Deputy Director of Income Tax, Bangalore V. Shri. Kumar K. Chandnani, Bangalore

ITA 145/BANG/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5246 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 05-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Keywords: Salary income; Capital Gains
• Section: 260A; 15

Judgement Text

PAGE 1 OF 6 ITA NO.145/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K., J.M. AND SHRI A MOHAN ALANKAMONY, A.M. ITA NO.145/BANG/2010 (ASST. YEAR 2006-07) DY. DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION), CIRCLE-1(1), BANGALORE. - APPELLANT VS SHRI KUMAR K CHANDNANI, RISHABA, PLOT 1/186/197, NO.1, CLASSIC ENCLAVE, HENNUR CROSS, CHELEKERE VILLAGE, KALYANNAGAR POST, BANGALORE-43. - RESPONDENT APPELLANT BY : SMT. JACINTA ZIMIK VASHAI RESPONDENT BY : SHRI MANOJ KUMAR O R D E R PER GEORGE GEORGE K : THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE CIT(A)-IV'S ORDER DATED 30.11.2009. THE RELEVANT A SST. YEAR IS 2006-07. 2. THE SOLITARY ISSUE THAT ARISES FOR OUR CONSIDER ATION IS WHETHER THE CIT(A) IS JUSTIFIED IN DELETING THE ADD ITION OF RS.15,67,834/- MADE BY THE ASSESSING OFFICER. PAGE 2 OF 6 ITA NO.145/BANG/2010 2 3. THE SHORT FACTS NECESSARY FOR ADJUDICATION OF T HE ISSUE ARE AS FOLLOWS:- THE ASSESSEE FOR THE CONCERNED YEAR FILED RETURN OF INCOME IN THE STATUS OF NON-RESIDENT INDIAN. DURIN G THE YEAR, THE ASSESSEE HAD OFFERED INCOME UNDER THE HEAD CAPITAL GAINS AND INTEREST. THE ASSESSEE IS A CAPTAIN OF A SHIP. T HE SHIP IS OWNED BY ANGLO EASTERN SHIP MANAGEMENT LTD., HONG KONG. THE COMPANY IS A RESIDENT OF HONG KONG AND OPERATED VESSELS IN INTERNATIONAL WATERS. THE ASESSEE WAS GETTING SALARY FOR WORKING IN THE SHIP. IT WAS SUBMITTED IN THE COURSE OF SCRUTINY ASSESSMENT THAT THE SALARY RECEIVED ON BOARD THE SHIP ON INSTRUCTION FROM THE ASSESSEE, WAS REMITTED TO HIS NRE ACCOUNT IN INDIA AND SINCE THE ACCRUAL AND RECEIPT OF THE SALARY WAS OVERSEAS, SUCH RECEIPT OF SALARY WAS NOT TAXABLE IN INDIA. THE ASSESSING OFFICER, HOWEVER, REJECTED THE EXPLANATION FURNISHED BY THE ASSESSEE AND CONCLUDED THAT THE SAID INCOME FELL WITHIN THE PURVIEW OF SECTION 5(2)(B) O F THE ACT. ACCORDING TO THE ASSESSING OFFICER, SINCE THE SALAR Y WAS REMITTED DIRECTLY BY THE EMPLOYER TO THE ASSESSEES NRE ACCO UNT, IT WAS RECEIVED OR DEEMED TO BE RECEIVED IN INDIA AND WAS CHARGEABLE TO TAX IN INDIA UNDER THE PROVISIONS OF SECTION 5(2)(B ) OF THE ACT. 4. BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS ST ATED THAT THE ASSESSEE RECEIVED SALARY ON BOARD THE SHIP AND UPON ADVICE OF THE ASSESSEE, THE EMPLOYER USED TO REMIT THE MAJOR PORTION OF THE SALARY TO THE DESIGNATED BANK ACCOUNT IN INDIA FOR MAINTENANCE OF HIS FAMILY. IT WAS CONTENDED, THE SALARY DID NOT A CCRUE TO ASSESSEE PAGE 3 OF 6 ITA NO.145/BANG/2010 3 IN INDIA BECAUSE THE SERVICES WERE PERFORMED OUTSID E INDIA. THE ASSESSEE HAD FURTHER CONTENDED THAT FOR A CHARGE TO ARISE ON RECEIPT BASIS, IT SHOULD BE A FIRST RECEIPT. THE MONEY SHO ULD BE RECEIVED IN INDIA AND IT SHOULD BEAR THE CHARACTER OF INCOME. A RECEIPT CAN OCCUR IN ONLY ONE PLACE, UNLIKE ACCRUAL OR ARISAL, WHICH MAY OCCUR AT MORE THAN ONE PLACE OR IN MORE THAN ONE COUNTRY. THE SAME SUM OF MONEY QUA INCOME CANNOT BE RECEIVED TWICE OVER, ONCE OUTSIDE INDIA AND THEN INSIDE IT (KESHAV MILLS LTD. V CIT ( 1953) 23 ITR 230, SECRETARY, BOARD OF REVENUE V RIPON PRESS & SU GAR MILLS LTD. AIR 1923 MAD 574). IT IS STRONGLY ARGUED THAT ONCE AN AMOUNT IS RECEIVED AS INCOME, ANY REMITTANCE OF SUCH AMOUNT T O ANOTHER PLACE DOES NOT RESULT IN RECEIPT WITHIN THE MEANING OF SECTION 5. IN THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS F URNISHED COPIES OF CERTIFICATES TO THE EFFECT THAT DURING THE A.Y. UNDER APPEAL, THE ASSESSEE WAS EMPLOYED IN THE CAPACITY OF MASTER ON M V KOTA HALUS AND M V KOTA HAPAS VESSELS MANAGED BY ANGL O EASTERN FOR THE PERIOD FROM 03.03.2005 TO 08.09.2005 AND FR OM 18.12.2005 TO 12.05.2006 RESPECTIVELY. IT IS FURTHER CONTENDE D THAT THE PLACE OF RECEIPT OF SALARY WAS NOT WITHIN THE TAXABLE TERRIT ORIES IN INDIA. IT IS CLAIMED THAT REMITTANCE OF A PORTION OF HIS SALARY TO HIS NRE ACCOUNT IN INDIA AMOUNTS TO DISPOSAL OF INCOME AFTE R SUCH INCOME IS EARNED OUTSIDE INDIA AND THAT THE SAID REMITTANCES MADE OUT OF INCOME EARNED OUTSIDE INDIA CANNOT BE SUBJECTED TO TAX IN INDIA. ACCORDING TO THE ASSESSEE, THE PLACE OF ACCRUAL OF SALARY IS THE PLACE OF RENDERING OF SERVICES, AS HAS BEEN HELD BY THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V AVTAR SINGH WADHWAN 247 ITR 260 (BOM.). PAGE 4 OF 6 ITA NO.145/BANG/2010 4 5. THE CIT(A) FOR THE DETAILED REASONING MENTIONED IN PARA 4.3 TO 4.3.2 OF HIS ORDER, ALLOWED THE APPEAL OF THE ASSESSEE. 6. THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. 7. THE LEARNED DR STRONGLY RELIED ON THE FINDINGS OF THE ASSESSING OFFICER. SHE ALSO STATED THAT THE TRIBUN AL DECISION RELIED ON BY THE CIT(A) IN ITA NO.1137/BANG/2008 IN THE CA SE OF ITO V PRAHLAD VIJENDRA RAO HAS NOT ATTAINED THE FINALITY AND THE REVENUE HAS FILED APPEAL U/S 260A OF THE ACT BEFORE THE HON BLE HIGH COURT. 8. PER CONTRA, THE LEARNED AR FOR THE ASSESSEE HAD SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY CO VERED BY THE DECISION OF THE HONBLE TRIBUNAL IN THE CASE OF ITO VS MR. PRAHLAD VIJENDRA RAO IN ITA NO.1137(B)/2008 FOR THE AY 2005 -06, WHEREIN IDENTICAL FACTS WERE CONSIDERED AND THE TRI BUNAL AFTER ELABORATELY CONSIDERING THE PRECEDENT ON THE SUBJEC T DISMISSED THE APPEAL FILED BY THE REVENUE. THE AR ALSO FILED A PA PER BOOK RUNNING INTO 55 PAGES INTER ALIA CONTAINING THE DETAILS OF NUMBER OF DAYS WORKED OUTSIDE INDIA AND NAMES OF SHIP AND THE DETA ILS OF SALARY DRAWN, AMOUNT APPROPRIATED ON BOARD OF SHIP AND AMO UNT REMITTED TO NRE ACCOUNT, ETC. 9. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIALS ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS BEEN RENDERING SERVICES OUTSIDE INDIA UNDER CONTRAC T OF SERVICE. THE CONTRACT OF SERVICE HAS BEEN ENTERED OUTSIDE IN DIA. AS PER THE CONDITIONS OF SERVICE, AN EMPLOYEE WAS TO BE PAID T HE WAGES IN CASH PAGE 5 OF 6 ITA NO.145/BANG/2010 5 (ABROAD THE SHIP) UNLESS THE EMPLOYEE OPTED FOR AN ALLOCATION. A CONFIRMATION FROM THE EMPLOYER TO THIS EFFECT IS PL ACED ON RECORD AT PAGES 43 TO 45 OF THE PAPER BOOK. UNDER THE ALLOC ATION, THE EMPLOYEE COULD CONVEY TO THE EMPLOYER, THE MANNER O F DISBURSEMENT OF SALARY, NOT TAKEN IN CASH. THE DET AILS OF SALARY RECEIVED BY THE ASSESSEE ON BOARD THE SHIP AND THE AMOUNTS REMITTED BY THE ASSESSEE IN HIS NRE ACCOUNT IN INDIA ARE NAR RATED IN PARA 4.3.1 OF THE CIT(A)S ORDER. 9.1 THE TRIBUNAL IN THE CASE OF MR. PRAHLAD VIJEND RA RAO IN ITA NO.1137/B/2008 SUPRA IN IDENTICAL CIRCUMSTAN CES HAS HELD AS FOLLOWS:- WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. WE ARE OF THE VIEW THAT AO HAS WRONGLY CONSTRUED THE PROVISION OF SECTION 5(2)(A) OF THE ACT WHILE HOLDING THAT THE SALARY INCOME WAS RECEIVED IN INDIA AND HENCE TAXABLE. SALARY INCOME IS TAXABLE ON ACCRUAL BASIS U/S 15 OF THE ACT. IN OTHER WORDS, SALARY DUE IS TAXABLE WHEN IT IS RECEIVABLE BY THE ASSESSEE REGARDLESS OF THE FACT THAT THE SALARY HAS BEEN ACTUALLY RECEIVED OR NOT. IT IS ONLY ADVANCE SALARY THAT IS TAXABLE ON RECEIPT BASIS AS AN EXCEPTION TO THE RULING THAT SALARY IS TAXABLE ON ACCRUAL BASIS. THE ASSESSEE HAS RENDERED THE SERVICES ON BOARD THE OCEAN LINER TO THE SAID COMPANY AND ASSESSEE WAS STAYING OUTSIDE INDIA FOR MORE THAN 182 DAYS. THE SALARY PAYABLE TO THE ASSESSEE IS ON BOARD THE OCEAN LINER AND THE SALARY IS NOT PAYABLE IN INDIA. IT IS ONLY THE RECEIPT OF THE SALARY THAT IS IN INDIA ON INSTRUCTIONS OF THE PAGE 6 OF 6 ITA NO.145/BANG/2010 6 ASSESSEE TO CREDIT THE SALARY IN THE BANK ACCOUNT OF THE ASSESSEE IN INDIA. IN THIS CONTEXT, HONBLE ITAT CALCUTTA BENCH IN THE CASE OF RANJIT KUMAR BOSE REPORTED IN 25 TTJ 368 UNDER SIMILAR FACTUAL MATRIX HAS HELD THAT THE SALARY ACCRUED OUTSIDE INDIA CANNOT BE TAXED IN INDIA MERELY BECAUSE IT IS RECEIVED IN INDIA. THE RATIO OF THE SAID DECISION IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE FACTS BEING SIMILAR, RESPECTFULLY FOLLOWING THE COORDINATE BENCH OF THE TRIBUNAL CITED SUPRA, WE HOLD THAT THE ORDER OF THE CIT(A) IS CORRECT AND IN ACCORDANCE WITH LAW AND NO INTERFERE NCE IS CALLED FOR. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ORDER PRONOUNCED ON MONDAY, THE 31 ST DAY OF MAY, 2010 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1) THE ASSESSEE (2) THE REVENUE (3) TH E CIT(A) CONCERNED. (4) THE CIT CONCERNED. (5) THE DR (6) GUARD FILE. (7) GUARD FILE, NEW DELHI. MSP/28.5 BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.