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Income Tax Appellate Tribunal, “L”
ITO WD 3(1)IT, Gautam Harikishan Kamdar Mumbai C/o-RameshbhaiAjmera 502, बिधम/ Jeevan Bodh, 6th floor, Vs. Mamladarwadi, Malad(w), Mumbai-400064 स्थायीलेखासं./जीआइआरसं./PAN/GIR No. AGDPK3670K (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri DhaneshBafna/Shri Siddharth Kumar Shah प्रत्यथीकीओरसे/Respondentby : Shri M. V. Rajguru सुनवाईकीतारीख/ : 30/10/2017 Date of Hearing घोषणाकीतारीख / : 04/01/2018 Date of Pronouncement आदेश / O R D E R
Per Sandeep Gosain, Judicial Member:
The present Appeal filed by the assesseeis against the order of Ld. Commissioner of Income Tax (Appeal) – 10, GautamHarikishanKamdar Mumbai dated 15.10.14 for AY 2011-12on the grounds mentioned herein below:-
1. That on the facts and in the circumstances of the case, the learned CIT(A) erred in upholding the action of the Assessing Officer in bringing to tax in India the entire salary income of the appellant amounting to Ps. 81,79,200. 2. a) That the learned CIT(A) erred in denying the benefit of the DTAA between India & Singapore to the appellant. b) That the learned CIT(A) erred in holding that the receipt of salary income by the appellant in India would render the same liable to tax in India. c) That the learned CIT(A) erred in upholding the action of the Assessing Officer in treating the deduction of tax at source u/s 192 of the Act as the final determination of the taxability of the salary income of the appellant.
That on the facts and in the circumstances of the case, the Learned CIT (A) erred in confirming the action of the Assessing Officer in GautamHarikishanKamdar ignoring the revised return of income filed by the appellant on March 12, 2013.
4. That the Appellant craves leave to add to and / or to alter, amend, rescind, modify, the grounds herein above or produce further documents before or at the time of hearing of this Appeal.
The brief facts as stated by the assessee is that he is a former employee of Motorola India Pvt. Ltd (MIPL). The assessee was on assignment to Motorola Electronics Pvt. Ltd, Singapor and since the assessee had visited India for 34 days during the year under consideration and as such qualified as non- resident of India. However, AO while passing order u/s 143(3) of I.T. Act has brought to tax in India the entire salary income of the assessee amounting to Rs. 81,79,200/-. Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties partly allowed the appeal of the assessee. Now before us, the assessee has preferred the present appeal by raising the above grounds.
GautamHarikishanKamdar Ground No. (1 to 3) 3. Since all the above grounds raised by the assessee are inter-connected and inter-related and relates to challenging the order of Ld. CIT(A) in upholding the order of AO in bringing to tax the entire salary income in India amounting to Rs. 81,79,200/-,therefore we thought it fit to dispose of the same through the present common order.
We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in its detailed order. The operative portion of the order of Ld. CIT(A) is contained in para no. 6 of its order and the same is reproduced below:-
I have considered the AO's order as well as the appellant AR's submission. Having considered both, I find that the AO has rightly GautamHarikishanKamdar taken note to the provisions of Section 6 r.w.s. 5 & 9 (1)(ii) of the Income-tax Act r.w. Article 15(1) of the DTAA of India and Singapore as the appellant has received the sum so under the head salary income in India, therefore, the chargeability of the tax on such income clearly lies under the Income-tax Act. Besides this, I also took note of the provisions of Section 19213, which the AO has rightly taken note while taking the decision. In view of the same, having taken note to the India-Singapore DTAA and also the relevantprovisions of the Income-tax Act, I consider it proper and appropriate to hold that the AU was completely justified in his action in taxing the aforesaid sum under the Income-tax Act. Accordingly, this ground of appeal is dismissed.
After having gone through the facts of the present case as well as considering the orders passed by revenue authorities and submissions/arguments made by both the parties, we find that Ld. CIT(A) upholded the order of the Assessing Officer in bringing to tax in India the entire salary income of the GautamHarikishanKamdar assessee amounting to Rs. 81,79,200/- solely on the ground that the assessee has received the sum so under the head salary income in India. Therefore, on this basis, Ld. CIT(A) has concluded the chargeability of the tax on such income under the Income Tax Act, 1961. Ld. AR raised and reiterated the same arguments as were raised before Ld. CIT(A). It was submitted that the salary is chargeable to tax on due basis and therefore the salary of the assessee cannot be taxed in India on receipt basis. It was also submitted that assessee is a resident in Singapore for India during the year under consideration and the salary is considered to accrued in the State where the employee exercises the employment and therefore, the total salary received by the assessee during the year under consideration was Rs. 81,79,200/-. However, out of this the salary amounting to Rs. 72,71,954 accrued in Singapore and the remaining salary accrued during the stay and worked from India. It was further submitted that by applying the provisions of I.T. Act as well as treaty, the salary income of Rs. 72,71,954/- shall not be taxable in India as the assessee has rendered his services outside in India.
GautamHarikishanKamdar Ld. AR also drawn our attention in the case of Bholanath Pal vrs. ITO (2012) 23 taxmann.com 177 (Bangalore) wherein it is held as under :-
Admittedly, the assessee is a non resident of 12.1 India for theentire previous year and was a tax resident of Japan. The assessee,therefore, entitled to the benefits of the India-Japan DTAA as a tax resident of Japan (and non resident of India). 12.2 Article 15(1) of India Japan Treaty DTAA provides for the following :-
Subject to the provisions of articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that Contracting State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other Contracting State 12.3 Article 15(2) of India Japan Treaty DTAA provides for the following :-
"Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first mentioned Contracting State, if :
GautamHarikishanKamdar (a) the recipient is present in that other Contracting State for a period or periods not exceeding in the aggregate 183 days during any taxable year or 'previous year', as the case may be; and (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of that other Contracting State; and (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in that other Contracting State".
12.4 As per Article 15(1) of the DTAA between India and Japan, thetax resident of Japan can be taxed in India only if the assessee is present in India for more than 183 days. From the assessment order it is clear that the assessee was present in India only for 83 days and hence, the assessee cannot be taxed in India for any part of salary for services rendered to Motorola Japan. The tax year in Japan is January to December whereas for India, it is April to March. For the purpose of Indian tax, one has to see the corresponding position in Japan for determining tax residency in Japan. It is seen that the assessee was present in India only for 83 days during the period April 1, 2005 to March 31, 2006. Hence, as the assessee was present in Japan for more than 183 days during the said period, the assessee would be regarded as a tax resident of Japan and entitled to claim tax treaty benefits as a tax resident of Japan. In view of the same, and further that the assessee's stay in India was only 83 days during the GautamHarikishanKamdar year under appeal, the assessee is entitled for exemption of tax in respect of his income from salary for the entire year.
12.5 The salary amount that is received by the assessee during his stay in Japan is not taxable as per the provisions of Income Tax Act, 1961 for the following reasons:-
• The assessee is a non resident is an undisputed fact. A non resident is taxable under section 5(2). The provision reads as follows :
"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 Page 16 of 18 16 ITA No.10/Bang/2011
(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".
12.6 The provisions of section 5(2) start with the expression "subject to the provisions of this Act". Hence, the provisions of section 5(2) are subject to other provisions contained in the Act and other provisions of the Act will have significant impact on the interpretation of Section 5(2). Reference is made to GautamHarikishanKamdar "The Law and Practice of Income Tax" by Kanga, Palkhivala and Vyas (Vol.I, Ninth Edition, page 311). Reference is also to the following judgements:-
CIT v Nippon Yusen Kaisha Tokyo (1998) 233 ITR 158/199 taxman 210 (Calcutta)
CIT Vrs. F Y Khambaty (1986) 159 ITR 203/24 (Bom.)
12.7 As per section 15, salary is not taxable on receipt basis except in case of advance salary or arrears salary. Regular salary under section 15(1)(a) is taxable on accrual basis. Salary is accrued where the employment services are rendered. In the instant case, for the assessee, the normal place where the employment services rendered is in Japan and not in India. His visits to India are in connection with business and not for rendering employment services for any Indian entity. There is no employment agreement for having rendered any services for Indian entity. In the instant case, the salary accrues to the assessee in Japan and the accrued salary is partly delivered by Motorola India in India. Hence, there is no accrual of salary in India.
12.8 In terms of section 9(1)(ii) income chargeable under the head"salaries" under section 15 shall be deemed to accrue or arise in India if it is earned in India, i.e., if the services under the agreement of employment are or were rendered in India. In the GautamHarikishanKamdar instant case, the employment services were entirely rendered outside India. Hence, the salary is not earned for rendering services in India. Therefore, salary for the entire year is not taxable. In this connection, reliance is placed on the following decisions:-
DIT (Intnl. Taxation) v PrahladVijendra Rao (2011) 198 Taxman 551 (Kar.)/(2011) 24 CTR Kar.) 107; Ranjit Kumar Bose v ITO (1986) 18 ITD 230 (Calcutta ITAT); CIT v Avtar Singh Wadhwan (2001) 247 ITR 260 (Bom.); Sreenivas Kumar Sistla (AAR No.514 of 2000).
12.9 For the aforesaid reasons, the salary which was received by the assessee for the services rendered in Japan for the period 1/4/2005 to 31/3/2006 is not liable to tax in India.
Apart from this, Ld. AR also relied upon the judgment in the case of DIT Vrs., PrahaladVijendra Rao [ITA NO. 838/09 (Kar. HC)], Ranjit Kumar Bose vrs. ITO [ITA NO. 2159/Kol/1984], NeerajBadayaVrs. ADIT [ITA NO. 308/JP/2014] & ITO vrs. Arjun Bhowmik [ITA NO. 3484/Del/2012].
GautamHarikishanKamdar After having gone through the aforementioned judgments, we find that the judicial authorities have taken a consistent view that the income chargeable under the head ‘salary’ u/s 15 shall be deemed to accrue or arise in India if it is earned in India, i.e., if the services under the agreement of employment are or were rendered in India. As per the facts of the present case, income was found to be chargeable under the Income Tax Act only on the ground that such sum was received in India and not on the ground that the services were rendered in India. Therefore, we are of the considered view that only that part of the salary can be taxed in India which is earned in India by rendering services under the agreement of employment. Hence in this circumstances, while respectfully following the consistent view taken by various judicial authorities and in the interest of justice, we set aside the order of Ld. CIT(A) and remit the matter back to the file of AO with a direction to pass afresh order regarding taxability of salary income of assessee, keeping in view the judicial pronouncements as detailed and discussed above. It is needless here to mention that before passing the order, the AO shall provide sufficient GautamHarikishanKamdar opportunity of hearing to the assessee. Resultantly these grounds raised by the assessee are allowed for statistical purposes. Ground NO. 4
5. This ground is general in nature, thus requires no specific adjudication.