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Section 5, 15 of the Act – Salary paid by foreign employer from its bank account outside India and directly deposited in Non Resident External (NRE) account in India of employee, being ‘received in India’ is taxable in India since the Taxpayer had not brought facts on record to prove that he had control over salary income in foreign jurisdiction prior to its remittance to his NRE account in India.
Facts
The Taxpayer, an individual was engaged in providing marine engineering services to two foreign companies (FCos). In the relevant year, the Taxpayer was in international waters to render services to FCos for more than 182 days and hence qualified as a NR under the Act. Additionally, he was not a resident of any other country during the relevant year. During the year, FCos directly deposited salary of the Taxpayer in his Non Resident External (NRE) bank account in India.
The A.O. observed that the income was received directly in the taxpayer’s NRE account in India. As the first point of receipt of salary was in India, salary income was taxable in India u/s 5(1)(a) of the Act on receipt basis.
Taxpayer contended that services were rendered to FCo outside India and the payment for which was made in USD. Since the payment was made by FCo in USD, it should be considered as having been made at the time of payment in FCos’ jurisdiction. The amount was merely remitted to his NRE account in India at his behest. As the first receipt was outside India, overseas salary income cannot be taxed in India.
Aggrieved, Taxpayer appealed before CIT(A). The CIT(A) upheld the AO’s contention. Being aggrieved, the Taxpayer filed an appeal before the Tribunal.
Held
It is not the case of the Taxpayer that he received the salary on board of a ship on high seas which subsequently got deposited in his NRE account. On the other hand, money was transferred directly from the FCos’ account outside India to the Taxpayer’s NRE account in India. Thus, the Taxpayer’s contention that salary was received outside India and not in India is not acceptable.
Contention of the Taxpayer that he had control over salary income in international waters and remittance by employers in USD in his NRE account was at the behest of his instruction is not acceptable since this could be so only if the Taxpayer received hot currency and deposited that in his NRE account. However, in absence of any evidence on record to prove that the Taxpayer had any control over money in the form of salary income in foreign jurisdiction.
The receipt in NRE account in India is the first receipt by the Taxpayer and hence salary income is taxable in India.
Also, from the Indian tax perspective, Taxpayer was an NR. He was also not a resident of any other foreign jurisdiction. If the Taxpayer’s contention of nontaxability of income is accepted then income will neither be taxable in India nor in any foreign jurisdiction.
