April 2009
Services rendered outside India by R but NOR are not taxable in India if the taxpayer can substantiate that presence outside India does not relate to his employment in India.
By Geeta Jani
Dhishat B. Mehta
Chartered Accountants
Reading Time 3 mins
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3 ACIT v. Shri Ellis ‘D’ Rozario (2009 TIOL 138 ITAT Del.) Section/Article : S. 5
A.Y. : 2001-02. Dated : 5-12-2008
Issue :
Services rendered outside India by R but NOR are not taxable in India if the taxpayer can substantiate that presence outside India does not relate to his employment in India.
Facts :
The assessee, an Australian National, was Resident but Not Ordinarily Resident (R but NOR). The assessee was employed by a UAE Company and was posted to India as a regional manager of the Indian sub-continent. The UAE company was in the process of establishing a liaison office for collection of information from India. For the year under reference, the assessee was in India for 224 days, while he was outside India for 51 days. The assessee claimed that proportionate salary for 51 days pertaining to the period for which he was outside India was not taxable in India, as (i) his residential status was that of R but NOR; and (ii) the visits outside India were on assignments totally unrelated to Indian assignment.
The CIT(A) accepted the claim of the assessee.
Before the Tribunal, the Department claimed that the visits outside India were in connection with assessee’s employment in India and hence the entirety of salary was chargeable to tax in India. The Tax Department also claimed that as per the assessee’s own admission, he had undertaken debriefing of his Indian activities during one of his visits abroad.
The assessee relied on the following decisions to claim that having regard to his status of R but NOR, salary pertaining to the period of stay outside India is not chargeable to tax in India :
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W/A Kielmann (ITR No. 4/1979) dated 9-8-1984 (Delhi HC)
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J Callo and Others (ITA No. 5921-5929/Del/86) dated 2-8-1989 (Delhi)
The assessee also relied on the decision of the Delhi Tribunal in the case of Eric Marou (ITA No. 1174/ Del./2005), dated 15-2-2008 to support the proposition that no inference can be drawn as to ‘while being outside India the employee rendered services in respect of their operations in India’ and that the period of employment outside India should not be considered as services rendered in India.
Held :
The Tribunal observed :
(1) The decisions relied on by the assessee involved cases where the employment contract specifically required of the assessee to work outside India for a particular period of time. As against that, in the case of the assessee, the employment contract required the assessee to be based in India and undertake overseas travel in connection with his employment in India. According to the Tribunal, as compared to other cases, the period for which the assessee was liable to work outside India was not specified in the agreement.
(2) The facts on record showed that while being outside India, the assessee held debriefing meeting about his Indian activities. Thus, even while being outside India, certain activities relating to the Indian activities were undertaken. The Tribunal held that such part of the salary was taxable as the income can be regarded as arising in India.
(3) The Tribunal set aside the matter with a direction that to the extent the assessee can substantiate with evidence, that while being outside India the assessee did not do any activity in relation to India-specific employment, the amount of such salary would be excluded from the scope of total income.
