By Geeta Jani / Dhishat B. Mehta
Chartered Accountants
15. IT A No.:2407/Bang/2018 Maya C. Nair vs.
ITO A.Y.: 2013-14 Date of Order: 31st
October, 2018
Section 5 of the Act – salary for services rendered
outside India but received in India is not taxable in India in absence of TRC
if the Taxpayer furnishes evidence in support of accrual of salary outside
India.
FACTS
The Taxpayer
was an individual employed in India. During the relevant year, she was deputed
by her employer to USA. During the deputation period, her entire remuneration
was credited by her employer to her bank account in India. As her stay in India
was less than one hundred and eighty-two days, she qualified as non-resident in
terms of section 6(1) of the Act. In her return of income, the Taxpayer
disclosed remuneration for services rendered in India as taxable and claimed
remuneration for the deputation period outside India as exempt. For the period
of her deputation in USA, the Taxpayer had furnished return of income in USA
and had also duly paid taxes in USA.
However, for the following reasons,
the AO concluded that the Taxpayer was not entitled to exemption of income
earned on deputation in USA and accordingly charged tax thereon.
(i) The Taxpayer had not provided confirmation of her employer in India
or in USA to establish that she was working in USA.
(ii) The receipt of salary in India by the Taxpayer suggested that
she had rendered services in India, unless the Taxpayer proved otherwise1.
(iii) To claim benefit in terms of India-USA DTAA, the Taxpayer was
required to provide Tax Residency Certificate (“TRC”), which she had failed to
provide.
The Taxpayer preferred an appeal
before CIT(A)-12. By her order dated 31-10-2017, and relying on certain
judicial decisions, CIT(A)-12 deleted the addition made by the AO in respect of
the exempt income. Subsequently, by a departmental administrative order, CCIT
transferred the appeal for that particular year to CIT (A)-10. Hence, CIT(A)-10
passed ex-parte order dated 28-02-2018. In his order, CIT(A)-10 upheld
the order of the AO treating income that had accrued in USA as taxable in
India.
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1. It may be
noted that section 5(2) of the Act provides that income received in India by a
non-resident is chargeable to tax in India.
HELD
- When
CIT(A)-10 passed the order, order of CIT(A)-12 was in existence. It was solely
the mistake of the department, for which, the Taxpayer should not be made to
suffer hardship and harassment.
- CIT(A)-12
could not have invalidated her order as ‘rectification’ u/s. 154 of the Act. Section
154 merely provides for correction of mistake apparent from the records but
does not confer power to recall or invalidate an order.
- As
there cannot be two appellate orders of two different CIT(A)s for the same
assessment year, order of CIT(A)-10, being later, was not a valid order under
law and was liable to be quashed as non-maintainable.
- It
is not the case of revenue that the order of CIT(A)-12 was perverse or was made
on wrong factual or legal premise. CIT(A)-12 had passed a reasoned order and
had relied on decisions of jurisdictional High Court and the Tribunal.
Therefore, remanding the matter to CIT(A)-10 would, rather than serving a
useful purpose, will cause hardship to the Taxpayer.
- In
ITO vs. Bholanath Pal [2012] 23 taxmann.com 177 (Bangalore), it was held
that salary accrues where the services under the employment are rendered. The
facts of the Taxpayer are similar to the facts in the said decision. Absence of
TRC cannot be a ground for denying DTAA benefit. A taxpayer is required to
provide evidence in support of exemption claimed. The Taxpayer had furnished
evidence of her stay outside India and since the salary for services rendered
outside India did not accrue in India, it was not taxable in India.
