ACIT(IT), Cir-1(1), Kolkata, Kolkata V. Shri Ayan Majumdar, Kolkata

ITA 1827/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0162 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 10-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOWDHURY
• Assessee Lawyers: NAVIN JAIN
• Keywords: Residential status; Double taxation relief
• Section: 143(3); 5(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SHRI S.S.GODARA, JM & HONBLE SHRI M.BALAGANESH, AM] I.T.A NO. 1827/KOL/2017 ASSESSMENT YEAR : 2014-1 5 ACIT(IT), CIRCLE-1(1), KOLKATA -VS- SHRI AYAN M AJUMDAR [PAN: AFBPM 9117 Q] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI ROBIN CHOWDHU RY, ADDL. CIT FOR THE RESPONDENT : SHRI NAVIN JAIN, AR DATE OF HEARING : 03.12.2018 DATE OF PRONOUNCEMENT : 05.12.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE ARISES OUT OF THE O RDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-22, KOLKATA [IN SHORT THE LD CI T(A)] IN APPEAL NO.75/CIT(A)- 22/KOL/16-17 DATED 26.05.2017 AGAINST THE ORDER PA SSED BY ACIT(IT), CIRCLE-1(1), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 19.12.2016 FOR THE ASSESSME NT YEAR 2014-15. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE ADDITION MADE IN THE SUM OF RS 66,3 8,022/- WHICH WAS BROUGHT TO TAX BY 2 ITA NO.1827/KOL/2017 SHRI AYAN MAJUNDAR A.YR. 2014-15 2 THE LD AO BY APPLYING THE PROVISIONS OF SECTION 5(2 )(A) OF THE ACT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSES SEE IS AN EMPLOYEE IN IBM INDIA PRIVATE LIMITED AND DURING THE FINANCIAL YEAR 2013-14 WAS S ENT ON SHORT TERM FOREIGN ASSIGNMENT TO UNITED KINGDOM. DURING THE PREVIOUS YEAR 2013-14, THE ASSESSEE STAYED IN INDIA FOR 13 DAYS. ACCORDINGLY, HIS RESIDENTIAL STATUS FOR THE YEAR UNDER CONSIDERATION WOULD BE NON-RESIDENT IN INDIA. DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE HAD RECEIVED THE FOLLOWING EMOLUMENTS FROM IBM :- A) GROSS SALARY RECEIVED RS 66,38,027/- AND B) FOREIGN ALLOWANCES ON ACCOUNT OF THE INTERNATION AL ASSIGNMENT RECEIVED IN UNITED KINGDOM FOR RENDERING SERVICES OUTSIDE INDIA RS 75 ,68,0505/- IBM HAD EFFECTED TDS OF RS 45,88,295/- ON THE ENTIR E EMOLUMENTS PAID TO THE ASSESSEE INCLUDING THE FOREIGN ALLOWANCES PAID TO THE ASSESS EE U/S 192(1) OF THE ACT. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASST YE AR 2014-15 DECLARING TAXABLE INCOME OF RS 11,99,620/- (BEING THE INCOME FROM OTHER SOUR CES) AFTER CLAIMING DEDUCTION OF RS 1,05,542/- UNDER CHAPTER VIA OF THE ACT AND CLAIMED A REFUND OF RS 45,26,490/- IN HIS RETURN OF INCOME. 3.1. DURING THE FINANCIAL YEAR 2013-14 , THE ASSESS EE QUALIFIES TO BE A TAX RESIDENT OF UNITED KINGDOM (UK). AS PER THE PROVISIONS OF ARTI CLE 16(1) OF THE INDIA-UK DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) , SALARY EARNED BY A UK TAX RESIDENT IS TAXABLE ONLY IN UK. ACCORDINGLY, THE ASSESSEE CLAIMED EXEM PTION OF RS 66,38,027/- AS PER ARTICLE 16(1) OF INDIA-UK DTAA. THE ASSESSEE PLEAD ED THAT THE ENTIRE FOREIGN ALLOWANCE OF RS 75,68,505/- WAS NOT OFFERED TO TAX IN INDIA AS THE SAME WAS RECEIVED BY THE ASSESSEE OUTSIDE INDIA FOR THE SERVICES RENDERE D OUTSIDE INDIA WHICH DOES NOT FORM 3 ITA NO.1827/KOL/2017 SHRI AYAN MAJUNDAR A.YR. 2014-15 3 PART OF THE TOTAL INCOME U/S 5(2) OF THE ACT. THE ASSESSEE ALSO CLAIMED RELIEF UNDER ARTICLE 16(1) OF INDIA UK DTAA IN RESPECT OF SALARY RECEIVED IN INDIA AMOUNTING TO RS 66,38,027/-. THE LD AO DENIED THE RELIEF CLAIMED IN THE SUM OF RS 66,38,027/- UNDER INDIA UK DTAA AND BROUGHT THE SAME TO TAX WHILE C OMPLETING THE ASSESSMENT. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THA T THE FACT THAT ASSESSEE HAD RENDERED SERVICES IN UK DURING THE RELEVANT ASST YEAR IS SUB STANTIATED FROM THE FOLLOWING DOCUMENTS:- A) COPY OF UK TAX RETURN FILED WITH UK REVENUE AUTH ORITIES B) CERTIFICATE OF IBM CLARIFYING THAT THE ASSESSEE WAS SENT ON SHORT TERM FOREIGN ASSIGNMENT TO UK. 4.1. WE FIND THAT THE PROVISIONS OF ARTICLE 16(1) O F INDIA-UK DTAA READS AS UNDER:- ARTICLE 16 DEPENDENT PERSONAL SERVICES 1. SUBJECT TO THE PROVISIONS OF ARTICLE '17 (DIRECT ORS' FEES), 18 (ARTISTES AND ATHLETES), 19 (GOVERNMENTAL REMUNERATION AND PENSIONS), 20 (PENSI ONS AND ANNUITIES), 21 (STUDENTS AND TRAINEES) AND 22 (TEACHERS) OF THIS CONVENTION, SALARIES, WAGES AND OTHER SIMILAR REMUNERATION DERIVED BY A RESIDENT OF A CONTRACTING STATE IN RESPECT OF AN EMPLOYMENT SHALL BE TAXABLE ONLY IN THAT STATE UNLESS THE EMPL OYMENT IS EXERCISED IN THE OTHER CONTRACTING STATE. IF THE EMPLOYMENT IS SO EXERCISE D, SUCH REMUNERATION AS IS DERIVED THEREFROM MAY BE TAXED IN THAT OTHER STATE. 2. NOTWITHSTANDING THE PROVISIONS OF PARAGRAPH 1 OF THIS ARTICLE, REMUNERATION DERIVED BY A RESIDENT OF A CONTRACTING STATE IN RESPECT OF AN EMPLOYMENT EXERCISED IN THE OTHER CONTRACTING STATE SHALL NOT BE TAXED IN THAT OTHER STATE IF : (A) HE IS PRESENT IN THE OTHER STATE FOR A PERIOD O R PERIODS NOT EXCEEDING IN THE AGGREGATE 183 DAYS DURING THE RELEVANT FISCAL YEAR; (B) THE REMUNERATION IS PAID BY, OR ON BEHALF OF, A N EMPLOYER WHO IS NOT RESIDENT OF THAT OTHER STATE; AND (C) THE REMUNERATION IS NOT DEDUCTIBLE IN COMPUTING THE PROFITS OF AN ENTERPRISE CHARGEABLE TO TAX IN THAT OTHER STATE. 4 ITA NO.1827/KOL/2017 SHRI AYAN MAJUNDAR A.YR. 2014-15 4 3. NOTWITHSTANDING THE PRECEDING PROVISIONS OF THIS ARTICLE, REMUNERATION IN RESPECT OF AN EMPLOYMENT EXERCISED ABOARD A SHIP OR AIRCRAFT I N INTERNATIONAL TRAFFIC MAY BE TAXED IN THE CONTRACTING STATE OF WHICH THE PERSON DERIVI NG THE PROFITS FROM THE OPERATION OF THE SHIP OR AIRCRAFT IS A RESIDENT. 4.2. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS A NO N-RESIDENT IN INDIA AND IS A TAX RESIDENT OF UK DURING THE YEAR UNDER CONSIDERATION. IT IS NOT IN DISPUTE THAT HIS EMPLOYMENT IS EXERCISED IN UK. WE FIND THAT THE LD AO HAD DENIED THE RELIEF CLAIMED UNDER INDIA UK DTAA FOR NOT FURNISHING THE TAX RESIDENCY CERTIFICA TE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ADMITTEDLY, THE SAME WAS FURNISHED BY THE ASSESSEE BEFORE THE LD CITA FOR THE FIRST TIME. THE LD CITA WITHOUT ASKING FO R A REMAND REPORT FROM THE LD AO IN THIS REGARD, PROCEEDED TO GRANT RELIEF TO THE ASSES SEE. WE FIND THAT THE REVENUE HAD RAISED ONE OF THE GROUND ON ACCOUNT OF VIOLATION OF PROVISIONS OF RULE 46A OF THE INCOME TAX RULES WITH REGARD TO THE TAX RESIDENCY C ERTIFICATE FURNISHED ONLY BEFORE THE LD CITA. HENCE IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE DEEM IT FIT AND APPROPRIATE, TO REMAND THIS ISSUE TO THE FILE OF LD AO , FOR THE LI MITED PURPOSE OF VERIFICATION OF THE TAX RESIDENCY CERTIFICATE FURNISHED BEFORE THE LD CITA. THIS WAS THE ONLY BASIS OF DENIAL OF CLAIM OF ASSESSEE BY THE LD AO IN THE ASSESSMENT. IF ON VERIFICATION OF THE SAME, THE LD AO IS SATISFIED REGARDING THE CLAIM OF THE ASSESSEE , THEN THE ASSESSEE SHOULD BE GRANTED THE RELIEF. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 05.12.2018 SD/- SD/ - [S.S. GODARA] [ M .BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 05.12.2018 SB, SR. PS 5 ITA NO.1827/KOL/2017 SHRI AYAN MAJUNDAR A.YR. 2014-15 5 COPY OF THE ORDER FORWARDED TO: 1. ACIT(IT), CIRCLE-1(1), 2 ND FLOOR, AAYAKAR BHAWAN POORVA, 110, SHANTIPALLY, KOL KATA- 700107. 2. SHRI AYAN MAJUMDAR, BD-302, SECTOR-1, SALT LAKE, KOLKATA-700064 3..C.I.T.(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER A SSISTANT REGISTRAR ITAT , KOLKATA BENCHES