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Income Tax Appellate Tribunal, DELHI BENCH “D” BENCH NEW DELHI
Before: AMIT SHUKLA & SHRI O.P. KANT
ORDER
PER AMIT SHUKLA, JUDICIAL MEMBER:
The aforesaid appeals have been filed by the Revenue against the impugned order dated 12.09.2013, passed by the ld. CIT (Appeals)-26, New Delhi, both for the quantum of assessment passed u/s 144/147(3) and penalty proceedings u/s 271(1)(c) for the A.Y. 2006-07.
We will first take up the quantum of appeal wherein revenue has raised following ground:- “A. The Ld. CIT (A) has erred in admitting the additional evidences without giving opportunity to the AO in clear violation of Page 1 of 8
Rule 46A of the IT Act without appreciating the fact that all the opportunities given to the Assessee during the assessment proceedings to present its case, remained unveiled. B. The CIT( A) has erred in deleting the addition of Rs. 2,13,50,268/- made by the AO on account of undisclosed income when source of such income remained unexplained during the assessment proceedings. C. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
3. The brief facts are that the respondent, Mr. Naoyoshi Noguchi is resident of Japan, who was deputed as Director General in ‘Japan External Trade Organization’ (JETRO), New Delhi from September, 2005 to May, 2010. The JETRO is a trade representation and organization of Japanese Government. The salary received by the respondent from JETRO was claimed as exempt not only under the domestic law, that is, in terms of provision section 10(6)(ii) of the Income Tax Act 1961, but also under the Article 19(1)(a) of Indo- Japan DTAA. During the relevant fiscal year the respondent made periodic remittance into his bank account into India for personal use and consumption. The ld. Assessing Officer based on information received from foreign tax authorities that the respondent has received an amount of Rs. 2,13,15,268/- from JETRO during the F.Y. 2005-06, formed a belief that this income (of Rs. 2,13,15,268/-) has escaped assessment and accordingly, he issued notice u/s 147 to the respondent to assess the said income in India, even though he did not have any PAN nor was required to file any return of income in India. The notices issued u/s 148 and other statutory notices for compliance could not be served upon the respondent/assessee. Accordingly, the Assessing Officer completed the assessment u/s 144 r.w.s. 147 and thereby taxing the entire amount of salary from Page 2 of 8 JETRO of Rs. 2,13,15,268/- as income of the respondent taxable in India from undisclosed sources. Even the penalty proceedings u/s 271(1)(c) was initiated and levied.
4. In the first appeal, though the Learned CIT(Appeals) has confirmed the validity of action for reopening u/s 147, however on merits has deleted the said addition after observing and holding as under:- “7. I have carefully considered the facts of the case and perused the material available on the records. I have also perused the DTAA. Undisputedly, the appellant has received JPY 5,55,418/- from JETRO in India. From the OM, (Annexure-A) and provisions of Income Tax Act, it is evident that the salary of employees of JETRO working in India is exempt from the income tax in India in accordance with the provisions of section 10(6)(ii) read with Article 19(l)(a) of the DTAA between India and Japan. Thus, it is held that the appellant's remuneration from JETRO, being an employee of JETRO, is not chargeable to tax. Hence, Rs. 2,13,50,268/- assessed as income u/s 144 is directed to be deleted. Consequential relief shall be given by the AO. Thus, the ground no. 3 of the A. No. 96 is decided in favour of the appellant.”
Since none appeared on behalf of assessee despite issuance of notice, therefore, we are proceeding to decide the matter on merits on the basis of material placed on record and after considering the submissions made by the ld. DR.
On the perusal of the material on record, we find that it is an undisputed that the respondent is a Japanese national who was deputed by the Government of Japan in the capacity of Director, Japan External Trade Organizations. Thus, the employer of the respondent was JETRO which is a trade representation organization Page 3 of 8 of a foreign state, that is, Japan. The amount received for sums aggregating to JPY 5,55,418/- (in terms of Japanese Yen) was in the form of salary from JETRO in India. Such a salary is not only exempt from Income Tax in India under section 10(6)(ii) of the Income Tax Act; but also under Article 19(1)(a) of Indo-Japan DTAA. First of all, under Income Tax Act, section 10 deals with incomes which are exempt or is not included in the computation of total income. The relevant clause (ii) of sub section 6 of section 10 exempts following income of an individual who is not citizen of India, which are as under:- “(6) in the case of an individual who is not a citizen of India,— "[(ii) the remuneration received by him as an official, by whatever name called, of an embassy, high commission, legation, commission, consulate or the trade representation of a foreign State, or as a member of the staff of any of these officials, for service in such capacity: Provided that the remuneration received by him as trade commissioner or other official representative in India of the Government of a foreign State (not holding office as such in an honorary capacity), or as a member of the staff of any of those officials, shall be exempt only if the remuneration of the corresponding officials or, as the case may be, members of the staff, if any, of the Government resident for similar purposes in the country concerned enjoys a similar exemption in that country : Provided further that such members of the staff are subjects of the country represented and are not engaged in any business or profession or employment in India otherwise than as members of such staff;] ” From the plain reading of the aforesaid provision it is quite ostensible that the remuneration received to an individual who is not citizen of India in his capacity as an official of an embassy, high commission, legation, commission, consulate, including the trade representation of foreign state is not taxable in India. It is not the case of revenue or anything has been brought on record that exemption to the respondent would be affected or can be denied either under the first or second proviso. Thus, u/s 10(6) the respondent’s salary is exempt from taxation in India.
In any case even under the terms of Article 19(1)(a) of DTAA the respondent’s salary is taxable only in Japan and not in India. This is quite borne out from the relevant Article which reads as under:- Article 19 1 (a) Remuneration, other than a pension, paid by a Contracting State, or a political sub-division or a local authority thereof, to an individual in respect of services rendered to that Contracting State, or a political sub-division or a local authority thereof, in the discharge of functions of a Governmental nature, shall be taxable only in that Contracting State. b. However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other Contracting State and the individual is a resident of that other Contracting State who: i. is a national of that other Contracting State; or ii. did not become a resident of that other Contracting State solely for the purpose of performing the services.
Clause (a) of paragraph 1 of article 19 makes it amply clear that the remuneration paid by a contracting state (here in this case Japan), to an individual in respect of services rendered to that contracting state, (Japan) to an individual (resident of Japan) in respect of services rendered to that contracting state (i.e. JETRO which is a trade organization of Japanese Government), the same shall be Page 5 of 8 taxable only in the contracting state (i.e. Japan). Thus, in terms of Article 19(1)(a) also the respondent’s salary is not taxable in India.
Accordingly, the order of the Learned CIT (Appeals), holding that assessee’s salary is not taxable in India is upheld and the grounds raised by the revenue is dismissed.
So far as the revenue’s ground that the Learned CIT (Appeals) has erred in admitting additional evidences without giving opportunities to the Assessing Officer in clear violation of Rule 46A of Income Tax Rules is not tenable, firstly, for the reason that the revenue could not point out as to what were the additional evidences filed by the assessee; and secondly, the issue relates to taxability of salary income in India which information was already there on record of the Assessing Officer. Thus, this ground raised by the revenue is misconceived and is thus dismissed.
Revenue’s appeal in pertains to levy of penalty u/s 271(1)(c) of Rs. 71,10,400/- levied by the Assessing Officer on account of taxation of salary income of the respondent in India. Since we have already held that the respondent’s salary is not taxable in India, therefore, there is no question of levying any penalty either for concealment of income or for furnishing of inaccurate particulars. Accordingly, penalty deleted by the Learned CIT (Appeals) is upheld and the grounds raised by the revenue are dismissed.
In the result, both the appeals of the Revenue are dismissed.
Order pronounced in the open court on 03.08.2017.