S. 9(1)(ii) : Salary relatable to visits outside India in respect of expatriate deputed to India held taxable.

The assessee was deputed to India as South East Asia Bureau
Chief of The Economist, UK for collection of news and views. He was having his
permanent base in India, controlling the operations from India and staying in
India with his family. During relevant year, the assessee visited Pakistan for 7
days, Sri Lanka for 14 days and the UK for 38 days, aggregating to a stay of 59
days outside India. Since his residential status during the relevant year was
resident but not ordinarily resident, he claimed that the remuneration received
for 59 days did not relate to services rendered to India and hence, it was not
taxable in India.

To examine the claim, the AO asked the assessee to furnish
copy of appointment/deputation letter, which the assessee did not furnish. Since
the assessee was responsible for South East Asian countries and the salary was
received because of his assignment in India, the AO held that the visits outside
India were incidental to the assignment in India and hence the salary for 59
days outside India was also taxable in India.

In appeal before CIT(A), the assessee furnished several
documents including the deputation letter and news stories/articles collected
from Pakistan, Sri Lanka, discussion with London editors on SEA Region
activities. After reviewing the documents, the CIT(A) held that the assessee’s
visits to Pakistan and Sri Lanka were for work done in those countries and hence
the remuneration relatable to stay in those countries was not taxable in India.
In respect of the assessee’s stay of 38 days in the UK at a stretch, the CIT(A)
held that entire period of 38 days cannot be considered as towards briefing
London editors about developments in SEA Region. The CIT(A) concluded that
period of 18 days could be considered for briefing and hence, remuneration
relatable to that period was not taxable in India but remuneration of balance
days was held taxable in India.

The Tribunal found that: the assessee was appointed as South
East Asia Bureau Chief for collection of news, views and information on various
aspects pertaining to that region; he was staying in India with his family; he
had no establishment in Pakistan and Sri Lanka; there was no material on record
to indicate that the terms of his appointment varied when he visited those
countries; and during visits to countries outside India he had not shifted his
family to those countries. The Tribunal observed that the assignment terms
contained provision for gathering news from neighbouring countries and
therefore, short visits to Pakistan and Sri Lanka for collection of news and to
London Head Quarters to brief the editors were also in connection with the
employment in India. The Tribunal, then, observed that the issue in question was
squarely covered by the decision in CIT v. Halliburton Offshore Services Inc,
(2004) 271 ITR 395 (Uttaranchal), wherein the Court had observed that S.
9(1)(ii) read with the Explanation provides for an artificial place of accrual
for income taxable under the head ‘Salaries’ and in such case, the place of
receipt or accrual of salary is immaterial. The Tribunal also referred to the
decision in the case of Hiromi Hirose in ITA No. 4506/Del./2003 for A.Y. 2003-04
and observed that the facts in that case were identical to those of the
assessee’s case.

Following the precedent in case of Hiromi Hirose, the
Tribunal held that the CIT(A) was not justified in treating that the salary
relatable to Pakistan, Sri Lanka and UK was for performance of duties outside
India and held that such salary was taxable in India.

Editorial Note : The abovementioned decision of the Delhi
Tribunal appears to be taking a position different than that taken by the Delhi
Tribunal in its two decisions in DCIT v. Mr. Erick Moroux C/o. Air France and
Others, (BCAJ July 2008 Page 455) and DCIT v. Vivek Paul, [82 TTJ
(Del.) 699], wherein it had held that Salary income of an expatriate who partly
rendered services in India and partly outside India would not be chargeable to
tax in India in respect of proportionate period for which services are performed
outside India.