Vera Fritsch, New Delhi V. DCIT Circle-1(3)(1) International Taxation, New Delhi

ITA 6938/DEL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2932 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 20-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PALAV NARANG
• Keywords: Double taxation relief; Set aside
• Section: 147; 148; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI BEFORE SHRI C.M. GARG, JUDICIAL MEMBER ITA No.6938/Del/2019 Assessment Year: 2010-11 Vera Fritsch, C-97, 2 nd Floor, Defence Colony, New Delhi. PAN: AANPF5884C Vs. DCIT, Circle-1(3)(1), International Taxation, New Delhi. (Appellant) (Respondent) Assessee by : Shri Palav Narang, CA Revenue by : Shri Mithalesh Kr. Pandey, Sr. DR Date of Hearing : 14.09.2022 Date of Pronouncement : 26.09.2022 ORDER This appeal filed by the assessee is directed against the order dated Nil of the CIT(A)-42, New Delhi, relating to Assessment Year 2010-11. 2. The grounds raised by the assessee read as under:- “1. On the facts and circumstances of the case, the order passed by Commissioner of Income Tax (Appeals) is bad both in the eye of law as well as on facts 2. The abovementioned order is passed in gross violation of principles of natural justice and neglecting all the documents submitted by the Appellant. 3. On the facts and circumstances of the case, various observations made by the Commissioner of Income Tax (Appeals) in the order are wrong and against the facts on record. ITA No.6938/Del/2019 2 4. On the facts and circumstances of the case, the honorable Commissioner of Income Tax (Appeals) has erred both on facts and in law in affirming the demand at an income of Rs.16,11,400 /- 5. On the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) has erred both on facts and in law. 6. That the appellant craves leave to add, amend or alter any of the grounds of appeal.” 3. The ld. assessee’s representative submitted that the assessee was appointed as a Consultant in the Austrian Trade Commission in the field of Mechanical Engineering & Terotechnology and Automotive Industry. The ld. AR further submitted that the assessee has been employed with the Austrian Trade Commission for a period of ten years and has also been issued an official passport via Austrian Government to that effect. The ld. AR submitted that the appellant was assessed at an income of Rs.16,11,400/- in the reassessment order under section 147 r.w.s. 143(3) of the Act. The ld. AR submitted that before the authorities below it was rightly submitted that all required information and documents as requested by the AO and the CIT(A) has been submitted and the evidence submitted before the ld.CIT(A) was also confronted to the AO and a remand report had also been obtained on 14.05.2019. The ld. AR submitted that since the appellant was employed with the Austrian Trade Commission and the amount deposited in the bank account of the assessee represents the receipts from such employment earned @ EUR 1800/- per month which was duly deposited in her bank account, the same is exempt u/s 10(6)(ii) of the Act. The ld. AR submitted that while the remuneration has not been defined in the Income-tax ITA No.6938/Del/2019 3 Act, it is understood to be the money paid in any form to any person for services rendered by him. The ld. AR vehemently pointed out that with this understanding, it cannot be argued that the monthly remuneration received by the assessee in her designation of a Consultant is not exempt under the purview of section 10(6)(ii) of the Act. The ld. AR submitted that even if one were to agree to the spurious argument that the definition of remuneration is narrowly defined as ‘salary’ as has been incorrectly inferred by the learned AO, the Income-tax Act clearly defines “Salary” as per section 17(1) to include “wages” u/s (17(1)(i) and “any fees, commissions, perquisites or profits in lieu of or in addition to salary or wages." He further submitted that the assessee has been continually engaged in her said position with the embassy from the period under review till date, which encompasses a period of almost 10 years thereby proving her status as a permanent employee of the embassy. He further submitted that due to her status as an employee of the embassy, the assessee is also entitled to consular/official passports which have her designation imprinted upon them. The ld. AR submitted that Article 27 of the DTAA between India and Austria has been wrongly interpreted by the AO because the fiscal privileges of diplomatic and consular officials are governed not by the DTAA but the Vienna convention in Diplomatic Relations of 1961. Article 34 of the said convention governs tax exemptions of diplomatic agents and ensures that incomes of diplomats, diplomatic missions, consulates, consular staff and similar officials are not taxed anywhere in the world. Since India and Austria are the signatories to this convention, reciprocal ITA No.6938/Del/2019 4 benefits in the form of income-tax exemptions are provided by them and by other signatories to each other. Therefore, in the light of the above documents establishing the assessee’s tax exempt status as an official in the office of the Austrian Trade Commission, reporting directly to the Trade Commissioner, the impugned assessment order and addition made therein may kindly be quashed or set aside. 4. Replying to the above, the ld. Sr. DR supported the assessment as well as the first appellate order and submitted that the ld.CIT(A) has elaborately considered the relevant provisions of the Act and other documentary evidence furnished by the assessee by calling remand report of the AO and placing on record rejoinder of the assessee. Therefore, the assessment order as well as the order of the ld.CIT(A) may kindly be confirmed. The ld. AR also pointed out that the appellant was appointed as a Consultant and no pension, social or accident insurance was to be paid by the employer, Austrian Trade Commission and, on termination of agreement, no gratuity was to be paid either. Therefore, the assessee was effectively engaged on contractual agreement basis as Consultant which is not under exemption available as per section 10(6)(ii) of the Act. Therefore, the orders of the authorities below may kindly be upheld. 5. On careful consideration of the above submissions, I am of the considered view that the AO picked up the case for initiation of proceedings u/s 147 by issuing notice u/s 148 of the Act and the same was not responded by the assessee ITA No.6938/Del/2019 5 and the AO passed the assessment order ex parte on the basis of best judgement u/s 144 of the Act. Thereafter, the assessee filed an appeal before the ld.CIT(A) and the assessee filed written submissions on which remand report was called from the AO, and, after obtaining rejoinder/comments of the assessee, the ld. CIT(A) passed the impugned first appellate order. Before the ld.CIT(A), it was contended that the payment received by the assessee is eligible for exemption under the provisions of section 10(6)(ii) of the Act and the certificate issued by the Embassy clearly specify that the assessee is part of their organization and not just an external consultant. 6. I may point out that the assessee has furnished two certificates issued by the Austrian Embassy: the first one dated 30.04.2019 wherein it has been certified that the assessee, an Austrian national, was appointed as Consultant from 01.04.2009 till 31.03.2010 and her annual salary/remuneration was stated as EUR 21,600/-. Subsequently, another certificate dated 17.06.2019 has been issued by the Austrian Embassy wherein it has been further stated that the assessee fell under full time employment with the Austrian Embassy, Commercial Section. 7. The provisions of section 10(6)(ii) reads as follows:- “(6) in the case of an individual who is not a citizen of India,— (i) [***] ITA No.6938/Del/2019 6 (ii) the remuneration received by him as an official, by whatever name called, of an embassy, high commission, legation, commission, consulate or the trade representation of a foreign State, or as a member of the staff of any of these officials, for service in such capacity : Provided that the remuneration received by him as a trade commissioner or other official representative in India of the Government of a foreign State (not holding office as such in an honorary capacity), or as a member of the staff of any of those officials, shall be exempt only if the remuneration of the corresponding officials or, as the case may be, members of the staff, if any, of the Government resident for similar purposes in the country concerned enjoys a similar exemption in that country : Provided further that such members of the staff are subjects of the country represented and are not engaged in any business or profession or employment in India otherwise than as members of such staff ; 8. In my humble understanding, in clause (ii) of sub-section (6) of section 10, the legislature has provided exemption from tax to the remuneration received by an official of an Embassy, high commission, legation, commission, consulate or the trade representation of a foreign State, or as a member of the staff of any of these officials, for service in such capacity. The legislation also provides in the first proviso that such remuneration received by him as a trade commissioner or other official representative in India of the Government of a foreign State shall be exempt only if the remuneration of the corresponding officials or, as the case may be, members of the staff, if any, of the Government resident for similar purposes in the country concerned enjoys a similar exemption in that country. ITA No.6938/Del/2019 7 9. In the present case, the main allegation and basis taken by the authorities below is that the assessee is not a staff member or any official, but, was engaged as Consultant on contractual agreement basis, therefore, the exemption u/s 10(6)(ii) of the Act is not available to her. From the copy of passport placed on record, I observe that in the official endorsement, it has been mentioned that the assessee is responsible as head of Technology at Austrian Trade Commission in New Delhi. The certificate issued by the Austrian Embassy clearly reveals that the assessee was appointed as Consultant in the Austrian Trade Commission in the field of Mechanical Engineering & Terotechnology and Automotive Industry, from the relevant financial period and subsequent certificate dated 17.06.2019 further clarify that the assessee has been under full time employment with Austrian Embassy, Commercial Section. This is also in conformity with the entries in the passport of the assessee. The copy of passport also reveals that the assessee is not having an ordinary passport, but, a service passport issued by the Government of Austria. At the cost of repetition, I may also point out that clause (ii) of sub-section (6) of section 10 clearly stipulates that the remuneration received as an official by whatever name called of an Embassy (which is Austrian Embassy in the present case) is not includable in the taxable income of an assessee. Therefore, the certificate issued by the Austrian Embassy cannot be doubted or disregarded in view of said provision and other surrounding facts and circumstances and duties assigned to the assessee by the Austrian Embassy are ITA No.6938/Del/2019 8 also mentioned in her passport by the Government of Austria. Therefore, I am compelled to have agreement with the contention of the ld. Assessee’s representative that the assessee has been in full time employment with the Austrian Embassy, Commercial Section. The ld.CIT(A) has also taken a basis for denying the exemption u/s 10(6)(ii) of the Act that the assessee is not eligible for any pension, social or accident insurance, gratuity, etc., but, this is not a pre- condition for allowing exemption u/s 10(6)(ii) of the Act. Therefore, the basis on which the ld.CIT(A) denied the benefit of the said exemption cannot be held as good and sustainable. 10. In view of the above, it is not the case of the authorities below that the officials of Indian Embassy are not getting the same benefit and thus the claim of the assessee is hit by proviso to clause (ii) of sub-section (6) of Section 10 of the Act. I also note that in the submissions, the ld. Sr. DR could not dispute that the Treaty at Vienna Convention was signed by India and Austria and both are under obligation to abide by the same and this fact also supports the case of the assessee that she is entitled to exemption u/s 10(6)(ii) of the Act on the remuneration received by her from Austrian Trade Commission, Austrian Embassy under full time employment. 11. In view of the above, the sole grievance of the assessee is allowed and the AO is directed to grant exemption u/s 10(6)(ii) of the Act to the assessee. ITA No.6938/Del/2019 9 12. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 26.09.2022. Sd/- (C.M. GARG) JUDICIAL MEMBER Dated: 26.09.2022. dk Copy forwarded to 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi