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 ITAT AGRA 

Arvind Singh Chauhan vs. Income-tax Officer

February 14, 2014 

Assessee's status for all the sources of income cannot be taken as resident merely for the reason he is resident for one of the sources of his income. Therefore salary income accrued outside india cannot be taxed in India.


Para 3, 18 & 19 of the order, inter-alia, read as under-
3) Briefly, the relevant material facts are like this. The assessee, an individual, is in employment of Executive Ship Management Pte. Ltd., Singapore (ESM-S, in short), and works on merchant vessels and tankers plying on international routes. In addition to this salary income, the assessee also derives income from bank interest and receives pension from Indian Army, his former employer. There is also no dispute that the assessee's stay in India, in the relevant previous year, was less than 182 days, and that the residential status of the assessee is ' non-resident'. In the income tax return filed by the assessee, the salary received by the assessee from ESM-S was not offered to tax. The income tax return filed by the assessee was selected for scrutiny assessment, and, in the course of resultant assessment proceedings, the Assessing Officer required the assessee to show cause as to why salary received by the assessee from ESM-S, for services rendered as ship crew, not be brought to tax in India. It was explained by the assessee that as assessee was a non-resident, the scope of his income liable to be taxed in India was restricted to income accruing or arising in India, income deemed to accrue or arise in India, or income received or is deemed to be received in India. Since the salary income in respect of ship crew is accruing and arising outside India, it is outside the ambit of limited scope of Section 5(2). As for salary income being credited to bank account in India, assessee's contention was that salary income deposited in bank account in India, directly from bank account of the company outside India was not taxable in India. Reliance was placed on judicial precedents in the cases of DIT v. Prahlad Vijendra Rao (51 DTR 95) , DIT v. Diglan George Smith [(2011) 40 (I) ITCL 419)] and ITO v. Lohithakshan Nambian (ITA No. 1045/ Bang/ 09; order dated 12.04.2010). None of these submissions, however, impressed the A.O. The Assessing Officer was of the view that the assessee's explanation cannot be accepted because section 6(5) provides that where a person's status is resident for one of the sources of his income, his status for all the sources of income is to be taken as resident, and because assessee's status for pension and interest, by his own admission, is that of ' resident' - an inference based on assessee having shown pension and interest income as his taxable income in the return of income, the status of the assessee for all his sources of income is required to be taken as ' resident'. The Assessing Officer further observed that, "Otherwise also, the assessee is a resident in India for one of the sources of income i.e. pension, because he was a Government employee and is getting pension." The Assessing Officer was also of the view that since appointment letter was issued by foreign employer's agent in India, it is to be deemed that the salary income accrued in India. A reference was made to Hon'ble Supreme Court's judgment in the case of CIT v. Shri Govardhan Ltd. (69 ITR 675) for the proposition that if an assessee acquires a right to receive income, the income is said to have accrued to him even though it may be received later, on it's being ascertained. It was also noted that "by receiving the appointment letter and details of salary to be paid, the assessee gets right to receive the salary". The AO further took note of the fact that the salary cheques were credited to assessee's account with HSBC Bank. It was in this backdrop that the salary of Rs.13,34,884 received from ESM-S was brought to tax in the hands of the assessee. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. Learned CIT(A) upheld the stand of the Assessing Officer and observed as follows:-

I have considered the rival contentions of the Ld. AR of the appellant and gone through the assessment order and the decisions in the cases relied upon by the appellant. The Assessing Officer has made the addition of Rs.13,34,884 as salary accrued and received in India. In this case, the appellant was an employee of M/s Executive Ship Management Pte Limited, Singapore. The employer company had issued the appointment letter to the appellant in India. Therefore, the salary was accrued in India. The appellant has maintained his bank account with HSBC Bank in India, in which the salary was deposited by the employer. Therefore the salary was also received in India. As per section 15 of the Income Tax Act also, the salary is to be tad on accrual basis. Since, the appointment letter was issued in India and therefore the salary was accrued in India. As per provision of the section 5(2) of the Income Tax Act, 1961 the income which is accrued or received in India is taxable in India. Accordingly, I am of the considered opinion that since the salary was accrued and received in India hence, the Assessing Officer has correctly assessed the salary income in the hands of the appellant. Therefore, the addition of Rs.13,34,884 is hereby confirmed.

 

18. This is an appeal filed by the assessee and is directed against the order dated 2nd August, 2013 passed by the CIT(A) in the matter of assessment under Section 143(3) of the Income Tax Act 1961, for the Assessment Year 2008-09, on the following grounds:
 
1. That, on the facts and circumstances of the case and in law and in any view of the matter, the authorities below have erred in making and upholding the addition of Rs.10,40,411 on account of salary considering it as accrued and received in India, which was remitted by the employer company by transferring the amount from bank account in Singapore to the NRE bank account of the assessee with HSBC Bank at Mumbai.
2. That, on the facts and circumstances of the case and in law and in any view of the matter, the authorities below have erred in making and upholding the addition of Rs 19,738 on account of bank interest earned and credited in NRE account with HSBC Bank, Mumbai.

19. Learned representatives fairly agree that whatever we decide for the assessment year 2009-10 will also apply mutatis mutandis for this assessment year as well. All the relevant facts and circumstances of the case, barring the amounts of additions, are the same as in the assessment year 2009-10. As we have deleted the similar additions for the assessment year 2009-10, as discussed in the foregoing paragraphs, we delete these additions as well. The assessee gets the relief accordingly.
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Author:

TaxReply


Feb 20, 2014


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