Sh. Arvind Singh Chauhan, Gwalior V. I.T.O., Ward-1(2), Gwalior

ITA 319/AGR/2013

• Counselvise Citation: 31920314 RSA 2013
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 08-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ATHESHAM ANSARI
• Assessee Lawyers: ASHOK VIJAYWARGIYA
• Keywords: Business income; Residential status; Salary income; Source of fund
• Section: 6; 15; 143(3); 5(2)

Judgement Text

I.T.A. NO.: 319 AND 320/AGR/2013 ASSESSMENT YEAR: 2008-09 AND 2009-10 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA [CORAM : BHAVNESH SAINI JM AND PRAMOD KUMAR AM] I.T.A. NO.: 319 AND 320/AGR/2013 ASSESSMENT YEAR: 2008-09 AND 2009-10 ARVIND SINGH CHAUHAN .APPELLANT 110 SARSWATI NAGAR UNIVERSITY ROAD, GWALIOR [PAN : AEIPC 2120 F] VS. INCOME TAX OFFICER WARD 1(2), GWALIOR .RESPONDENT APPEARANCES BY: ASHOK VIJAYWARGIYA, FOR THE APPELLANT ATHESHAM ANSARI , FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : FEBRUARY 11, 20 14 DATE OF PRONOUNCING THE ORDER : FEBRUARY 14, 201 4 O R D E R PER PRAMOD KUMAR: ITA NO. 320/AGRA/2013 ASSESSMENT YEAR 2009-10 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS D IRECTED AGAINST THE ORDER DATED 31 ST JULY, 2013 PASSED BY THE CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT 1961, FOR THE ASSESSMENT YEAR 2009-10. 2. IN GROUND NO.1, THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCE:- THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW AND IN ANY VIEW OF THE MATTER, THE AUTHORITIES BELOW HA VE ERRED IN MAKING AND UPHOLDING THE ADDITION OF RS.13,34,884 O N ACCOUNT I.T.A. NO.: 319 AND 320/AGR/2013 ASSESSMENT YEAR: 2008-09 AND 2009-10 PAGE 2 OF 11 OF SALARY CONSIDERING IT AS ACCRUED AND RECEIVED IN INDIA, WHICH WAS REMITTED BY THE EMPLOYER COMPANY BY TRANSFERRIN G THE AMOUNT FROM BANK ACCOUNT IN SINGAPORE TO THE NRE BA NK ACCOUNT OF THE ASSESSEE WITH HSBC BANK AT MUMBAI. 3. BRIEFLY, THE RELEVANT MATERIAL FACTS ARE LIKE T HIS. THE ASSESSEE, AN INDIVIDUAL, IS IN EMPLOYMENT OF EXECUTIVE SHIP MANA GEMENT PTE. LTD., SINGAPORE ( ESM-S, IN SHORT ), AND WORKS ON MERCHANT VESSELS AND TANKERS PLYING ON INTERNATIONAL ROUTES. IN ADDITION TO THI S SALARY INCOME, THE ASSESSEE ALSO DERIVES INCOME FROM BANK INTEREST AND RECEIVES PENSION FROM INDIAN ARMY, HIS FORMER EMPLOYER. THERE IS AL SO NO DISPUTE THAT THE ASSES SEES STAY IN INDIA, IN THE RELEVANT PREVIOUS YEAR, WAS LESS THAN 182 DAYS, AND THAT THE RESIDENTIAL STATUS OF THE ASSESSEE IS NON - RESIDENT. IN THE INCOME TAX RETURN FILED BY THE ASSESSEE, THE SA LARY RECEIVED BY THE ASSESSEE FROM ESM-S WAS NOT OFFERED TO TAX. THE INC OME TAX RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMEN T, AND, IN THE COURSE OF RESULTANT ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY SALARY RECEIVED BY THE ASSESSEE FROM ESM-S, FOR SERVICES RENDERED AS SHIP CREW, NOT BE B ROUGHT TO TAX IN INDIA. IT WAS EXPLAINED BY THE ASSESSEE THAT AS ASSESSEE W AS A NON-RESIDENT, THE SCOPE OF HIS INCOME LIABLE TO BE TAXED IN INDIA WAS RESTRICTED TO INCOME ACCRUING OR ARISING IN INDIA, INCOME DEEMED TO ACCR UE OR ARISE IN INDIA, OR INCOME RECEIVED OR IS DEEMED TO BE RECEIVED IN INDI A. SINCE THE SALARY INCOME IN RESPECT OF SHIP CREW IS ACCRUING AND ARIS ING OUTSIDE INDIA, IT IS OUTSIDE THE AMBIT OF LIMITED SCOPE OF SECTION 5(2). AS FOR SALARY INCOME BEING CREDITED TO BANK ACCOUNT IN INDIA, ASSESSEES CONTENTION WAS THAT SALARY INCOME DEPOSITED IN BANK ACCOUNT IN INDIA, D IRECTLY FROM BANK ACCOUNT OF THE COMPANY OUTSIDE INDIA WAS NOT TAXABL E IN INDIA. RELIANCE WAS PLACED ON JUDICIAL PRECEDENTS IN THE CASES OF DIT VS. PRAHLAD VIJENDRA RAO (51 DTR 95) , DIT VS. DIGLAN GEORGE SMITH [(2011) 40 (I) ITCL 419)] AND ITO VS LOHITHAKSHAN NAMBIAN (ITA NO. 1045/ BANG/ 09; ORDER DATED 12.04.2010). NONE OF THESE SUBMISSIONS, HOWEVER, IMPRESSED THE A.O. THE ASSESSING OFFICER WAS OF TH E VIEW THAT THE I.T.A. NO.: 319 AND 320/AGR/2013 ASSESSMENT YEAR: 2008-09 AND 2009-10 PAGE 3 OF 11 ASSESSEES EXPLANATION CANNOT BE ACCEPTED BECAUSE S ECTION 6(5) PROVIDES THAT WHERE A PERSONS STATUS IS RESIDENT FOR ONE OF THE SOURCES OF HIS INCOME, HIS STATUS FOR ALL THE SOURCES OF INCOME IS TO BE TAKEN AS RESIDENT, AND BECAUSE ASSESSEES STATUS FOR PENSION AND INTER EST, BY HIS OWN ADMISSION, IS THAT OF RESIDENT - AN INFERENCE BASED ON ASSESSEE HAVING SHOWN PENSION AND INTEREST INCOME AS HIS TAXABLE IN COME IN THE RETURN OF INCOME, THE STATUS OF THE ASSESSEE FOR ALL HIS SOUR CES OF INCOME IS REQUIRED TO BE TAKEN AS RESIDENT. THE ASSESSING OFFICER FURTHER OBSERVED THAT, OTHERWISE ALSO, THE ASSESSEE IS A RESIDENT IN INDIA FOR ONE OF THE SOURCES OF INCOME I.E. PENSION, BECAUSE HE WAS A GO VERNMENT EMPLOYEE AND IS GETTING PENSION . THE ASSESSING OFFICER WAS ALSO OF THE VIEW THAT SINCE APPOINTMENT LETTER WAS ISSUED BY FO REIGN EMPLOYERS AGENT IN INDIA, IT IS TO BE DEEMED THAT THE SALARY INCOME ACCRUED IN INDIA. A REFERENCE WAS MADE TO HONBLE SUPREME COURTS JUD GMENT IN THE CASE OF CIT VS. SHRI GOVARDHAN LTD. (69 ITR 675) FOR THE PROPOSITION THAT IF AN ASSESSEE ACQUIRES A RIGHT TO RECEIVE INCOME, THE IN COME IS SAID TO HAVE ACCRUED TO HIM EVEN THOUGH IT MAY BE RECEIVED LATER , ON ITS BEING ASCERTAINED. IT WAS ALSO NOTED THAT BY RECEIVING THE APPOINTMENT LETTER AND DETAILS OF SALARY TO BE PAID, THE ASSESS EE GETS RIGHT TO RECEIVE THE SALARY . THE AO FURTHER TOOK NOTE OF THE FACT THAT THE S ALARY CHEQUES WERE CREDITED TO ASSESSEES ACCOUNT WITH HS BC BANK. IT WAS IN THIS BACKDROP THAT THE SALARY OF RS.13,34,884 RECEI VED FROM ESM-S WAS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. AGGRIE VED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. LEARNED CIT(A) UPHELD THE STAND OF THE ASSESSING OFFICER AN D OBSERVED AS FOLLOWS:- I HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE LD. AR OF THE APPELLANT AND GONE THROUGH THE ASSESSMENT ORDER AND THE DECISIONS IN THE CASES RELIED UPON BY THE APPELLANT . THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS.13,34 ,884 AS SALARY ACCRUED AND RECEIVED IN INDIA. IN THIS CASE, THE A PPELLANT WAS AN EMPLOYEE OF M/S EXECUTIVE SHIP MANAGEMENT PTE LIMIT ED, SINGAPORE. THE EMPLOYER COMPANY HAD ISSUED THE APP OINTMENT LETTER TO THE APPELLANT IN INDIA. THEREFORE, THE S ALARY WAS ACCRUED IN INDIA. THE APPELLANT HAS MAINTAINED HIS BANK ACCOUNT I.T.A. NO.: 319 AND 320/AGR/2013 ASSESSMENT YEAR: 2008-09 AND 2009-10 PAGE 4 OF 11 WITH HSBC BANK IN INDIA, IN WHICH THE SALARY WAS DE POSITED BY THE EMPLOYER. THEREFORE THE SALARY WAS ALSO RECEIV ED IN INDIA. AS PER SECTION 15 OF THE INCOME TAX ACT ALSO, THE S ALARY IS TO BE TAD ON ACCRUAL BASIS. SINCE, THE APPOINTMENT LETTE R WAS ISSUED IN INDIA AND THEREFORE THE SALARY WAS ACCRUED IN INDIA . AS PER PROVISION OF THE SECTION 5(2) OF THE INCOME TAX ACT , 1961 THE INCOME WHICH IS ACCRUED OR RECEIVED IN INDIA IS TAX ABLE IN INDIA. ACCORDINGLY, I AM OF THE CONSIDERED OPINION THAT SI NCE THE SALARY WAS ACCRUED AND RECEIVED IN INDIA HENCE, THE ASSESS ING OFFICER HAS CORRECTLY ASSESSED THE SALARY INCOME IN THE HAN DS OF THE APPELLANT. THEREFORE, THE ADDITION OF RS.13,34,884 IS HEREBY CONFIRMED. 4. THE ASSESSEE IS NOT SATISFIED BY THE STAND SO TA KEN BY THE CIT(A) AND IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITIONS. 6. WE FIND THAT THE ASSESSING OFFICER HAS HIMSELF T AKEN NOTE OF THE NUMBER OF DAYS OF HIS STAY OUTSIDE INDIA, AS PER PA SSPORT ENTRIES, AND GIVEN A CATEGORICAL FINDING THAT THE ASSESSEES RES IDENTIAL STATUS, UNDER SECTION 6, IS OF NON - RESIDENT. YET, HE HAS PROCEEDED TO TREAT THE ASSES SEE AS RESIDENT FOR ALL PURPOSES ON THE BASIS OF REAS ONING THAT ONCE ASSESSEE HAS A RESIDENTIAL STATUS OF RESIDENT FOR THE PURP OSE OF BANK INTEREST AND PENSION INCOME, AND IN VIEW OF OPERATION OF SECTION 6(5), THE ASSESSEE IS REQUIRED TO BE TREATED AS RESIDENT FOR THE PURPOS ES OF ALL SOURCES OF HIS INCOME. HOWEVER, THE REASONING SO ADOPTED BY THE ASSESSING OFFICER IS BASED ON FUNDAMENTAL CONCEPTUAL MISCONCEPTIONS OF F ACTS AS ALSO OF LAW. 7. IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER WA S CLEARLY IN ERROR IN ASSUMING THAT THE ASSESSEE HAS ACCEPTED THE STATUS OF RESIDENT, SO FAR AS INTEREST AND PENSION INCOME IS CONCERNED, JUST BECA USE THE ASSESSEE HAS INCLUDED INTEREST AND PENSION INCOME IN HIS TAXABLE INCOME. THE PENSION INCOME RECEIVED BY THE ASSESSEE ACCRUED AND WAS REC EIVED IN INDIA I.T.A. NO.: 319 AND 320/AGR/2013 ASSESSMENT YEAR: 2008-09 AND 2009-10 PAGE 5 OF 11 INASMUCH AS THE PENSION WAS PAID BY HIS FORMER EMPL OYER IN INDIA, AND, THEREFORE, IRRESPECTIVE OF HIS RESIDENTIAL STATUS, THE INCOME WAS TAXABLE IN INDIA. SIMILARLY, SO FAR AS INTEREST ON SAVINGS BAN K ACCOUNT WAS CONCERNED, THE INTEREST ACCRUED IN INDIA WAS CREDIT ED, IN INCOME CHARACTER AS SUCH, IN INDIA, AND WAS, THEREFORE, TA XABLE IN INDIA. THIS TAXABILITY DOES NOT REQUIRE RECIPIENT OF INCOME TO HAVE RESIDENT S TATUS UNDER SECTION 6 AT ALL, AS EVEN A NON RESIDENT, BY THE VIRTUE OF SECTION 5(2), IS TAXABLE IN INDIA IN RESPECT OF (A) INCOME RECEIVED OR IS DEEMED TO BE RECEIVED IN INDIA, BY OR ON BEHALF OF SUCH PERSO N; AND (B) INCOME WHICH ACCRUES OR ARISES, OR IS DEEMED TO ACCRUE OR ARISE TO HIM, IN INDIA. THE ASSESSING OFFICER WAS THUS CLEARLY IN ERROR IN ASSU MING THAT THE ASSESSEE ACCEPTED HIS RESIDENTIAL STATUS AS RESIDENT FOR T HE PURPOSE OF PENSION INCOME AND INTEREST INCOME, OR THAT THE ASSESSEE HA D RESIDENT STATUS FOR THESE INCOMES. IN VIEW OF THIS FINDING, SECTION 6(5 ) CANNOT HAVE ANY APPLICATION IN THE MATTER, THOUGH, FOR THE REASONS WE WILL SET OUT NOW, SECTION 6(5) IS ANYWAY A REDUNDANT LEGAL PROVISION WHICH CAN NO LONGER HAVE ANY PRACTICAL IMPLICATIONS. SECTION 6(5) PROVIDES THAT, IF A PERSON IS RESIDENT IN INDIA IN A PREVIOUS YEAR RELEVANT TO AN ASSESSMENT YEAR IN RESPECT OF ANY SOURCE OF INCOME, HE SHALL BE DEE MED TO BE RESIDENT IN INDIA IN THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR IN RESPECT OF EACH OF HIS OTHER SOURCES OF INCOME . THIS SUB SECTION IS ONE OF THE FEW PROVISIONS WHICH HAVE REMAINED INTACT SI NCE THE INCOME TAX ACT,1961, IS ENACTED, BUT THEN IRONICALLY THIS SUB SECTION ITSELF IS REDUNDANT SINCE LONG TIME, BECAUSE EFFECTIVE ASSESS MENT YEAR 1989-90, PREVIOUS YEAR, FOR ALL SOURCES OF INCOME AND FOR AL L ASSESSEE, IS UNIFORM I.E. FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSES SMENT YEAR. UNTIL THAT TIME, IT WAS POSSIBLE FOR AN ASSESSEE TO HAVE DIFFE RENT PREVIOUS YEARS FOR DIFFERENT SOURCES OF INCOME, E.G. CALENDAR YEAR FOR BUSINESS INCOME AND FINANCIAL YEAR FOR INCOME FORM SALARIES, AND, THERE FORE, IT WAS POSSIBLE TO HAVE DIFFERENT RESIDENTIAL STATUS FOR DIFFERENT SOU RCES OF INCOME, BECAUSE THE NUMBER OF DAYS OF PRESENCE IN INDIA WAS TO BE S EEN VIS--VIS THE RELEVANT PREVIOUS YEARS AND THOSE PREVIOUS YEARS, I N SOME CASES, COULD I.T.A. NO.: 319 AND 320/AGR/2013 ASSESSMENT YEAR: 2008-09 AND 2009-10 PAGE 6 OF 11 COVER DIFFERENT PERIOD EVEN AS ASSESSMENT YEARS FOR ALL THOSE PREVIOUS YEARS REMAINED THE SAME. WITH THE UNIFORMITY OF PRE VIOUS YEARS, SUCH A SITUATION IS NO LONGER POSSIBLE, AND, THE LEGAL PRO VISION INCAPABLE OF ANY APPLICATION. IF THIS LEGAL PROVISION STILL EXISTS O N THE STATUTE, IT CAN ONLY BE EXPLAINED BY INERTIA OF THE LAW MAKERS IN WEEDING O UT REDUNDANT LEGAL PROVISIONS. 8. ONCE IT IS NOT IN DISPUTE THAT THE ASSESSEE QUAL IFIES TO BE TREATED AS A NON - RESIDENT UNDER SECTION 6 OF THE ACT, AS IS THE UND ISPUTED POSITION IN THIS CASE, THE SCOPE OF TAXABLE INCOME IN THE HA NDS OF THE ASSESSEE, UNDER SECTION 5(2), IS RESTRICTED TO (A) INCOME REC EIVED OR IS DEEMED TO BE RECEIVED IN INDIA, BY OR ON BEHALF OF SUCH PERSO N; AND (B) INCOME WHICH ACCRUES OR ARISES, OR IS DEEMED TO ACCRUE OR ARISE TO HIM, IN INDIA. THEREFORE, IT IS ONLY WHEN AT LEAST ONE OF THESE TWO CONDITIONS IS FULFILLED THAT THE INCOME OF A NON-RESIDENT CAN BE BROUGHT TO TAX IN INDIA. IN THE PRESENT CASE, THE SERVICES ARE RENDERED OUTSIDE IND IA AS CREW ON MERCHANT VESSELS AND TANKERS PLYING ON INTERNATIONA L ROUTES. A SALARY IS COMPENSATION FOR THE SERVICES RENDERED BY AN EMPLOY EE AND, THEREFORE, SITUS OF ITS ACCRUAL IS THE SITUS OF SERVICES, FOR WHICH SALARY PAID, BEING RENDERED. IN THE CASE OF CIT VS AVTAR SINGH WADHWAN (247 ITR 260), HONBLE BOMBAY HIGH COURT HAS HELD THAT INCOME FROM SALARY, IN THE CASE OF CREW OF EVEN AN INDIAN VESSEL OPERATING IN INTER NATIONAL WATERS, IS TO BE TREATED AS HAVING ACCRUED OUTSIDE INDIA. AS FOR THE ASSESSING OFFICERS RELIANCE ON HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF CIT VS. SHRI GOVARDHAN LTD (SUPRA) AND HIS OBSERVATION TO THE EFFECT THAT BY RECEIVING THE APPOINTMENT LETTER AND DETAILS OF SAL ARY TO BE PAID, THE ASSESSEE GETS RIGHT TO RECEIVE THE SALARY , THIS IS WHOLLY INCORRECT TO ASSUME THAT AN EMPLOYEE GETS RIGHT TO RECEIVE THE S ALARY JUST BY GETTING THE APPOINTMENT LETTER. AN EMPLOYEE HAS TO RENDER T HE SERVICES TO GET A RIGHT TO RECEIVE THE SALARY AND UNLESS THESE SERVIC ES ARE RENDERED, NO SUCH RIGHT ACCRUES TO THE EMPLOYEE. UNDOUBTEDLY, I F AN ASSESSEE ACQUIRES A RIGHT TO RECEIVE AN INCOME, THE INCOME IS SAID TO HAVE ACCRUED TO HIM I.T.A. NO.: 319 AND 320/AGR/2013 ASSESSMENT YEAR: 2008-09 AND 2009-10 PAGE 7 OF 11 EVEN THOUGH IT MAY BE RECEIVED LATER, ON ITS BEING ASCERTAINED , BUT THIS PROPOSITION WILL BE RELEVANT ONLY WHEN ASSESSEE GET S A RIGHT TO RECEIVE THE INCOME, AND, IN THE PRESENT CASE, ASSESSEE GETS HIS RIGHT TO RECEIVE SALARY INCOME WHEN HE RENDERS THE SERVICES AND NOT WHEN HE SIMPLY RECEIVES THE APPOINTMENT LETTER. THE STAND OF THE ASSESSING OFFICER, WHICH HAS BEEN RATHER MECHANICALLY APPROVED BY THE LEARNED COMMISSIONER (APPEALS) AS WELL, IS DEVOID OF LEGALL Y SUSTAINABLE MERITS. 9. THE NEXT OBJECTION OF THE ASSESSING OFFICER, WHI CH HAS MET LEARNED CIT(A)S APPROVAL, IS THAT THE MONEY WAS RECEIVED IN INDIA, SINCE, BE YOND ANY DISPUTE OR CONTROVERSY, THE SALARY CHEQUES WERE CREDITED TO THE ASSESSEES ACCOUNT WITH HSBC, MUMBAI. SO FAR AS THIS ASPECT OF THE MATTER IS CONCERNED, IN OUR CONSIDERED VIEW, T HE LAW IS TRITE THAT RECEIPT OF INCOME, FOR THIS PURPOSE, REFERS TO THE FIRST OCCAS ION WHEN ASSESSEE GETS THE MONEY IN HIS OWN CONTROL REAL OR CONSTRUCTIVE. WHAT IS MATERIAL IS THE RECEIPT OF INCOME IN ITS CHARACTER AS INCOME, A ND NOT WHAT HAPPENS SUBSEQUENTLY ONCE THE INCOME, IN ITS CHARACTER AS S UCH IS RECEIVED BY THE ASSESSEE OR HIS AGENT; AN INCOME CANNOT BE RECEIVED TWICE OR ON MULTIPLE OCCASIONS. AS THE BANK STATEMENT OF THE ASSESSEE C LEARLY REVEALS THESE ARE US DOLLAR DENOMINATED RECEIPTS FROM THE FOREIGN EMP LOYER AND CREDITED TO NON RESIDENT EXTERNAL ACCOUNT MAINTAINED BY THE ASSESSEE WITH HSBC MUMBAI. THE ASSESSEE WAS IN LAWFUL RIGHT TO RECEIVE THESE MONIES, AS AN EMPLOYEE, AT THE PLACE OF EMPLOYMENT, I.E. AT THE L OCATION OF ITS FOREIGN EMPLOYER, AND IT IS A MATTER OF CONVENIENCE THAT TH E MONIES WERE THEREAFTER TRANSFERRED TO INDIA. THESE MONIES WERE AT THE DISPOSAL OF THE ASSESSEE OUTSIDE INDIA, AND, IT WAS IN EXERCISE OF HIS RIGHTS TO SO DISPOSE OF THE MONEY, THAT MONIES WERE TRANSFERRED TO INDIA . WE MAY, IN THIS REGARD, REFER TO HONBLE MADRAS HIGH COURTS JUDGME NT IN THE CASE OF CIT VS AP KALYANKRISHNAN (195 ITR 534) WHEREIN THEIR LORDSHIPS WERE IN SEISIN OF A SITUATION IN WHICH THE ASSESSEE HAD RECEIVED P ENSION FROM MALAYSIAN GOVERNMENT WHICH WAS REMITTED BY THE ACCO UNTANT GENERAL, FEDERATION OF MALAYA, KUALA LUMPUR TO ACCOUNTANT GE NERAL, MADRAS, FOR I.T.A. NO.: 319 AND 320/AGR/2013 ASSESSMENT YEAR: 2008-09 AND 2009-10 PAGE 8 OF 11 ONWARD PAYMENT TO THE ASSESSEE. ON THESE FACTS, RE JECTING THE CONTENTION OF THE REVENUE THAT THE PENSION AMOUNTS ARE REQUIRE D TO BE TREATED AS HAVING BEEN RECEIVED IN INDIA, THEIR LORSHIPS OBSER VED, INTER ALIA, THAT THAT THE PENSION PAYABLE TO THE ASSESSEE HAD ACCRUE D I N MALAYA.. AND ONLY THEREAFTER, BY AN ARRANGEMENT EMBODIED IN THE LETTER FOUND IN ANNEXURE D TO THE STATED CASE, THE PENSION HAD B EEN REMITTED TO THE ASSESSEE IN INDIA AND MADE AVAILABLE TO HIM. TH E ASSESSEE HAD, THEREFORE, TO BE REGARDED AS HAVING RECEIVED THE IN COME OUTSIDE INDIA AND THE PENSION HAD BEEN REMITTED OR TRANSMIT TED TO THE PLACE WHERE THE ASSESSEE WAS LIVING, AS A MATTER OF CONVE NIENCE AND THAT WOULD NOT, IN OUR VIEW, CONSTITUTE RECEIPT OF PENSI ON IN INDIA BY THE ASSESSEE, FALLING WITHIN S. 5(1)(A) OF THE ACT . THIS WOULD SHOW THAT ONCE AN INCOME IS RECEIVED OUTSIDE INDIA, WHETHER I N REALITY OR ON CONSTRUCTIVE BASIS, THE MERE FACT THAT IT HAS BEEN REMITTED TO INDIA WOULD NOT BE DECISIVE ON THE QUESTION AS TO INCOME IS TO BE TREATED AS HAVING BEEN RECEIVED IN INDIA. THE CONNOTATION OF AN INCOM E HAVING BEEN RECEIVED AND AN AMOUNT HAVING BEING RECEIVED ARE QU ALITATIVELY DIFFERENT. THE SALARY AMOUNT IS RECEIVED IN INDIA IN THIS CASE BUT THE SALARY INCOME IS RECEIVED OUTSIDE INDIA. IT IS ELEMENTARY THAT AN INCOME CANNOT BE TAXED MORE THAN ONCE BUT IF, AT EACH POINT OF RECEIPT, TH E INCOME IS TO BE TAXED, IT MAY HAVE TO BE TAXED ON MULTIPLE OCCASIONS. IN THIS VIEW OF THE MATTER, IN A SITUATION IN WHICH THE SALARY HAS ACCRUED OUTS IDE INDIA, AND, THEREAFTER, BY AN ARRANGEMENT, SALARY IS REMITTED T O INDIA AND MADE AVAILABLE TO THE EMPLOYEE, IT WILL NOT CONSTITUTE R ECEIPT OF SALARY IN INDIA BY THE ASSESSEE SO AS TO TRIGGER TAXABILITY UNDER S ECTION 5(2)(A) OF THE ACT. 10. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARI NG IN MIND ENTIRETY OF THE CASE, WE DEEM IT FIT AND PROPER TO DELETE THE I MPUGNED ADDITION OF RS 13,34,884. THE ASSESSEE GETS THE RELIEF ACCORDINGLY . I.T.A. NO.: 319 AND 320/AGR/2013 ASSESSMENT YEAR: 2008-09 AND 2009-10 PAGE 9 OF 11 11. GROUND NO. 1 IS THUS ALLOWED. 12. IN GROUND NO. 2, THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE: THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW AND IN ANY VIEW OF THE MATTER, THE AUTHORITIES BELOW HA VE ERRED IN MAKING AND UPHOLDING THE ADDITION OF RS 40,589 ON A CCOUNT OF BANK INTEREST EARNED AND CREDITED IN NRE ACCOUNT WI TH HSBC BANK, MUMBAI. 13. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CON CERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT TOT AL AMOUNT OF RS 40,589 HAS BEEN CREDITED TO THE ASSESSEES BANK ACCOUNT WI TH HSBC BUT THE ASSESSEE HAS NOT INCLUDED THE SAME IN HIS TAXABLE I NCOME. ON THIS BASIS, THE ASSESSING OFFICER ADDED THE SAID AMOUNT TO THE INCOME RETURNED BY THE ASSESSEE. AGGRIEVED BY THE ADDITION SO MADE, AS SESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS.EVEN THOUGH IT WAS POINTED OUT TO THE LEARNED CIT(A) THAT THE A CCOUNT, IN WHICH THE INTEREST OF RS 40,589 WAS CREDITED, WAS AN NRE (NON -RESIDENT- EXTERNAL) ACCOUNT, AND SUCH, INTEREST EARNED THEREON WAS EXEM PT UNDER SECTION 10(4)(II) OF THE ACT, LEARNED CIT(A) HELD THAT SINC E THE SAID ACCOUNT WAS NOT AN NRE ACCOUNT, AND, ACCORDINGLY, EXEMPTION UND ER SECTION 10(4)(II) WAS NOT AVAILABLE. THE ASSESSEE IS NOT SATISFIED WI TH THE STAND SO TAKEN BY THE LEARNED CIT(A) AND IS IN APPEAL BEFORE US. 14. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITION. 15. ON A PERUSAL OF BANK STATEMENTS, WE FIND THAT T HE HSBC HAS CATEGORICALLY INDICATED THAT THE ACCOUNT IN QUESTIO N IS AN NRE ACCOUNT. WHEN THIS WAS POINTED OUT TO THE LEARNED DEPARTMENT AL REPRESENTATIVE, HE DID NOT HAVE MUCH TO SAY EXCEPT FOR PLACING HIS RATHER DUTIFUL RELIANCE I.T.A. NO.: 319 AND 320/AGR/2013 ASSESSMENT YEAR: 2008-09 AND 2009-10 PAGE 10 OF 11 ON THE ORDERS OF THE AUTHORITIES BELOW. IN THIS VI EW OF THE MATTER, AND IN VIEW OF SPECIFIC MANDATE OF SECTION 10(4)(II) WHICH EXEMPTS INTEREST ON NRE ACCOUNTS FROM INCOME TAX, WE UPHOLD THE GRIEVAN CE OF THE ASSESSEE AND DELETE THE IMPUGNED ADDITION OF RS 40,589. 16. GROUND NO. 2 IS ALSO THUS ALLOWED. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10 IS ALLOWED. ITA NO. 319/AGRA/2013 ASSESSMENT YEAR 2008-09 18. THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS DIRECTED AGAINST THE ORDER DATED 2 ND AUGUST, 2013 PASSED BY THE CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT 1961, FOR THE ASSESSMENT YEAR 2008-09, ON THE FOLLOWING GROUNDS: 1. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW AND IN ANY VIEW OF THE MATTER, THE AUTHORITIES BELO W HAVE ERRED IN MAKING AND UPHOLDING THE ADDITION OF RS.10,40,41 1 ON ACCOUNT OF SALARY CONSIDERING IT AS ACCRUED AND REC EIVED IN INDIA, WHICH WAS REMITTED BY THE EMPLOYER COMPANY B Y TRANSFERRING THE AMOUNT FROM BANK ACCOUNT IN SINGAP ORE TO THE NRE BANK ACCOUNT OF THE ASSESSEE WITH HSBC BANK AT MUMBAI. 2. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW AND IN ANY VIEW OF THE MATTER, THE AUTHORITIES BELO W HAVE ERRED IN MAKING AND UPHOLDING THE ADDITION OF RS 19,738 O N ACCOUNT OF BANK INTEREST EARNED AND CREDITED IN NRE ACCOUNT WITH HSBC BANK, MUMBAI. 19. LEARNED REPRESENTATIVES FAIRLY AGREE THAT WHATE VER WE DECIDE FOR THE ASSESSMENT YEAR 2009-10 WILL ALSO APPLY MUTATIS MUTANDIS FOR THIS ASSESSMENT YEAR AS WELL. ALL THE RELEVANT FACTS AND CIRCUMSTANCES OF THE I.T.A. NO.: 319 AND 320/AGR/2013 ASSESSMENT YEAR: 2008-09 AND 2009-10 PAGE 11 OF 11 CASE, BARRING THE AMOUNTS OF ADDITIONS, ARE THE SAM E AS IN THE ASSESSMENT YEAR 2009-10. AS WE HAVE DELETED THE SIMILAR ADDIT IONS FOR THE ASSESSMENT YEAR 2009-10, AS DISCUSSED IN THE FOREGO ING PARAGRAPHS, WE DELETE THESE ADDITIONS AS WELL. THE ASSESSEE GETS T HE RELIEF ACCORDINGLY. 20. IN THE RESULT, THIS APPEAL FOR THE ASSESSMENT Y EAR 2008-09 IS ALSO ALLOWED. 21. TO SUM UP, BOTH THE APPEALS FILED BY THE ASSESS EE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 14 TH DAY OF FEBRUARY, 2014. SD/XX SD/XX BHAVNESH SAINI PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AGRA, THE 14 TH DAY OF FEBRUARY, 2014 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA