What did the Tribunal hold?

The Tribunal held that the Double Taxation Avoidance Agreement (DTAA) between India and Switzerland, specifically Article 15, was not considered by the lower authorities. Therefore, the matter needs to be reconsidered by the Assessing Officer in light of the DTAA.

The assessee, an employee of Infosys, was deputed to Switzerland where he received a maintenance allowance. While salary was paid in India, taxes on the allowance were paid in Switzerland. The assessee claimed exemption under Section 10(14)(i) of the Income-tax Act.

What were the issues?

Whether the maintenance allowance received by the assessee in Switzerland is taxable in India, considering the DTAA between India and Switzerland and the provisions of Section 10(14)(i).

G. Narayanan vs ITO | ITAT Chennai 2016

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY

For Respondent: Shri Supriyo Pal, JCIT

Hearing: 03.10.2016Pronounced: 25.11.2016

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 5, Chennai, dated 26.07.2016 and pertains to assessment year 2010-11.

Shri S. Subramaniam, the Ld. representative for the assessee, submitted that the assessee is an employee of Infosys Technologies Limited. The Infosys Technologies Limited sent the assessee on deputation to Switzerland from 01.03.2009 to 19.09.2009. During this period, the assessee was paid salary in India. However, the maintenance allowance was paid in Switzerland and the taxes on maintenance allowance was paid in Switzerland by the employer himself. However, the other statutory dues were paid by the assessee in terms of deputation scheme.

Referring to the Double Taxation Avoidance Agreement between Government of India and Government of Switzerland, the Ld. representative submitted that in respect of salary, the assessee was liable to pay tax only in Switzerland and not in India. Therefore, the maintenance allowance received by the assessee in Switzerland is not taxable in India. The Ld. representative further submitted that even otherwise, the tax paid by the assessee in Switzerland has to be given credit in India.

Shri Supriyo Pal, the Ld. Departmental Representative, submitted that the assessee claimed before the Assessing Officer as well as the CIT(Appeals) that maintenance allowance received in Switzerland was exempt under Section 10(14)(i) of the Income-tax Act, 1961 (in short 'the Act'). Certain allowances received by the assessee were exemption under Section 10(14)(i) of the Act to the extent to which it was spent. In this case, the assessee has not filed any evidence to support the expenditure incurred. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer.

We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that the assessee received salary in India and the assessee continued to be employee of Infosys Technologies Ltd. in India.

The assessee was sent on deputation to Switzerland to execute work of Infosys Limited in Switzerland. The Double Taxation Avoidance Agreement between Government of India and Government of Switzerland, more particularly Article 15, says that 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 State unless the employment is exercised in the other Contracting State. This provision of Double Taxation Avoidance Agreement was not considered by both the authorities below. Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer.

Accordingly, the orders of the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider the issue in the light of the provisions of Double Taxation Avoidance Agreement between Government of India and Government of Switzerland and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

In the result, the appeal of the assessee is allowed for statistical purposes.

G. NARAYANAN,CHENNAI vs. ITO, CHENNAI

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