Balamurhu Kadiresan, Coimbatore V. ITO, CHENNAI

ITA 353/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9442 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 25-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 16-02-2016
• Court: TRIBUNAL
• Department Lawyers: MURALI MOHAN
• Assessee Lawyers: SHAILESH KUMAR
• Keywords: Services rendered outside India; Additional evidence; Reasonable cause
• Section: 5(2)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , ! ' , # $% BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ ITA NO. 353/MDS/2016 / ASSESSMENT YEAR : 2011-12 SRI BALAMURHU KADIRESAN, 40, SUBA DHARSAN, III STREET, INDRA GARDENS, UPPLIPALAYAM POST, COIMBATORE 641015. PAN AIAPB3420H ( /APPELLANT) VS THE INCOME-TAX OFFICER, INTERNATIONAL TAXATION-1(1), CHENNAI. ( /RESPONDENT) / APPELLANT BY : SHRI SHAILESH KUMAR, ADVOCATE / RESPONDENT BY : SHRI MURALI MOHAN, JCIT / DATE OF HEARING : 25.04.2016 ! / DATE OF PRONOUNCEMENT: 29.04.2016 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 4. 11.2015. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : - - ITA 353/16 2 1. THAT THE ASSESSING OFFICER (AO)/CIT (A) HAVE GROSSLY ERRED IN FACTS AND LAW IN TAXING ENTIRE SAL ARY INCOME OF NON-RESIDENT ASSESSEE IN INDIA, INCLUDING FOREIGN ALLOWANCES RECEIVED OUTSIDE INDIA. 2. THAT THE AO/CIT(A) HAVE GROSSLY ERRED IN FACTS A ND LAW IN DISALLOWING THE EXEMPTION CLAIMED UNDER SECTION 5(2) OF THE ACT AMOUNTING TO ` 32,25,165 BY INCORRECTLY STATING THAT FOREIGN ALLOWANCES WERE RECEIVED IN INDIA. 3. THAT THE ORDER OF THE AO/CIT(A) IS PERVERSE, SIN CE THE ISSUE OF TAXABILITY OF FOREIGN ALLOWANCES IS DE CIDED ON AN INCORRECT ASSUMPTION THAT SUCH ALLOWANCES ARE RECEIVED IN INDIA, IGNORING THE DETAILS/EVIDENCES SUBMITTED BY THE ASSESSEE TO SUBSTANTIATE THAT SUCH FOREIGN ALLOWANCES ARE ACTUALLY RECEIVED OUTSIDE IN DIA. 4. THAT THE ORDER OF THE CIT(A) IS BASED ON CONJECTURES, SURMISES, INCORRECT APPLICATION OF LAW AND ERRONEOUS ASSUMPTIONS AND IS HENCE LIABLE TO BE QUASHED. 3. THERE IS A DELAY OF ONE DAY IN FILING THIS APPEA L BEFORE THE TRIBUNAL. ACTUALLY, THERE IS NO DELAY, IF WE EXCLU DE THE DATE OF FILING OF APPEAL. ACCORDINGLY, THE DELAY IS CONDON ED AND THE APPEAL IS ADMITTED FOR ADJUDICATION. 4. THE ASSESSEE HAS FILED ADDITIONAL EVIDENCE AS FO LLOWS : 1. AXIS BANK ACCOUNT STATEMENT BEARING NO.009040101 361652 FOR PERIOD FROM 1.4.2010 TO 31.3.2011 2. CONFIRMATION OF REMITTANCE ACCOUNTS AXIS BANK TRAVEL CURRENCY CARDS DATED 14.1.2014 ISSUED BY THE AXIS B ANK LTD., AXIS HOUSE C-2, WADIA INTERNATIONAL CENTRE, PANDURA NG BUDHKAR MARG, WORLI, MUMBAI. - - ITA 353/16 3 ACCORDING TO THE ASSESSEE, FOREIGN ALLOWANCES AMOUN TING TO ` 32,25,165/- WERE RECEIVED BY THE ASSESSEE OUTSIDE I NDIA AND DULY SUBMITTED COPY OF HIS INDIAN CITIBANK ACCOUNT BEFORE THE LOWER AUTHORITIES TO SUBSTANTIATE THAT FOREIGN ALLO WANCES WERE NOT RECEIVED IN HIS INDIAN BANK ACCOUNT, INTER-ALIA ALO NG WITH OTHER FACTUAL DETAILS AND DOCUMENTS IN SUPPORT OF HIS CLA IM. HOWEVER, THE COMMISSIONER OF INCOME-TAX(APPEALS) ALLEGED THA T SUCH FOREIGN ALLOWANCES WERE RECEIVED IN INDIA. HENCE, THE ABOVE DOCUMENTS ARE FILED TO CLARIFY THE CORRECT FACTS. 5. WE HAVE GONE THROUGH THE PETITION. WE FIND THAT THERE EXISTS REASONABLE CAUSE FOR NOT FURNISHING TH ESE DOCUMENTS BEFORE THE LOWER AUTHORITIES. ACCORDINGL Y, THESE ADDITIONAL EVIDENCE IS ADMITTED FOR ADJUDICATION. 6. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFF ICER, ON PERUSAL OF THE STATEMENT OF TOTAL INCOME NOTICED THAT THE ASSESSEE HAS CLAIMED EXEMPTION U/S.5(2) OF THE ACT IN RESPECT OF A SUM OF ` 32,25,164/- OUT OF TOTAL SALARY OF ` 38,14,991/- RECEIVED FROM IBM INDIA PVT. LTD. DURIN G THE FINANCIAL YEAR 2010-11. IT WAS SEEN THAT THE ASSES SEES EMPLOYER, IBM INDIA PVT. LTD. HAS DEDUCTED TDS OF - - ITA 353/16 4 ` 10,14,355/- ON THE ENTIRE SALARY OF ` 38,14,991/-, BUT THE ASSESSEE CLAIMED REFUND OF ` 9,86,466/-. IT WAS SUBMITTED BEFORE THE LOWER AUTHORITIES THAT THE ASSESSEE, AN IBM EMPLOYEE WAS SENT ON INTERNATIONAL ASSIGNMENT BY IB M AND TDS OF ` 10,14,355/- HAS BEEN DEDUCTED ON HIS ENTIRE SALARY OF INCOME. THE ASSESSEE HAS STATED THAT AS HE IS A NON- RESIDENT, THE INCOME RECEIVED OR DEEMED TO BE RECEI VED IN INDIA OR ACCRUED OR DEEMED TO BE ACCRUED IN INDIA I S ONLY TAXABLE. ACCORDING TO THE ASSESSEE, THE INCOME REC EIVED FROM IBM INDIA PVT. LTD. IS FOR SERVICES RENDERED O UTSIDE INDIA AND IT IS NOT TAXABLE IN INDIA. THE AO REJEC TED THE CLAIM OF THE ASSESSEE BY OBSERVING AS FOLLOWS : I) AS PER COPY OF ASSIGNMENT LETTER SUBMITTED BY T HE ASSESSEE IT IS SEEN THAT AT PAGE 4 (PARA 3), IT IS CLEARLY STATED THAT ASSESSEE WILL REMAIN AN EMPLOYEE OF IBM INDIA LTD. AND THE LAWS OF THAT COUNTRY WILL BE APPLICABLE. II) AT PAGE 8 OF THE ASSIGNMENT LETTER IT IS STATED THAT ASSESSEES SALARY WILL CONTINUE TO BE ADMINISTRATED UNDER HOME LOCATION SALARY PLAN AS PER WHICH SALARY WOULD BE PAID IN HOME LOCATION COUNTRY TO ASSESSEE S HOME LOCATION BANK. III) IBM INDIA LTD. HAS DEDUCTED TDS ON THE ENTIRE SALARY AMOUNT PAID TO THE ASSESSEE DURING THE FINANCIAL YEAR 2010-11 AND ISSUED FORM 16 TO THE ASSESSEE. - - ITA 353/16 5 IV) THOUGH SALARY IS RECEIVED BY THE ASSESSEE FOR SERVICES RENDERED OUTSIDE INDIA, THE SERVICES ARE UTILISED BY THE INDIAN COMPANY FOR GENERATION OF IN COME IN INDIA. V) SALARY OF THE ASSESSEE IS CREDITED TO BANK ACCO UNT OF THE ASSESSEE IN INR IN INDIA. HENCE THE INCOME IS DEEMED TO BE RECEIVED IN INDIA WHICH IS TAXABLE AS PER SECTION 5(2) OF THE ACT. AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE TH E CIT(APPEALS), WHO CONFIRMED THE ORDER OF THE AO. A GAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LD. AR, SUBMITTED THAT THE ASSESSEE WAS SENT ON A FOREIGN ASSIGNMENT AND RECEIVED SALARY AS WELL AS ALLOWANCES. THE SALARY WAS TO BE TAXED IN INDIA. HOWEVER, THE ALLOWANCES CANNOT BE TAXED IN INDIA, AS IT IS R ECEIVED OUTSIDE INDIA AND THE EMPLOYER DEDUCTED TDS WRONGLY . THE SAME WAS CORRECTED BY THE ASSESSEE WHILE FILING THE RETURN OF INCOME AND THE FOREIGN ALLOWANCES RECEIVE D BY THE ASSESSEE CANNOT BE TAXED IN INDIA. AS THE ASSESSEE IS A NON-RESIDENT IN INDIA IN THE RELEVANT ASSESSMENT YE AR, THE PROVISIONS OF SEC.6(1) ARE ATTRACTED. THEREFORE, T HE LD. AR, SUBMITTED THAT THE FOREIGN ALLOWANCES RECEIVED BY T HE ASSESSEE OUTSIDE INDIA FOR THE SERVICES RENDERED AR E NOT - - ITA 353/16 6 TAXABLE IN INDIA, IN VIEW OF SEC.5(2) OF THE ACT. HE RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF ADIT V. SH RI KARTIK VYAS, UDAIPUR IN ITA NO.375/JP/2012 DATED 31.12.201 4, WHEREIN IT WAS OBSERVED AS FOLLOWS : 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE APPELLANT WAS NON-RESIDENT DURING THE YEAR UNDER CONSIDERATION AND ALLOWANCES WERE RECEIVED BY HIM IN NETHERLANDS. THE EMPLOYER WRONGLY DEDUCTED TDS, THE APPELLANT HAD CLAIMED REFUND ON IT. THE INDIAN INCOME HAS BEEN CONSIDERED BY THE APPELLANT AS TAXABLE BUT THE ALLOWANCES PAID OUTSIDE THE INDIA ARE NOT TAXABLE U/S.5(2) OF THE ACT IN THE CASE OF NON-RESIDENT. THE CASE LAW RELIED UPON BY THE LEARNED CIT(A) ARE SQUARELY APPLICABLE IN THE CASE OF THE ASSESSEE, THEREFORE, WE CONFIRM THE ORDER OF HE LEARNED CIT(A). 8. ON THE OTHER HAND, THE LD. DR, SUBMITTED THAT TH E QUESTION, WHETHER THE INCOME ON ACCOUNT OF ALLOWANC ES ACCRUED OR AROSE IN INDIA IS A QUESTION OF FACT, WH ICH HAS TO BE DECIDED ON THE BASIS OF ASSIGNMENT LETTER ISSUED BY IBM INDIA PVT. LTD. FOR THE ASSESSEES ASSIGNMENT AT NETHERLANDS, WHICH IS PLACED ON RECORD AT PAGES 46 TO 58 OF THE PAPER BOOK. ACCORDING TO THE LD. DR, THE ASSES SEE REMAINED AS AN EMPLOYEE OF IBM INDIA PVT. LTD. AND THE SALARY STILL CONTINUED TO BE ADMINISTRATED UNDER HO ME - - ITA 353/16 7 LOCATED SALARY PLAN AS PER WHICH THE SALARY WOULD B E PAID IN HOME LOCATION COUNTRY TO ASSESSEES HOME LOCATION B ANK, THAT IS THE REASON IBM INDIA PVT. LTD. HAD DEDUCTED TDS ON ENTIRE SALARY PAID BY THE ASSESSEE FOR THE FINANCIA L YEAR 2010-11 AND ISSUED FORM 16 TO THE ASSESSEE COVERING THE ENTIRE PAYMENT RECEIVED BY THE ASSESSEE FOR THE SER VICES RENDERED OUTSIDE INDIA AND THE SERVICES ARE UTILISE D IN INDIAN COMPANY FOR GENERATION OF INCOME IN INDIA. ACCORDING TO THE LD. DR, THE ABOVE FACTS CLEARLY ES TABLISH THAT THE SALARY AS WELL AS THE ALLOWANCES ARE TAXAB LE U/S.5(2) OF THE ACT. HE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS REMAINED AS AN EMPLOYEE OF IBM INDIA P VT. LTD. THE SALARY WAS ADMINISTRATED UNDER HOME LOCATE D SALARY PLAN AS PER WHICH THE SALARY WOULD BE PAID I N HOME LOCATION COUNTRY TO ASSESSEES HOME LOCATION BANK A ND THE IBM INDIA PVT. LTD. HAD DEDUCTED TDS ON ENTIRE SALA RY PAID TO THE ASSESSEE. MORE SPECIFICALLY, THE ALLOWANCES HAD - - ITA 353/16 8 BEEN DEPOSITED IN AXIS BANK ACCOUNT NO. 009040101361652, WHERE THE BANK IS LOCATED IN NO.9, MG ROAD, BANGALORE-560001. CONTRARY TO THIS, THE ASSE SSEES COUNSEL TOOK A PLEA THAT THE PAYMENT OF FOREIGN ALL OWANCES WAS RECEIVED BY THE ASSESSEE THROUGH NOSTRO ACCOUNT OF AXIS BANK BY IBM INDIA PVT. LTD. SUBSEQUENTLY, FUN DS ARE REMITTED FROM NOSTRO ACCOUNT TO IBM BRANCH AS PER T HE INSTRUCTION OF IBM INDIA PVT. LTD. AS SUCH, IT IS TO BE ACCRUED/RECEIVED OUTSIDE INDIA. ON FACTUAL EXAMINA TION OF THE RECORD, AS WE OBSERVED EARLIER, THE AMOUNTS HAV E BEEN CREDITED TO THE ASSESSEES ACCOUNT IN INDIA I.E. AX IS BANK ACCOUNT NO.009040101361652 FOR THE PERIOD FROM 1.4. 2010 TO 31.3.2011. HOWEVER, IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS REMAINED AS AN EMPLOYEE OF IBM INDIA P VT. LTD. AND THE LAW OF LAND WOULD REMAIN APPLICABLE TO THE ASSESSEE AND FURTHER, SALARY WAS CONTINUED TO BE PA ID UNDER HOME LOCATION SALARY PLAN. AS THE SALARY WAS PAID TO ASSESSEES HOME LOCATION BANK, TDS WAS RIGHTLY DEDU CTED BY IBM INDIA PVT. LTD. ACCORDINGLY, FORM 16 WAS IS SUED TO THE ASSESSEE. - - ITA 353/16 9 9.1 IT IS ALSO AN ADMITTED FACT THAT THE SALARY REC EIVED BY THE ASSESSEE FOR THE SERVICES RENDERED OUTSIDE INDI A AND THE SERVICES ARE UTILISED IN INDIAN COMPANY FOR GEN ERATION OF INCOME IN INDIA. IT IS ALSO AN ADMITTED FACT THA T THE SALARY WAS CREDITED IN BANK ACCOUNT AS INR. CONTRARY TO T HIS, THE ASSESSEE PLACED RELIANCE ON THE ORDER OF THE TRIBUN AL IN THE CASE CITED SUPRA. THERE IS QUALITATIVE DIFFERENCE BETWEEN THE FACTS OF THE PRESENT CASE AND THE CASE RELIED O N BY THE LD. AR. IN THAT CASE, THE NON-RESIDENT RECEIVED SA LARY AND ALLOWANCES IN NETHERLANDS AND ALSO THE ASSESSEE HAD PAID TAXES ON SALARY AND ALLOWANCES RECEIVED IN NETHERLA NDS IN THE CONCERNED PERIOD AND HENCE, IT IS NOT TAXABLE I N INDIA. FURTHER, WHEN THE SALARY RECEIVED BY THE ASSESSEE I S TAXABLE IN INDIA, ON THE SAME PROPOSITION, THE ALLO WANCES RECEIVED BY THE ASSESSEE WAS INEXTRICABLY LINKED TO THE SALARY. IN VIEW OF THE FUNCTIONS OF THE ASSESSEE I N ABROAD, THE ALLOWANCES RECEIVED BY HIM CANNOT BE GIVEN SEPA RATE TREATMENT THAN SALARY, WHEN THE ASSESSEE WAS CONTIN UED TO WORK UNDER THE CONTROL AND SUPERVISION OF IBM INDIA PVT. LTD. HENCE, WE ARE OF THE OPINION THAT THE LOWER A UTHORITIES - - ITA 353/16 10 HAVE TAKEN A CORRECT VIEW OF THE FACTS SO AS TO HOL D THAT SEC.5(2) OF THE ACT IS APPLICABLE IN THIS CASE. AC CORDINGLY, WE ARE INCLINED TO CONFIRM THE ORDERS OF THE LOWER AUTHORITIES. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 29 TH OF APRIL, 2016 AT CHENNAI. SD/- SD/- ( ' . . ' . #$ ) ( % & ' ( ) ) N.R.S.GANESAN * )+,-./0-1223-04* 5 67 /JUDICIAL MEMBER 6789::2;.<-.<=>?@>0 %5 /CHENNAI, A6 /DATED, THE 29 TH APRIL, 2016. MPO* 6$ BCDC /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. E)* /CIT(A) 4. E /CIT 5. CF# G /DR 6. #HI /GF.