SHRI CHANDRASHEKHAR MUNDIRKA SINGH, Nagpur V. I.T.O. WARD -5(2), Nagpur

ITA 605/NAG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7691 (ITAT-NAGPUR)
• Duration Of Justice: 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 14-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Double taxation relief; Opportunity of being heard; Earning of tax free income; Advance ruling

Judgement Text

1 ITA NOS. 605 & 606/NAG/2016. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO S . 605 & 606 /NAG/2016 ASSESSMENT YEAR S : 20 08 - 09 & 2009 - 10. SHRI CHANDRASHEKHAR MUDRIKA SINGH, THE INCOME - TAX OFFICER, NAGPUR. VS. WARD - 5(2), NAGPUR. PAN ADIPS6014P. APPELLANT. RESPONDENT. APPELLANT BY : SHRI K.M. GUPTA. RESPONDENT BY : SHRI A.R. NINAWE. DATE OF HEARING : 05 - 01 - 2016 DATE OF PRONOUNCEMENT : 6 TH JANUARY, 2017. O R D E R. T HESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST RESPECTIVE ORDER S OF L EARNED CIT (APPEALS) - 4, NAGPUR PERTAINING TO CONCERN ASSESSMENT YEARS . 2. SINCE THE ISSUES ARE COMMON AND CONNECTED AND THE APPEALS WERE HEARD TOGETHER , THESE ARE BEING DISPOSED OF BY THIS COMMON ORDER. THE COMMON GROUNDS OF APPEAL READ AS UNDER : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW APPLICABLE THERETO, THE COMMISSIONER OF INCOME TAX (APPEALS) - 4 AND ASSESSING OFFICER HAS COMMITTED MISTAKE IN TREATING THE SALARY EARNED FOR SERVICES RENDERED IN INDONESIA AS INCOME TAXABLE IN INDIA, WHEN THE APPELLANT WORKED AT INDONESIA (OUT OF INDIA) FOR MORE THAN 182 DAYS IN A GIVEN FINANCIAL YEAR AND THAT THE SAME IS ACCEPTED BY BOTH THE AUTHORITIES. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW APPLICABLE THERETO, 2 ITA NOS. 605 & 606/NAG/2016. THE COMMISSIONER OF INCOME TAX (APPEALS) - 4 HAS COMMITTED MISTAKE IN ACCEPTING THE SUBMISSION MADE BY THE COUNSEL OF ASSESSEE AS ADMISSION MADE BY THE ASSESSEE HIMSELF. 3. IN THE FACTS AND CIR CUMSTANCES OF THE CASE AND LAW APPLICABLE THERETO, THE COMMISSIONER OF INCOME TAX (APPEALS) - 4 HAS COMMITTED MISTAKE IN ACCEPTING THE SUBMISSION MADE BY THE COUNSEL IN THE COURSE OF ASSESSMENT PROCEEDINGS, WHEN : - A. A CONCESSION/SUBMISSION IS MADE ON A POINT OF LAW WHICH IS CONTRARY TO THE PROVISION OF LAW. B. THE ASSESSING OFFICER HAS PASSED THE ORDER ON MERITS AND NOT ON THE BASIS OF THE CONCESSION/SUBMISSION MADE BY THE ASSESSEES COUNSEL. S INCE FACTS ARE IDENTICAL I AM REFERRING TO FIGURES AND FACTS FROM IT A 605 /NAG/2016. . 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER : THE ASSESSEE WAS PAID THE SALARY OF RS.8,57,941/ - IN INDIA AND THE EMPLOYER M/S SMS INFRASTRUCTURE LTD., NAGPUR DEDUCTED TDS OF RS.1,79,092 FROM THE SALARY. IN THE COMPUTATION OF TOTAL INCOME (PART B OF THE ITR - 2) THE ASSESSEE SHOWN SALARY RECEIVED FROM M/S SMS INFRASTRUCTURES LTD. AT RS.2,59,453/ - AFTER REDUCING EXEMPT INCOME THEREFROM. THE SAID AMOUNT OF RS.5,98, 488/ - WAS SHOWN AS EXEMPT INCOME AS SALARY EARNED IN INDONESIA IN SCHEDULE E1 OF ITR2 CLAIMING THE STATUS OF NRI AND CLAIMING THAT THE SALARY WAS RECEIVED FOR WORKING IN INDONESIA . IN SUPPORT OF SUCH A CLAIM THE ASSESSEE ENCLOSED A COPY OF PASSPORT AND CAL CULATION SHEET SHOWING STAY OUTSIDE OF COUNTRY DURING PERIOD FROM 16 - 7 - 2007 TO 13 - 8 - 2007 (27 DAYS). 04 - 9 - 2007 TO 05 - 10 - 2007 (31 DAYS). 01 - 11 - 2007 TO 24 - 01 - 2008 (83 DAYS) AND 06 - 02 - 2008 TO 20 - 3 - 2008 (44 DAYS) STATING TOTAL STAY OUTSIDE OF INDIA FOR 185 DAY S DURING THE F.YR. 2007 - 08. 4. I N RESPONSE TO ASSESSEE'S REPLY TO A NOTICE ISSUED IN THIS REGARD THE A SSESSING OFFICER RECORDED THE ASSESSEE S SUBMISSIONS AS UNDER : 3 ITA NOS. 605 & 606/NAG/2016. THE CLAIM OF TAX FREE INCOME OF SHRI C.M. SINGH, DUE TO HIS NRI STATUS IS WITHDRAWN. THOUGH THERE IS NRI STATUS FOR HIM BUT IT IS NOT POSSIBLE TO PRODUCE ANY DOCUMENTS FILED WITH TAX AUTHORITIES OF INDONESIA THE BIFURCATION OF SALARIES RECEIVED IN INDIA AND INDONESIA WAS DONE AS PER HIS APPOINTMENT LETTER , ENTRIES IN HIS PA SSPORT OF STAY OUT OF INDIA AND MONTHLY SALARY RECEIVED BY HIM. THE CLAIM OF TAX FREE INCOME SHOWN IN THE RETURN, MAY BE DISALLOWED AND TAXED ACCORDINGLY. THE INCOME FIGURES WERE SHOWN CORRECTLY IN THE RETURN BY THE ASSESSEE UNDER THE ASSUMPTION THAT THE NRI STATUS MAKES HIS INCOME TAX FREE. AND NEVER CLAIMED THAT HE HAS PAID ANY TAXES OUTSIDE COUNTRY. THE TDS IS ALSO PROPERLY ON HIS SALARY. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, ASST. M AY BE DONE ACCORDINGLY AND KINDLY NO PENALTY MAY BE LEV IED. H OWEVER THE A SSESSING O FFICER DID NOT CONSIDER THE ASSEESSEE S SUBMISSION AS ABOVE. HE PROCEEDED TO REFER TO THE PROVISIONS OF INDIA AND INDONESIA DTAA, AND THE SECTION 5 OF THE I NCOME T AX ACT. THE A SSESSING O FFICER ALSO REFERRED TO THE DECISION OF AUTHORITY OF ADVANCE RULING. REFERRING TO THE PROVISIONS OF ABOVE DTAA AND THE RULING OF AUTHORITY OF ADVANCE RULING THE A SSESSING O FFICER PROCEEDED TO HOLD THAT ASSESSEE S CLAIM FOR EXEMPTION IN RESPECT OF SALARY EA RNED IN INDONESIA AS INVALID AND H AS REJECTED THE SAME . 5. AGAINST THE ABOVE ORDER ASSESSEE APPEA LED BEFORE THE L EARNED CIT(APPEALS). LEARNED CIT(APPEALS) ELABORAT E LY REPRODUCED THE ASSESSEE S SUBMISSIONS AND CASE LAW REFERRED IN EXTENSO. L EARNED CIT( A PPEALS) CONCLUDED AS UNDER : 1. 4 . 1 I HAV E CO N SIDERE D TH E ASSESSMENT O R DE R FRA M ED B Y T H E AO , T H E GROUNDS OF A PP E A L A N D T H E S UBMI SSIO N MAD E B Y TH E A PP E LL A NT AND V AR I O U S . J UDI CI A L P R O N OU N CE M E N TS RE LIED UPON BY THE A PPELL A NT . IT IS A N UNDI S PUTED FA CT TH A T TH E APP E LL ANT H A S S TAYED O UT S ID E IND IA FOR MO RE TH A N 1 82 D AYS DU R IN G T H E YEA R AND T H E RE FOR E A S P E R THE P R OV ISI O N S OF SEC . 6 O F TH E I . T. ACT, 1 96 1 , T HE A P PELLA NT IS N OT A R ES ID E NT OF I NDIA FOR TH E G I VE N ASSESSMEN T YEAR . F R OM THE FACTS OF T HE CASE, IT A L SO A P P E AR S T H AT S A L A R Y INCOM E H A S B EE N EA RNED OUT S IDE INDIA A ND TH A T TH E A P PEL L A N T ' S 4 ITA NOS. 605 & 606/NAG/2016. SA L A R Y H A S B E EN P A ID B Y TH E E MPL OYER MLS S MS IN F R AS T R UCTUR E LTD. , NAGPU R FRO M IND IA AND TDS HA S BEE N D E D UC T E D O N TH E SA L A R Y. 4.2 TH E PROV I S I O N S O F S EC. 9 DE A L S WI TH IN C OM E D EE M E D T O ACC RU E T O A R ISE I N INDI A . TH E P ROV I S IONS O F SE . 9 ( 1 )( II ) & ( III ) D EAL WI TH : ' ( II ) I NCO M E WHICH FALLS UNDE R THE HEAD ' SALARIE S ' , IF IT IS E ARN E D IN IN DIA . [ EX P L A N A TI ON> FOR TH E R E M OV AL O F DOUB T S, IT IS H E R EBY D ECLA R E D TH A T T H E I N COME O F TH E NATU RE R E F E RR ED TO IN TH IS C LAU SE P AYABLE FOR _ (A) S E RVICE RENDER E D IN INDIA ; AND (B) TH E REST P E R IO D OR LEA V E PE R IO D W HI CH IS P R ECE D ED A N D S UCCE ED E D BY SE RVICE S R E NDE R ED IN I NDIA A N D FORMS PA R T O F TH E S E R V ICE CON T RACT OF E M P L OY M E N T , S H A LL B E R E GAR DE D AS INC O M E EARN E D IN INDIA ; ] (I I I ) IN CO ME C HARG E ABL E UND ER TH E HEAD ' SALARIES ' PA Y ABL E B Y TH E G OV E R NM E N T TO A C I TI Z EN OF I NDIA FOR S E R VI C E O U TSIDE INDI A ,' 4.3 A PL A I N P ERUSA L O F T H IS SEC T IO N S HO W S TH A T A N Y SA L ARY I N CO M E W HI C H IS EAR N E D O U TSIDE INDIA WILL NOT FALL UNDER S ALARY INC O M E WHI C H IS DEEM E D TO A CCRU E OR A R ISE I N INDI A . 4 . 4 H O WEVE R , O N TH E O TH E R H A ND , I F IND T H A T TH E A O H AS M A D E T H E A DDITI O N MA INL Y O N A C CO U N T OF LETTER DTD , 12 . 11 . 2010, WITHDRAWIN G TH E C L A IM OF T AX FR E E I N C OME O F SHRI C . M . SINGH (TH E APP E LLANT ), DU E T O HIS NRI ST A TUS C ONSID E RIN G I NABIL I TY TO PROD U C E T AX D OC UM E NTS F I L E D WI TH T AX AU T HORIT I ES OF IND ONE SI A . T HE AO HA S A L SO R E L IE D ON T H E RA TIO OF JU DG M EN T O F A U T H OR IT Y F OR ADVA N CE R U L I NG S I N CAS E OF S . MOHAN (2 00 7 ) 2 9 4 ITR 1 77 (AAR) W H ER E RU L IN G H A S B E E N G I VE N THAT TH E OPTION O F TA X SA L ARY IN CO R N E EVE N IN C A S E WH E R E THE AS S E S SEE S TA YS O UT S I D E INDIA FOR MORE THAN 1 8 2 D A Y S R E S T S W I TH BO TH TH E C O UN TRI ES . SIN C E , TH E AD DI T I ON H AS BEE N M A D E B Y TH E AO B A SE D O N ASS E SSES C L AIM O F W I TH DRAWA L OF TAX FR EE I N CO M E F R O M S ALA R Y EA RN E D I N IN DO N ES I A , I A M N O T G OIN G INTO TH E MER I TS OF AD D I TI O N MADE. TH E FAC T O F T H E CAS E S HO WS THA T TH E O FF E R OF T AX ATION O F SA L A RY I NCO M E WA S M ADE BY T H E AP P E L L A NT IN GOOD FAITH SUBJECT TO TH E C O ND I TI O N TH A T N O P E N A L T Y I S IMPO SE D . T H E A PP E LL A NT AT NO S TA GE T RI E D TO C O NC E A L T H E PA R T I C UL A R S O F I N CO M E OR AG R EE D T H A T AN A DD I T IO N C OU LD B E M A D E ON M E RIT S B Y T H E AO . T H E DI SC L OS UR E WA S A PP A RENTL Y TO B U Y PE A C E O F MIND . 4.5 TH E HON ' BL E C O UR T KAR N AT A K A HC IN C A S E O F T . P . INDR A KUM A R VS. ITO ( 2 010) 32 2 FTR 45 4 ( KARNAT A KA H E ) HA S H E LD T H AT W H ER E TH E APP E L L A NT S C A S E W A S T AK EN UP F OR SCR UT I N Y A ND TH E A S SE S SEE V O LUNT AR IL Y OFFER E D INCOME FOR T AXA TI O N T O TH E EXTEN T O F R S . 1 0 L AC S T O AVO ID AN Y FUR T H E R SC R UTIN Y B Y TH E A O TH E N I T C O U L D B E A CT E D U PON AT I TS F A C E V A LU E W I T H OUT F U RTH E R P R OB E . TH E H O N ' BL E HIGH C O URT H E LD TH A T TH E E N T IR E EXE RC I SE BY TH E A O WAS T O DE T E RMIN E TH E I NCO M E OF T HE ASSES S EE W H ERE UP O N TA X LI AB I L I T Y I S A UT O M A T ICA LL Y F I XED IN TE RM S OF T H E R A T ES A S P R O VI D E D B Y T H E FIN ANCE ACT . T H E H O N 'BL E C O URT H E L D TH A T I F A N ASSESSEE HIM SE L F V OLUNT A RIL Y OFF ER E D I N COME FOR T A X A T IO N TH E N T H ERE I S NO THI N G E L S E F O R A O T O PRO B E A S T H E A S S E S SE E H IMS E LF I S 5 ITA NOS. 605 & 606/NAG/2016. VOLUN T EE RING TO O FF E R T H E A MOUN T AS H I S IN C OME. 5.0 ACC ORD I N G LY , RE L Y IN G ON T HE RA T IO O F TH E A BO V E M E NTIONED JUD G M E NT , I AM CONFIR M I NG T HE A D D I T IO N M A D E B Y T H E A O. TH E GRO UND S O F APPEA L F I L E D B Y THE A P PE L LA NT A R E D ISM I SSED . 6. A GAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. 7. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. I FIND THAT THE ASSESSEE HAS SUBMITTED A LETTER BEFORE ASSESSING OFFICER OFFERING TO WITHDRAW THE CLAIM OF EXEMPTION B UT THE A SSESSING O FFICER HAS NOT AT ALL CONSIDERED THE SAID LETTER OFFERING WITHDR AWAL OF THE CLAIM. HE HAS DECIDED THE ISSUE PURELY ON MERIT BY CONSIDERING THE PROVISIONS OF THE DIRECT TAX AVOIDANCE AGREEMENT BETWEEN INDIA AND INDONESIA AND THE RULINGS FROM AUTHORITY OF ADVANCE RULING.. 8. UPON ASSESSEE'S APPEAL L EARNED CIT (APPEALS) H AS ERRONEOUSLY NOTED THAT THE A SSESSING O FFICER HAS LEVIED THE TAX ONLY ON ASSESSEE'S CONCESSION BY WITHDRAWING THE CLAIM OF EXEMPTION. T HIS IS AN ERRONEOUS APPRECIATION OF THE FACT. THERE IS NO WHISPER IN THE A SSESSING O FFICER S ORDER THAT HE IS LEV Y ING THE TAX ON THE BASIS OF ASSESSEE'S CONCESSION. IN SUCH CIRCUMSTANCES L EARNED CIT (APPEALS) RELIANCE UPON THE DECISION OF H ONOURABLE HIGH COURT OF K ARNATAKA IN THE CASE OF T . P . INDRAKUMAR ( SUPRA ) IS ALSO NOT APPLICABLE, AS IN THE SAID CASE IT WAS NOTED TH AT BY OFFERING INCOME FOR TAXATION THERE WAS NOTHING ELSE FOR THE A SSESSING O FFICER TO PROBE. HERE THE CASE IS NOT SO. 9. IN THE BACKGROUND OF AFORESAID DISCUSSION I A M OF THE CONSIDERED OPINION THAT THE ORDER OF LEARNED CIT (APPEAL S ) IS NOT LIABLE TO BE SUSTAINED. B OTH THE COUNSEL FAIRLY AGREED THAT THE ISSUE MAY BE REMITTED TO THE FILE OF L EARNED CIT (APPEALS) TO CONSIDER THE ISSUE ON MERITS .ACCORDINGLY I REMIT THE ISSUE TO THE FILE OF L EARNED CIT (APPEALS). THE L EARNED CIT (APPEALS) S HALL CONSIDER THE ISSUE A FRESH AND PASS A SPEAKING ORDER ON THE MERITS OF THE CASE AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. 6 ITA NOS. 605 & 606/NAG/2016. 10. IN THE RESULT THESE APPEALS BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPE N COURT ON THIS 6 TH DAY OF JANUARY., 2017. SD/ - ( SHAMIM YAHYA) AC COUNTANT MEMBER. NAGPUR, DATED: 6 TH JANUARY, 2017. COPY FORWARDED TO : 1. SHRI CHANDRASHEKHAR MUDRIKA SINGH, C/O M.S. GUPTA, ADVOCATE, 333, DARODKAR SQUARE, CENTRAL AVENUE, GANDHIBAGH, NAGPUR - 2. 2. I.T.O., WARD - 5 ( 2 ), NAGPUR. 3. PR. C.I.T. - 3 , NAGPUR. 4. CIT(APPEALS), - 4 , NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.