Gulam Muntaz Khan, Bhubaneswar V. DDIT (International Taxation), Bhubaneswar

ITA 170/CTK/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5322 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-05-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 05-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: P R MOHANTY
• Keywords: Residential status; Salary income; Question of law
• Section: 142(1); 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PA V AN KUMAR GADALE, JM ./ ITA NO. 170 / CTK /20 1 7 ( / ASSESSMENT YEAR : 20 12 - 20 1 3 ) GULAM MUNTAZ KHAN, HI G - 7, DHARMA VIHAR, KHANDAGIRI, BHUBANESWAR - 751030 VS. DDIT(IT), BHUBANESWAR - 751007 ./ ./ PAN/GIR NO. : A ONPK 9315 H ( / APPELLANT ) .. ( / RESPONDENT ) /AS SESSEE BY : SHRI P.R.MOHANTY , AR /REVENUE BY : SHRI D.K.PRADHAN, DR / DATE OF HEARING : 03 / 05 /201 8 / DATE OF PRONOUNCEMENT 08 / 05 /201 8 / O R D E R PER SHRI PA V AN KUMAR GADALE, JM : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAIN ST THE ORDER OF CIT(A) - 3 , BHUBANESWAR , IN A PPEAL NO. 0422 /201 4 - 1 5 , DATED 02.02.2017 , FOR THE ASSESSMENT YEAR 2012 - 2013 , PASSED U/S.143(3) / 250 OF THE I.T.ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : - 1 . THAT THE LD COMMISSIONER OF INCOME TAX (APP EALS - 3) DID NOT JUSTIFY IN DISMISSING THE APPEAL OF THE ASSESSEE PRAYING FOR GRANTING HIM THE NRI STATUS FOR THE ASSESSMENT YEAR IN QUESTION ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THEREFORE THE ORDER OF THE CIT(A) BE QUASHED AND THE ASSESSEE BE ALLOWE D THE RELIEF OF ESTABLISHING HIS STATUS AS NRI DURING THE PREVIOUS YEAR CORRESPONDING TO THE ASSESSMENT YEAR IN QUESTION. 2. THAT THE ASSESSING OFFICER DID NOT CONSIDER THE FACTS IN RELATION TO CONSIDERING THE NRI STATUS OF THE ASSESSEE DURING THE PREVIO US YEAR CORRESPONDING TO THE ASSESSMENT YEAR IN QUESTION AND TREATED THE ASSESSEE AS A RESIDENT EVEN THOUGH THE ASSESSEE SATISFIED THE CONDITIONS U/S.6 FOR ESTABLISHING THE RESIDENTIAL STATUS. THE ACTION OF THE ASSESSING OFFICER IS ULTRA VIRES THE PROVISIO NS OF THE INCOME TAX ACT AND THE SAME SHOULD BE ANNULLED AND THE ASSESSEES INCOME FOR THE PREVIOUS YEAR BE ALLOWED TO BE EXEMPT BEING A NRI. ITA NO. 170 /CTK/201 7 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SALARIED EMPLOYEE AND FILED THE RETURN OF INCOME ON 30.08 .2012 WITH TOTAL INCOME OF RS. 24,35,115/ - , SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) & 142(1) OF THE ACT WAS ISSUED . IN COMPLIANCE, LD. AR OF THE ASSESSEE APPEARED AND SUBMITTED THAT THE ASSESSEES MAIN SOURCE OF INCOME IS SALA RY FROM PRIVATE SHIPPING COMPANY AND ASSESSEE BEING A NON - RESIDENT OF INDIA FOR 182 DAYS, THEREFORE APPLYING THE PROVISIONS OF SECTION 6 OF THE ACT THE ASSESSEE IS NON - RESIDENT AND NO INCOME HAS TO BE TAXED. THE AO IS OF THE OPINION THAT THE ASSESSEE IS A RESIDENT OF INDIA AND SETTLED IN INDIA FOR MORE THAN 182 DAYS AND, THEREFORE, CALLED FOR THE COPY OF PASSPORT AND OTHER INFORMATION. THE AO OBSERVED THAT THE INCOME OF THE ASSESSEE IS TAXABLE AND ISSUED SHOW CAUSE NOTICE. THE ASSESSEE FILED EXPLANATION THA T THE ASSESSEE IS A NON - RESIDENT IN THE PREVIOUS YEAR AND ASSESSEE HAS CLAIMED EXEMPT ION U/S.6 OF THE ACT IN RESPECT OF RESIDENTIAL STATUS AS HE IS WORKING IN THE SHIPPING COMPANY AND AMOUNT IS RECEIVED IN FOREIGN CURRENCY IN SAUDI ARABIA AND SUBS EQUENTLY TRANSFERRED TO INDIA. THESE FACTS WERE NOT BEEN CONSIDERED BY THE AO AND FOUND THAT THE ASSESSEE HAS LEFT INDIA FOR EMPLOYMENT PURPOSE FOR 180 DAYS AND, THEREFORE, EXEMPT ION CLAIMED U/S.6(1) OF THE ACT IS NOT APPLICABLE AND ASSESSED THE TOTAL INC OME OF RS. 24,35,115/ - AND PASSED T HE ORDER WITHOUT GIVING EXEMPT ION. 4. ON APPEAL, THE CIT(A) HAS CONFIRMED THE ADDITION. 5. BEFORE US, LD. AR SUBMITTED THAT THE ASSESSEE IS A NON - RESIDENT OF INDIA AND IS WORKING IN SHIPPING AND CLAIMED EXEMPTION OF SALARY RECEIVED ITA NO. 170 /CTK/201 7 3 FROM FOREIGN EMPLOYEE WHILE IN ABROAD AND THE ASSESSEE STATUS IN THE PRESENT PERIOD IS A NON - RESIDENT, AND, THEREFORE, ELIGIBLE FOR CLAIM OF EXEMPTION AND THE INCOME EARNED OUTSIDE INDIA IS NOT TAXABLE AND SUPPORTED WITH JUDICIAL DECISIONS. 6. CON TRA, LD. DR RELIED ON THE ORDER OF CIT(A). 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE DISPUTED ISSUE WITH RESPECT TO THE INCOME ACCRUED AND RECEIVED OUTSIDE INDIA AND THE AO IS OF THE OPINION THAT THE STATUS OF THE ASSE SSEE IS A RESIDENT WHEREAS ASSESSEES CLAIM I S NON - RESIDENT. LD. AR SUBMITTED THAT THE ASSESSEE HAS RECEIVED SALARY IN FOREIGN CURRENCY. WE FOUND THAT THE STATUS OF THE ASSESSEE HAS TO BE CONSIDERED BASED ON STAY IN INDIA . LD. AR FURTHER SUBMITTED IN THE E ARLIER YEARS AND SUBSEQUENT YEARS THE REVENUE HAS ACCEPTED ASSESSEES CLAIM AS NON - RESIDENT BUT I N THE CURRENT ASSESSMENT YEAR THE AO HAS MADE ADDITION. THE ASSESSEE HAS RECEIVED THE AMOUNT IN SAUDI RI Y ALS AND WAS CREDITED TO THE FOREIGN BANK ACCOUNT IN SA UDI ARABIA AND SUBSEQUENTLY MONEY HAS BEEN TRANSFERRED TO NR E ACCOUNT IN INDIA. L D. AR RELIED ON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI PRADIPTA KUMAR BAHINIPATI, ITA NO.160/CTK/2016, ORDER DATED 20.12.2016 FOR THE ASSESSM ENT YEAR 2012 - 2013 AT PARA 4, WHERE THIS SIMILAR ISSUE HAS BEEN DEALT AND DELETED THE ADDITION AND TRIBUNAL HAS HELD THAT INCOME IS NOT LIABLE TO TAX. THE OBSERVATION OF THE TRIBUNAL IS AS UNDER : - 4.1 THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. AVTAR SINGH WADHWAN REPORTED IN 247 ITR 260 HAS HELD THAT THE PLACE OF CONTRACT WAS NOT RELEVANT. THAT, THE SOURCE FROM WHICH PAYMENT WAS MADE WAS NOT RELEVANT. WHAT WAS RELEVANT WAS THE ITA NO. 170 /CTK/201 7 4 PLACE WHERE THE SERVICE WAS RENDERED AND THE PLACE WHERE THE INCOME A CCRUED. SINCE THE INCOME WAS EARNED IN FOREIGN WATERS, IT HAD ACCRUED TO THE ASSESSEE OUTSIDE INDIA. IN THE PRESENT CASE, THE ASSESSEE IS AN INDIVIDUAL AND A MARINE. ENGINEER ON BOARD THE SHIP WHICH WAS AN INDIAN SHIP OWNED BY THE SHIPPING CORPORATION OF I NDIA AND RESIDENTIAL STATUS OF THE ASSESSEE WAS NON - RESIDENT. THE HONOURABLE COURT, CONTENDED THAT ONCE THE ASSESSEE WAS FOUND TO BE A NON - RESIDENT, THEN THE ONLY QUESTION WHICH WAS REQUIRED TO BE DECIDED WAS THE PLACE WHERE THE SERVICES WERE RENDERED BECA USE THAT WAS THE RELEVANT TEST TO DECIDE WHERE THE INCOME ACCRUED. FURTHER THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF THE DIRECTOR OF INCOME - TAX (IT) V. SRI.PRAHLAD VIJENDRA RAO IN ITA NO.838/2009, WAS CONSIDERING THE IDENTICAL FACTUAL SITUATION AND H AD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT FINDING OF THE HON'BLE KARNATAKA HIGH COURT READS AS FOLLOWS: '6. HAVING HEARD THE LEARNED ADVOCATES APPEARING FOR THE PARTIES AND, AFTER PERUSING THE ORDERS PASSED BY THE AUTHORITIES AND AFTER HAVING GIVEN OUR ANXIOUS CONSIDERATION TO THE CONTENTIONS RAISED, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO SUBSTANTIAL QUESTIONS OF LAW INVOLVED IN THIS APPEAL FOR BEING FORMULATED AND ADJUDICATED FOR THE FOLLOWING REASONS. (A) THE REVENUE DOES NO T DISPUTE THAT ASSESSEE HAD WORKED AS A CHIEF ENGINEER ON THE BOARD OF 'A SHIP BELONGING TO HIS EMPLOYER 'M/S.LIVE STOCK TRANSPORT & TRADING COMPANY', KUWAIT AND DURING THE RELEVANT PERIOD THE ASSESSEE HAD STAYED OUTSIDE INDIA FOR A PERIOD OF 225 DAYS AND THE SALARY DISCHARGED WAS EARNED BY HIM WAS ON ACCOUNT OF THE WORK DISCHARGED BY HIM ON BOARD DURING THE SAID PERIOD WHICH IS OUTSIDE THE SHORES OF INDIA. (B) THE CIT(APPEALS) HAS PLACED RELIANCE IN THE CASE OF CIT V. AVTAR SINGH WADHWAN REPORTED IN 247 ITR 260 (2001) WHEREIN IT HAS BEEN HELD THAT SALARY RECEIVED BY THE NON RESIDENT MARINE ENGINEER FOR SERVICES RENDERED BY HIM ON A FOREIGN GOING INDIAN SHIP WHICH MAINLY REMAINED AWAY FROM THE INDIAN COAST DURING THE RELEVANT ACCOUNTING YEAR ACCRUED OUTSID E INDIA AND WAS NOT TAXABLE IN INDIA. WHILE ANSWERING THE QUESTION OF LAW THERE UNDER WITH REFERENCE TO SECTION 9(I)(II) IN THE SAID CASE IT HAS ALSO BEEN HELD THAT THE SALARY WHICH IS EARNED IN INDIA WILL ALONE BE REGARDED AS INCOME ARISING IN INDIA AND N OT OTHERWISE. THE PRINCIPLES LAID DOWN IN THE SAID CASE IS SQUARELY APPLICABLE TO THE FACTS OF PRESENT CASE ALSO. (C) THE CRITERIA OF APPLYING THE DEFINITION OF SECTION 5(2)(B) WOULD BE SUCH INCOME WHICH IS EARNED IN INDIA FOR THE SERVICES RENDERED IN IN DIA AND NOT OTHERWISE. (D) UNDER SECTION 15 OF ACT EVEN ON ACCRUAL BASIS SALARY INCOME IS TAXABLE I.E., IT BECOMES TAXABLE IRRESPECTIVE OF THE FACT WHETHER IT IS ACTUALLY RECEIVED OR NOT ONLY WHEN SERVICES RENDERED IN INDIA IT BECOMES TAXABLE BY IMPLICAT ION. HOWEVER, IF SERVICES ARE RENDERED OUTSIDE INDIA SUCH INCOME WOULD NOT BE TAXABLE IN INDIA. ITA NO. 170 /CTK/201 7 5 7. THE EXPLANATION TO SECTION 9(I)(II) HAS BEEN TAKEN NOTE OF WHILE ANSWERING THE SUBSTANTIAL QUESTION OF LAW IN FAVOUR OF THE ASSESSEE AND TO NEGATIVE THE CON TENTIONS OF THE REVENUE. APPLYING THE SAID PRINCIPLES TO THE FACTS OF THE PRESENT CASE AND NUMBER OF DAYS WORKED BY THE ASSESSEE OUTSIDE INDIA AS EXTRACTED IN ASSESSMENT ORDER WHEN TAKEN INTO CONSIDERATION IT WOULD EMERGE THAT ASSESSEE WAS WORKING OUTSIDE INDIA FOR A PERIOD OF 225 DAYS AND THE INCOME IN QUESTION EARNED BY ASSESSEE HAS NOT ACCRUED IN INDIA AND IS NOT DEEMED TO HAVE ACCRUED IN INDIA. AS SUCH THE CONTENTION OF THE REVENUE CANNOT BE ACCEPTED.' 4.2 FURTHER WE NOTICED IN THE SCRUTINY ASSESSMENT COMPLETED IN ASSESSEES CASE FOR ASSESSMENT YEAR 2010 - 2011 ASSESSEES SALARY INCOME FROM THE FOREIGN SHIPPING COMPANY RECEIVED IN FOREIGN CURRENCY WAS NOT BROUGHT TO TAX. 4.3 IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS AND THE FACTUAL SITUATION MENTIONED ABOVE, WE ARE OF THE VIEW THE SALARY INCOME RECEIVED FROM THE FOREIGN COMPANY FOR RENDERING SERVICES ABROAD IS NOT LIABLE TO BE TAXED IN THE RELEVANT ASSESSMENT YEAR. IT IS ORDERED ACCORDINGLY. WE FOUND THE PRESENT CASE IS SIMILAR TO DECISION OF COORDIN ATE BENCH AND AS A JUDICIAL PRECEDENCE , WE FOLLOW THE SAME AND DIRECT THE AO TO DELETE THE ADDITION 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 08 / 05 / 201 8 . SD/ - ( N.S.SAINI ) SD/ - ( PA V A N KUMAR GADALE ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 08 / 0 5 /201 8 . . / PKM , SENIOR PRIVATE SECRETARY / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - 2. / THE RESPONDENT - 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//