indian Bank.

Representations have been received in the Board that income by way of salary, received by non-resident seafarers, for services rendered outside India on-board foreign ships, are being subjected to tax in India for the reason that the salary has been received by the seafarer into the NRE bank account maintained in India by the seafarer.

2.

The matter has been examined in the Board. Section 5(2)(a) of the Income-tax Act provides that only such income of a non-resident shall be subjected to tax in India that is either received or is deemed to be received in India. It is hereby clarified that salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because the said salary has been credited in the NRE account maintained with an Indian bank by the seafarer.

No doubt, assessee before us had received his salary through an NRO account with a Bank in India and not through an NRI A/c. However, in my opinion there could be no much differentiation between an NRI A/c and NRO A/c, in the facts and circumstances of this case. Assessee in my opinion was eligible to claim the benefit of the Circular reproduced above.

There is no case for the Revenue that assessee was not on Board of a foreign Ship. In such circumstances, in my opinion assessee ought not have been taxed for the sum of Rs.30,00,457/- received for his services as a Non-Resident Sea-farer. The addition stands deleted. Grounds 2 to 5 are allowed. :- 5 -:

7.

Vide its Grounds 6 & 7, assessee is aggrieved on an addition of Rs.7,90,000/-, considered by Ld.AO as unexplained cash credit.

8.

The Ld.AR did not advance any arguments on these grounds raised by the assessee. Hence, these grounds are dismissed as not argued.

9.

In the result, the appeal filed by the assessee is treated as partly allowed.

Order pronounced on the 2nd day of August, 2018, in Chennai. (अ"ाहम पी. जॉज") (ABRAHAM P.GEORGE) लेखा सद"य/ACCOUNTANT MEMBER

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