ACIT, New Delhi V. Shri Raj Jain, New Delhi

ITA 1636/DEL/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2721 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 23-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 04-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHIM SINGH SENIOR
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Residential status; Salary income; Advance ruling; Revised return
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NO.1636/DEL/2011 (ASSESSMENT YEAR : 2006-07) ACIT, CIRCLE 48 (1), VS. SHRI RAJ JAIN, NEW DELHI. B 117, NIRMAN VIHAR, DELHI 110 092. (PAN : AACPJ3471E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHWANI TANEJA, ADVOCATE & SHRI SOMIL AGGARWAL, CA REVENUE BY : SHRI BHIM SINGH, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-XXX, NEW DELHI DATED 31.01.2011. 2. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE O N 26.07.2006 IN WHICH THE SALARY INCOME DECLARED AS TAXABLE INCOME. AT TH E TIME OF THE HEARING DURING THE SCRUTINY ASSESSMENT BEFORE THE ASSESSING OFFICER, THE LD. AR FOR THE ASSESSEE PLEADED THAT THE ASSESSEE IS A NON-RES IDENT AND THE SALARY INCOME IS NOT TAXABLE IN INDIA AS THE ASSESSEE WAS WORKING IN WHIRLPOOL CHINA AND SALARY ACCRUED AND AROSE IN THE CHINA ONLY AND DURI NG THE RELEVANT FINANCIAL ITA NO.1636/DEL/2011 2 YEAR, THE ASSESSEE WAS OUT OF INDIA FOR 236 DAYS. I N VIEW OF PROVISIONS OF INCOME-TAX ACT, 1961, ASSESSEE WAS NOT LIABLE TO BE TAXED IN INDIA. ASSESSEE WAS NON-RESIDENT DURING THE RELEVANT FINANCIAL YEAR . ONLY THE INCOME RECEIVED OR DEEMED TO RECEIVE IN INDIA AND INCOME ARISES OR DEEMED TO ARISE IN INDIA ARE TAXABLE IN INDIA. ASSESSEES INCOME NEITHER REC EIVED OR DEEMED TO RECEIVE OR ARISES OR DEEMED TO ARISE IN INDIA. THE ASSESSIN G OFFICER DID NOT ACCEPT THE ASSESSEES CONTENTION AND MAKE THE ASSESSMENT. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A) AND CIT (A) HAS GRANTED THE RELI EF TO THE ASSESSEE BY HOLDING AS UNDER :- WE ARE ENCLOSING HEREWITH A RECENT DECISION IN THE CASE OF SHRI ANURAG CHAUDHARY VS CIT IN AAR NO.89/2010 DATED 11.02.2010 AND THE FACTS OF THAT CASE IS SIMILAR TO THE FACTS OF THE CASE OF ASSESSEE AND SQUARELY APPLIES IN THE CASE O F ASSESSEE. COPY OF THE SAME IS ENCLOSED HEREWITH. I HAVE CONSIDERED THE ASSESSMENT ORDER, CONTENTIONS OF THE ASSESSEE RAISED IN THE ASSESSMENT PROCEEDING AND IN THE WRITTEN SUBMISSIONS & HAVE PERUSED THE PAPER BOOK. HAVING G ONE THROUGH ALL THESE DOCUMENTS, I AM OF THE CONSIDERED VIEW THAT ASSESSEE IS BOUND TO SUCCEED IN APPEAL IN THE MATTE R. ASSESSEE IS NOT A RESIDENT DURING THE YEAR UNDER CONSIDERATION, INTER ALIA, FOR THE REASON AS HE HAS BEEN OUT OF INDIA 182 DAYS (TO BE PRECISE 236 DAYS) DURING THE YEAR UNDER APPEAL WHICH HAS BE EN VERIFIED BY ME FROM THE COPY OF THE PASSPORT FILED IN THE AS SESSMENT PROCEEDINGS AND NOW FILED IN THE PAPER BOOK. THUS, ACCORDING TO SECTION 6 OF THE ACT, HE IS NON-RESIDENT AS HE BEIN G CITIZEN OF INDIA HAS REMAINED OUT OF INDIA FOR MORE THAN 182 D AYS DURING THE PREVIOUS YEAR RELEVANT TO A.Y. UNDER APPEAL. HI S VISIT TO INDIA DURING THE YEAR UNDER APPEAL WAS IN ALL FOR L ESS THAN 182 DAYS AND THUS HE WAS NON-RESIDENT VIEWED FROM ANY A NGLE. HAVING SO HELD, ACCORDING TO SECTION 5, IN CASE OF A NON RESIDENT, INCOME RECEIVED OR DEEMED TO BE RECEIVED IN INDIA O R ARISING OR DEEMED TO BE ARISING IN INDIA ALONE ARE TAXABLE IN INDIA. INCOME ITA NO.1636/DEL/2011 3 EARNED AND RECEIVED OUTSIDE INDIA IS NOT TAXABLE IN THE CASE OF NON-RESIDENT. AS HAS BEEN EXPLAINED IN LETTER DATED 13-10-2008 BY THE ASSESSEE WAS EMPLOYED WITH M/S. WHIRLPOOL CH INA FOR THE PERIOD 01-08-2004 TO 30-06-2006 AND HIS SALARY WAS CREDITED IN HSBC, HONG KONG, COPY OF WHICH HAS BEEN FILED BY TH E ASSESSEE AT PAGE 73-81 OF THE PAPER BOOK. I HAVE AL SO PERUSED THE COPY OF LETTER DATED 19-12-2008 FILED BY THE ASSESS EE DURING ASSESSMENT PROCEEDINGS SUBMITTING THE COPY OF WORKI NG VISA IN CHINA. THEREFORE, ALL THESE EVIDENCES ESTABLISH THA T ASSESSEE WAS NON-RESIDENT AND EARNED SALARY OUTSIDE INDIA WHICH WAS RECEIVED BY HIM OUTSIDE INDIA AND THEREFORE SUCH SALARY AMOU NTING TO RS.1,05,77,063/- WAS NOT TAXABLE IN INDIA. THUS THE ASSESSING OFFICER IS DIRECTED TO EXCLUDE THE SAME FROM THE TO TAL TAXABLE INCOME OF THE APPELLANT-ASSESSEE. TAX CANNOT BE DEM ANDED ON INCOME WHICH HAS BEEN WRONGLY OFFERED TO TAX BY THE ASSESSEE. SUCH INCOME WAS NOT TAXABLE IN INDIA. ASSESSEE BROU GHT ALL THESE FACTS ESTABLISHING NON TAXABILITY OF THE SAID SALAR Y INCOME IN INDIA DURING THE ASSESSMENT PROCEEDINGS ITSELF. BOA RD CIRCULAR NO. 14 DATED 11-04-1955 CLEARLY SAYS THAT NO TAX SH OULD BE RECOVERED ON ACCOUNT OF THE MISTAKE OR IGNORANCE OF THE ASSESSEE. THIS IS EQUALLY SETTLED LAW THAT THERE CA N BE NO ESTOPPEL AGAINST LAW. THE ASSESSING OFFICER'S CONTENTION THA T ASSESSEE TRAVELLED TO INDIA QUITE OFTEN AND THEREFORE SALARY SHOULD BE TREATED TO BE EARNED IN INDIA IS MISPLACED BECAUSE IN THE FACTS OF THE CASE AT HAND, ASSESSEE WAS EMPLOYED BY WHIRLPOO L, CHINA AND SERVICES WERE RENDERED IN CHINA AND THEREFORE S ALARY WOULD BE TREATED AS EARNED IN CHINA. IF ASSESSEE HAS UNDE RTAKEN THE TRAVEL TO INDIA, IT MAY BE RELEVANT FOR COUNTING TH E PHYSICAL PRESENCE OF THE ASSESSEE, IN INDIA SO AS TO DETERMI NE THE RESIDENTIAL STATUS OF THE ASSESSEE. IN THIS CASE TH E COPY OF PASSPORT CLEARLY DEMONSTRATES THAT HE HAS BEEN OUT OF INDIA FOR 232 DAYS DURING THE YEAR UNDER APPEAL. THOUGH FORM NO. 16 WAS ISSUED BY WHIRLPOOL OF INDIA LTD., BUT APPELLAN T HAS FURNISHED A LETTER DATED 24-11-2008 DURING THE ASSE SSMENT PROCEEDINGS ENCLOSING A CERTIFICATE FROM WHIRLPOOL INDIA LTD. DATED 10-11-2008 IN WHICH WHIRLPOOL INDIA LTD. HAS CERTIFIED THAT THE ASSESSEE WAS EMPLOYED WITH WHIRLPOOL CHINA FROM 1- 08-2004 TO 30-06-2006. THIS CERTIFICATE HAS NOT BEE N CONTROVERTED BY AO IN THE ASSESSMENT ORDER. THUS, A FTER TAKING INTO ACCOUNT THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, I HOLD THAT THE SALARY INCOME OF RS.L,05,77,063/- WAS NOT TAXABLE IN ITA NO.1636/DEL/2011 4 INDIA AND AO IS DIRECTED TO EXCLUDE THE SAME FROM T HE TAXABLE INCOME OF THE ASSESSEE APPELLANT. NOW, THE REVENUE IS IN APPEAL BEFORE US BY TAKING T HE FOLLOWING GROUNDS OF APPEAL :- 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN: I) HOLDING THAT SALARY INCOME AMOUNTING TO RS.1,05,77,063/- OF THE ASSESSEE WAS NOT TAXABLE IN INDIA (WHICH WAS EARLIER DECLARED TAXABLE IN THE RETURN OF INCOME FILED BY THE ASSESSEE AND TDS AMOUNTING TO RS.37,20,479/- WAS DEDUCTED BY THE INDIAN EMPLOYER) AND DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE SAME FROM THE TAXABLE INCOME OF' THE ASSESSEE: II) IGNORING THE FACTS THAT (A) THE TDS ON SALARY I NCOME WAS DEDUCTED BY THE INDIAN COMPANY I.E. WHIRLPOOL INDIA LTD. AND NOT BY THE WHIRLPOOL CHINA LTD. AND THE FORM NO. 16 CLEARLY SHOWS THAT THE ASSESSEE WAS ON PAY ROLL OF AN INDIAN COMPANY AND HENCE HIS SALARY INCOME WAS CHARGEABLE TO TAX IN VIEW OF PROVISIONS OF SECTION 9(I)(I) EVEN THOUGH THE STATU S OF THE ASSESSEE WAS NON-RESIDENT, (B) THE SALARY CERTIFICATE ISSUED BY WHIRLPOOL INDIA LTD SHOWS THE STATUS OF THE ASSESSEE AS REGIONAL HEAD- MARKETING & PROD. WHICH SUBSTANTIATE THE FACT THAT THE ASSESS EE WENT TO CHINA ON OFFICIAL VISITS ONLY & (C) REVISED RETURN WAS NOT FILED BY THE ASSESSEE. THE APPELLANT CRAVES THE RIGHT TO ALTER, AMEND, ADD OR SUBSTITUTE THE GROUNDS OR APPEAL. 3. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE HA VE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THR OUGH THE CASE LAWS RELIED UPON BY BOTH THE SIDES. IN THIS CASE, THE UNDISPUTE D FACTS ARE AS UNDER. ITA NO.1636/DEL/2011 5 DURING THE RELEVANT PERIOD THE ASSESSEE WAS WORKING FOR WHIRLPOOL CHINA AND THE SALARY WAS CREDITED IN HSBC HONG KONG . THE ASSESSEE WAS EMPLOYED WITH WHIRLPOOL CHINA FROM 01.08.2004 TILL 30.06.2006. DURING THE RELEVANT FINANCIAL YEAR, THE ASSESSEES STAY IN IND IA WAS LESS THAN 182 DAYS. THE RESIDENTIAL STATUS OF THE ASSESSEE WAS NOT RESI DENT DURING THE RELEVANT PERIOD. SIMILAR SITUATION HAS BEEN CONSIDERED BY TH E AUTHORITY OF ADVANCE RULING IN THE CASE OF ANURAG CHAUDHARY REPORTED IN 322 ITR 293 WHEREIN THE AUTHORITY FOR ADVANCE RULING HELD AS UNDER :- SEC. 6 SUB-SO (1), WHICH DETERMINES THE RESIDENTIA L STATUS OF AN INDIVIDUAL, REQUIRES THAT EITHER THE APPLICANT SHOU LD HAVE BEEN IN INDIA FOR 182 DAYS [VIDE CL. (A)] OR FOR 60 DAYS OR MORE, IF HE WAS IN INDIA FOR 365 DAYS OR MORE IN FOUR PRECEDING YEA RS [(VIDE CL. (C)]. THE EXPLANATION TO THIS SUB-SECTION PROVIDES THAT A CITIZEN OF INDIA WHO LEAVES INDIA FOR THE PURPOSE OF EMPLOY MENT OUTSIDE INDIA CAN BE CONSIDERED AS RESIDENT OF INDIA, IF HE HAS BEEN IN INDIA FOR 182 DAYS OR MORE EVEN THOUGH HE MAY HAVE BEEN IN INDIA FOR MORE THAN 365 DAYS IN 4 PRECEDING YEARS. THE NET EFFECT OF S. 6(1) READ WITH B THE EXPLANATION IS THAT FOR AN INDIVIDUAL WHO HAS LEFT INDIA FOR EMPLOYMENT OUTSIDE INDIA, HE SHOULD BE TREATED AS RESIDENT OF INDIA ONLY IF HE WAS IN INDI A DURING THE RELEVANT PERIOD/YEAR FOR 182 DAYS OR MORE. IN OTHER WORDS, IF AN INDIVIDUAL HAS SPENT LESS THAN 182 DAYS IN INDIA DU RING A PREVIOUS YEAR AND WAS OUTSIDE INDIA FOR THE PURPOSE S OF EMPLOYMENT, THEN REGARDLESS OF HIS BEING IN INDIA F OR 365 DAYS OR MORE DURING 4 PRECEDING PREVIOUS YEARS, HE CANNO T BE TREATED AS A RESIDENT OF INDIA. THERE IS NO INFORMATION REG ARDING APPLICANT'S STAY IN INDIA DURING 4 PRECEDING YEARS. IF THE APPLICANT WAS NOT PRESENT IN INDIA FOR MORE THAN 36 5 DAYS IN 4 PRECEDING YEARS, THEN CL. (A) OF SUB-SO (1) OF S. 6 WOULD APPLY AND IT REQUIRES STAY OF 182 DAYS OR MORE IN INDIA T O BE TREATED AS RESIDENT. ON THE OTHER HAND, IF THE APPLICANT WAS P RESENT IN INDIA FOR 365 DAYS OR MORE DURING 4 PRECEDING FEW YEARS, THEN CL. (C) OF SUB-S. (1) TO S. 6 R/W EXPLN. (A) WOULD APPLY AN D IT REQUIRES ITA NO.1636/DEL/2011 6 STAY OF 182 DAYS OR MORE FOR A PERSON WHO LEAVES IN DIA FOR EMPLOYMENT OUTSIDE, TO BE TREATED AS RESIDENT OF IN DIA. FROM THE FACTS AVAILABLE IN THE APPLICATION, THE APPLICANT S ATISFIES NEITHER CL. (A) NOR CL. (C) OF S. 6(1) SO AS TO MERIT TREAT MENT AS A RESIDENT OF INDIA DURING THE RELEVANT PERIOD. IT NECESSARILY FOLLOWS THAT THE APPLICANT WAS A 'NON-RESIDENT' DURING THE RELEVANT PERIOD. CONSEQUENTLY HIS INCOME THAT ACCRUED OUTSIDE INDIA IN USA BY REASON OF HIS EMPLOYMENT THERE CANNOT FORM PART OF THE TOTAL INCOME TAXABLE IN INDIA. THE DEPARTMENT IN ITS COMM ENTS HAS ALSO CLARIFIED THAT THE APPLICANT MAY BE TREATED AS NRI AS HE REMAINED IN INDIA FOR 123 DAYS DURING THE FINANCIAL YEAR 2008- 09. THE ISSUE REGARDING LEAVING INDIA FOR PURPOSE OF EM PLOYMENT OUTSIDE INDIA WAS CONSIDERED IN THE CASE OF BRITISH GAS INDIA (P) LTD. REPORTED IN 285 ITR 218 (AAR) WHEREIN IT WAS HELD AS UNDER :- THE CONTENTION OF THE CIT THAT HE HAS BEEN IN INDI A FOR MORE THAN 60 DAYS IS SUPPORTED BY CL. (C) OF S. 6( 1) BU T THIS IGNORES EXPLN. (A) THEREOF. FOR THE WORDS 'SIXTY DAYS', OCC URRING IN SUB- CL. (C) OF S. 6(1), THE WORDS 'ONE HUNDRED AND EIGH TY-TWO DAYS' HAD BEEN SUBSTITUTED BY THE EXPLANATION. IF CL. (C) IS READ IN THE LIGHT OF THE EXPLN. (A), IT IS APPARENT THAT THE ST AY OF G IS LESS THAN 182 DAYS (HIS STAY IS 88 DAYS IN INDIA), THERE FORE, HE BECOMES A NON-RESIDENT AND THUS THE REQUIREMENT OF THE TAX LIABILITY OF NON-RESIDENT FOR THE PURPOSE OF DEFINI TION OF 'ADVANCE RULING' IN S. 245N(A) IS SATISFIED. THE CONTENTION THAT SINCE HE IS ALREADY IN EMPLOYMENT AND IS LEAVING INDIA ON DEPUT ATION, HE CANNOT BE SAID TO LEAVE J INDIA FOR EMPLOYMENT, CAN NOT BE ENDORSED. A CAREFUL READING OF EXPLN. (A) WOULD SHO W THAT THE REQUIREMENT OF THE EXPLANATION IS NOT LEAVING INDIA FOR EMPLOYMENT BUT IT IS LEAVING INDIA FOR THE PURPOSES OF EMPLOYMENT OUTSIDE INDIA. FOR THE PURPOSE OF THE EX PLANATION, AN INDIVIDUAL NEED NOT BE AN UNEMPLOYED PERSON WHO LEAVES INDIA FOR EMPLOYMENT OUTSIDE INDIA. THEREFORE, THE FACT THAT G WAS ALREADY AN EMPLOYEE AT THE TIME OF LEAVING INDI A IS HARDLY MATERIAL OR RELEVANT. FOR ALL THESE REASONS, G IS N OT A RESIDENT IN INDIA IN THE FINANCIAL YEAR 2005-06. ITA NO.1636/DEL/2011 7 IN VIEW OF THE ESTABLISHED LEGAL POSITION, THE ASSE SSEE WAS NOT RESIDENT DURING THE RELEVANT PERIOD AS HE HAS LEFT INDIA FOR THE PU RPOSE OF EMPLOYMENT OUTSIDE INDIA. HIS STAY DURING THE RELEVANT FINANCIAL YEAR WAS LESS THAN 182 DAYS IN INDIA. THEREFORE, HIS STATUS WAS NON-RESIDENT DURIN G THE RELEVANT FINANCIAL YEAR. THE CONTENTION THAT HE WAS ALREADY EMPLOYED I N THE WHIRLPOOL INDIA PRIOR TO THE LEAVING INDIA FOR WORKING WITH WHIRLPO OL CHINA SHALL NOT EFFECT THE RESIDENTIAL STATUS OF THE ASSESSEE. CONSIDERING THESE FACTS IN VIEW, WE UPHELD THE ORDER OF THE CIT (A) THAT SALARY INCOME OF THE ASSESSEE ACCRUED AND AROSE DURING THE EMPLOYMENT IN CHINA IS NOT TAX ABLE IN INDIA. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 31 ST DAY OF JULY, 2013. SD/- SD/- (C.M. GARG) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 31 ST DAY OF JULY, 2013 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.