Krishna Reddy Gaddam, Hyd, Hyderabad V. ITO (International Taxation)-I, Hyd, Hyderabad

ITA 842/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2348 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: ABHIROOP BHARGAV
• Keywords: Salary income; Double taxation relief; Principle of natural justice; Additional evidence; Revised return
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B SMC : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA.NO.842/H/2016 ASSESSMENT YEAR: 2009 - 2010 SHRI KRISHNA REDDY GADDAM, HYDERABAD. PAN: ADEPG 8217 G VS. THE INCOME TAX OFFICER, ( INTERNATIONAL TAXATION ) - 1, HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI ABHIROOP BHARGAV FOR REVENUE : SMT. N. SWAPNA, DR DATE OF HEARING : 13.09.2017 DATE OF PRONOUNCEMENT : 0 1 .12.2017 ORDER PER D. MANMOHAN , VP. THIS APPEAL IS FILED AT THE INSTANCE OF THE ASSESSEE AND IT IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A) - 10, HYDERABAD. FOLLOWING GROUNDS WERE URGED BEFORE THE TRIBUNAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSMENT MADE IS VERY HIGHLY EXCESSIVE AND CONTRARY TO FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE AND FAIR PLAY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, HONBLE COMMISSIONER OF INCOME TAX (APPEALS) - 10 ERRED ON FACTS AND IN LAW IN UPHOLDING THE AS SESSMENT ORDER OF THE INCOME TAX OFFICER, INTERNATIONAL TAXATION - I IN BRINGING TO TAX IN INDIA THE INCOME TAX APPELLANT AMOUNTING TO RS. 6,54,930/ - . 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT (A) ERRED IN UPHOLDING THE ORDER OF LD A.O. OF MAKING AN ADDITION OF RS. 1,00,890/ - TO THE APPELLANTS INCOME, WITHOUT GIVING THE EXEMPTION TOWARDS HOUSE RENT ALLOWANCE (HRA) OF RS. 1,00,890/ - . 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT (A) ERRED IN UPHOLDING THE ORDER OF LD A.O. OF MAKING AN ADDITION OF OVERSEAS INCOME OF RS. 4,87,000/ - TO THE APPELLANTS INCOME, BY IGNORING THE EXEMPTION CLA IMED BY THE APPELLANT UNDER ARTICLE 16(1) OF INDIA - USA DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD A.O., THE LD. CIT(A) ERRED IN NOT DECIDING THE ISSUES ON MERITS OF THE CASE. 6. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD A.O. ERRED IN NOT GRANTING THE CREDIT FOR THE ENTIRE AMOUNT OF TAX DEDUCTED AT SOURCE IN INDIA. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. A.O. ERRED IN LEVYING INTEREST UNDER SECTION 234B AND 234C O F THE ACT. 2 2. FACTS NECESSARY FOR DISPOSAL OF APPEAL ARE STATED IN BRIEF. ASSESSEE IS ADMITTEDLY A NON - RESIDENT. FOR THE YEAR UNDER CONSIDERATION HE DECLARED TOTAL TAXABLE INCOME OF RS. 10,66,900/ - . THEREAFTER, A REVISED RETURN OF INCOME WAS FILED W HEREIN HE DECLARED TAXABLE INCOME OF RS. 62,619/ - ONLY. UNDER THESE CIRCUMSTANCES, THE CASE WAS SELECTED FOR SCRUTINY WITH THE APPROVAL OF DIT (IT & TP) AND NOTICE U/S 143(2) WAS ISSUED. 3. D URING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE WAS A FORM ER EMPLOYEE OF M/S. MOTOROLA INDIA PVT LTD., FROM 01.04.2008 TO 14.12.2008 AND THEREAFTER, HE JOINED M/S. MOTOROLA INC. USA, BASED IN USA. AS PER FORM NO.16, ISSUED BY M/S. M/S. MOTOROLA INDIA PVT LTD., AN AMOUNT OF RS. 11,34,711/ - WAS RECEIVED AS SALARY INCOME , AFTER CLAIMING EXEMPTION U/S 10 OF THE ACT AMOUNTING TO RS. 1,68,833/ - . 4. AS HAS BEEN POINTED OUT EARLIER, THE APPEAL LANT HAS STAYED IN INDIA FOR 38 DAYS ONLY, AND AS SUCH QUALIFIED TO BE CONSIDERED AS NON - RESIDENT INDIAN (NRI). IN OTHER WORDS, AS A TAX RESIDENT OF USA, FOR THE YEAR 2008, THE ASSESSEE FILED HIS RETURN IN USA, OFFERING HIS GLOBAL INCOME IN ACCORDANCE WITH TH E TAX LAWS OF USA. THOUGH THE ASSESSEE INITIALLY DECLARED TOTAL INCOME OF RS. 10,66,930/ - , IT WAS LATER ON NOTICED THAT THE TAXABLE INCOME IN INDIA IS MUCH LESS SINCE HE IS ENTITLED TO CLAIM BENEFIT UNDER ARTICLE 16(1) OF INDIA USA DTAA, AMOUNTING TO RS . 10,04,284/ - . SINCE THE EXEMPTION WAS NOT CLAIMED ORIGINALLY, A REVISED RETURN WAS FILED. 5. IT WAS CONTENDED THAT THE ASSESSEE RESIDED IN RENTED PREMISES AT SOMAJIGUDA, HYDERABAD ALONG WITH HIS FAMILY, UNTIL DECEMBER 2008 , WHILE HE WAS EMPLOYED WITH MO TORO LA. OWING TO HIS PLACE OF EMPLOYMENT HE CLAIMED EXEMPTION IN RESPECT OF HOUSE RENT ALLOWANCE (HRA), U/S 10(13A) OF THE ACT, UPON ACTUAL PAYMENT OF RENT. THE ASSESSEE OWNED A HOUSE PROPERTY IN HYDERABAD ON WHICH HOUSING LOAN OF RS. 10,348/ - WAS PAID A ND THE SAME WAS CLAIMED IN THE REVISED RETURN OF INCOME SINCE IT WAS TREATED AS SELF - OCCUPIED FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER INCOME TAX ACT, 196 1 . 6. THE OVERSEAS INCOME WAS ALSO EXCLUDED FROM TAXABLE INCOME. A.O. OBSERVED THAT THE ASSESSEE RECEIVED AN AMOUNT OF RS. 1,00,890/ - AS HRA FROM HIS EMPLOYER AND 3 ALSO CLAIMED DEDUCTION REFERABLE TO INTEREST PAID ON HOUSING LOAN. MOST OF THE TIME, ASSESSEE WAS WORKING OUTSIDE INDIA; HE STAYED IN INDIA FOR ONLY FOR 38 DAYS , OUT OF 365 DAYS , AS PER HIS STATEMENT. THEREFORE, THERE IS NO NECESSITY TO PERFORM LONG JOURNEY OF 32 KMS DAILY FROM OWN RESIDENCE TO OFFICE AS STATED BY THE ASSESSEE. HE FURTHER OBSERVED THAT THE ASSESSEE OWNS A RESIDENCE IN KANCHANBAGH, HYDERABAD, WHICH IS ADJACENT TO INNER RING ROAD AND ALSO VERY CONVENIENT TO PERFORM JOURNEY DIRECTLY TO HIS OFFICE THROUGH INNER RING ROAD. THE ASSESSEE HAS GIVEN HIS OWN ADDRESS AS ADDRESS FOR CORRESPONDENCE AND IN FACT LETTERS ADDRESSED TO KANCHANBAGH ADDRESS WERE SERVED PROPERLY BY THE POSTA L AUTHORITIES WHICH INDICATES THAT THE ASSESSEE WAS RESIDING IN HIS OWN PREMISES. UNDER THESE CIRCUMSTANCES, THE A.O. CONCLUDED THAT THE ASSESSEE WOULD NOT HAVE STAYED IN RENTAL PREMISES BUT HE CLAIMED TO HAVE PAID RENT , ONLY TO AVOID PAYMENT OF TAXES. BASED ON SUCH FINDING, THE A.O. CONCLUDED THAT THE HRA RECEIVED BY THE ASSESSEE IS PART OF TAXABLE INCOME AND , CLAIM OF DEDUCTION U/S 10(13A) OF THE ACT, AMOUNTING TO RS. 1,00,890/ - , IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE BY TREATING IT AS A PART OF SALARY INCOME. 7 . IT MAY BE NOTICED THAT THE ASSESSEE ADMITTED AN AMOUNT OF RS. 3,11,120/ - AS OTHER INCOME, AS COULD BE NOTICED FROM FORM NO.16 ISSUED BY THE EMPLOYER I.E., M/S. MOTOROLA INDIA PVT LTD. HOWEVER, IN THE COMPUTATION SHEET, ENCLOSED TO REVISED RETURN, THE ASSESSEE ADMITTED AN AMOUNT OF RS. 3,21,469/ - AS OVERSEAS INCOME REFERABLE TO SPOUSAL PREDIUM AND INCREMENTAL HOUSING. AFTER ANALYSING THE COMPUTATION THE A.O. NOTICED THAT THIS IS PA RT OF AN AMOUNT OF RS. 4,87,000/ - , CLAIMED AS EXEMPTION. SINCE THE ASSESSEE FAILED TO PRODUCE PROOF / EVIDENCE IN SUPPORT OF THE CLAIM OF ANY OVERSEAS INCOME, THE A.O. DISALLOWED THE CLAIM AND ADDED BACK TO THE ASSESSEES TOTAL INCOME BY TREATING IT AS I NCOME FROM OTHER SOURCES. IN THIS REGARD, HE OBSERVED THAT EVEN IN FORM NO.16 IT WAS REPORTED AS OTHER INCOME. MOREOVER THE ASSESSEE WAS FILING THE RETURNS IN USA AND HE COULD HAVE CLAIMED THE SAME IN US INDIVIDUAL INCOME TAX RETURNS , IF AT ALL IT IS A SPOUSAL PREDIUM AND INCREMENTAL HOUSING INCOME - CONNECTED TO THE OVERSEAS STAY OF THE ASSESSEE. 8 . ASSESSEE CLAIMED DEDUCTION TOWARDS TDS. IN THIS REGARD THE A.O. OBSERVED THAT OUT OF THE TOTAL INCOME OF RS. 10,66,9 0 0/ - AN AMOUNT OF RS. 10,04,284/ - WAS CLAIMED AS EXEMPTION UNDER ARTICLE 16(1) OF THE INDIA USA DTAA AND ADMITTED NET TAXABLE 4 INCOME AT RS. 62,610/ - ONLY AND HENCE TDS CLAIM CANNOT BE ENTERTAINED SINCE IT IS R EFERABLE TO THE INCOME ACCRUED / AROSE IN INDIA. IN OTHER WORDS, THE ASSESSEE HAV ING STAYED FOR LESS THAN 60 DAYS IN INDIA, HE IS A NON - RESIDENT AND THE ASSESSEE HAVING CLAIMED THE ENTIRE TDS AMOUNT, DEDUCTED IN INDIA, AS CREDIT IN THE US INDIVIDUAL RETURN. THE CLAIM OF TDS , AGAIN IN INDIAN INCOME TAX RETURNS , WILL AMOUNT TO DOUBLE CLAIM WHICH IS NOT PERMISSIBLE AND THUS THE CLAIM OF DEDUCTION OF TDS WAS REJECTED BY THE A.O. ACCORDINGLY THE ASSESSMENT WAS COMPLETED ON A TOTAL TAXABLE INCOME OF RS. 6,54,930/ - . 9 . ON AN APPEAL FILED BY THE ASSESSEE, LD. CIT(A) OBSERVED THAT THOUGH NUMBER OF OPPORTUNITIES WERE GIVEN TO THE ASSESSEE, NONE APPEARED ON BEHALF OF THE ASSESSEE AND THEREFORE, THE APPEAL WAS DISPOSED OF BASED ON THE INFORMATION AVAILABLE ON RECORD. WHILE D ISPOSING OF THE APPEAL HE HAD TAKEN INTO CONSIDERATION THE FINDING OF THE ASSESSING OFFICER AND CONFIRMED THE ORDER PASSED BY THE A.O. IN THIS REGARD, HE OBSERVED THAT NO EVIDENCE HAS BEEN FURNISHED EVEN BEFORE THE FIRST APPELLATE AUTHORITY WITH REGARD TO THE CLAIM THAT RENT HAS BEEN PAID BY THE ASSESSEE AND HENCE EXEMPTION U/S 10(13A) OF THE ACT IS NOT PERMISSIBLE. SIMILARLY, AS REGARDS THE AMOUNT RECEIVED AS SPOUSAL PREDIUM AND INCREMENTAL HOUSING, LD. CIT(A) OBSERVED THAT THOUGH IN THE STATEMENT OF FAC TS IT WAS SUBMITTED THAT IN THE RETURN OF INCOME FILED IN USA , GLOBAL INCOME FOR THE PERIOD 01.01.2008 TO 3 0 .01.2008 WAS CONSIDERED AND IT INCLUDED SALARY RECEIVED FROM MOTOROLA DURING THIS PERIOD THE TAX CREDIT CLAIMED UNDER ARTICLE 16(1) OF INDIA USA D TAA RELATES TO THE PERIOD FROM 01.01.2008 TO 01.04.2008 AND 07.11.2008 AND 14.11.2008 , BUT IN THE ABSENCE OF ANY EVIDENCE FILED IN THAT REGARD, HE CONFIRMED THE ACTION OF THE ASSESSING OFFICER. SIMILARLY WITH REGARD TO NON - GRANTING OF CREDIT FOR TDS , IN T HE ABSENCE OF ANY FURTHER DETAILS / EVIDENCE FILED BEFORE THE LD. CIT(A), THE GROUND WAS REJECTED. THE INTEREST U/S 234B AND 234C OF THE ACT, BEING CONSEQUENTIAL IN NATURE, THE GROUND W AS DISMISSED. 10 . AGGRIEVED BY THE EXPARTE ORDER PASSED BY THE LD. CI T(A), ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNAL. DETAILED PAPER BOOK WAS FILED BEFORE THE TRIBUNAL ALONG WITH A SEPARATE PAPER BOOK ANNEXING RENT AGREEMENT, VEHICLE REGISTRATION FORM, GAS CONNECTION F O RM AND PER - DIEM WORKSHEET AND REQUESTED FOR ADMISSION OF THE SAME ON THE GROUND THAT THESE DOCUMENTS HAVE A SIGNIFICANT BEARING ON THE APPEAL AND GOES 5 TO THE ROOT OF THE MATTER; HENCE IN THE INTEREST OF JUSTICE THE SAME DESERVES TO BE ADMITTED. TWO SETS OF PAPER BOOKS WERE ALSO FILED I.E., PAGES FROM 1 TO 124, WHICH ARE NOTHING BUT THE RETURNS FILED IN INDIA AND USA, FORM NO.16 ISSUED BY THE EMPLOYEER, COPY OF THE DTAA, SUBMISSIONS FILED BEFORE THE A.O. ETC. 1 1 . LD COUNSEL FOR THE ASSESSEE ADVERTED MY ATTE NTION TO PAGE 98 AND PAGES 27 TO 30 OF THE PAPER BOOK TO SUBMIT THAT IN THE TAX RETURNS FILED IN US, TAX CREDIT OF INDIA WAS NOT CLAIMED AND THUS THE SAME SHOULD HAVE BEEN ADJUSTED AGAINST THE TAX PAYABLE IN INDIA. IT WAS ALSO SUBMITTED THAT THE INCOME EA RNED BY THE ASSESSEE FROM MOTOROLA INCLUDED INDIAN SOUR CE WHICH WAS OFFERED TO TAX IN INDIA AND THE TDS PERTAINS TO THE SAID INCOME WHICH WAS OTHERWISE ALLOWABLE AS DEDUCTION. DURING THE PREVIOUS YEAR RELEVANT TO THE A.Y. 2009 - 10, THE ASSESSEE HAS ALSO RE CEIVED GRATUITY AMOUNT OF RS. 2,75, 3 22/ - FROM MOTOROLA AND IT WAS NOT CLAIMED AS EXEMPTION IN ANY OF THE EARLIER YEARS AND THUS EXEMPTION WAS CLAIMED IN THE YEAR U/S 10(10) OF THE ACT. 12. IN THE PETITION SEEKING ADMISSION OF ADDITIONAL EVIDENCE , ASSESS EE SUBMITTED THAT HE WAS SENT TO INDIA BY THE MOTOROLA FOR 38 DAYS ONLY THOUGH HE W AS OTHERWISE PERMANENTLY EMPLOYED WITH MOTOROLA USA. ACCORDINGLY, SALARY INCOME RECEIVED FROM MOTOROLA FOR THE LIMITED PERIOD OF 38 DAYS WAS OFFERED TO TAX AND CLAIMED EXEM PTION UNDER ARTICLE 16(1) OF INDIA USA DTAA. THE A.O. AS WELL AS THE LD. CIT(A) DOUBTED THE GENUINENESS OF RENT AND DISALLOWED THE CLAIM OF EXEMPTION ON THE SPOUSAL PREDIUM AND INCREMENTAL HOUSING (OVERSEAS INCOME) OVERLOOKING THE FACT THAT THE GAS CONN ECTION IS AVAILABLE AT THE SAID ADDRESS AND THERE WAS ALSO A RENTAL AGREEMENT WHICH IS NOW FILED BEFORE THE TRIBUNAL. LD COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON SEVERAL CASE LAW IN SUPPORT OF HIS CLAIM THAT WHEN EVIDENCE IS GENUINE AND RELIABLE, IN TH E INTEREST OF SUBSTANTIAL JUSTICE, ADDITIONAL EVIDENCE DESERVE TO BE ADMITTED. 1 3 . ON THE OTHER HAND, LD DR RELIED UPON THE ORDERS PASSED BY THE TAX AUTHORITIES. 1 4 . I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. SINCE THE MAT ERIAL FILED BEFORE THE TRIBUNAL ARE ESSENTIAL FOR DISPOSAL OF THE APPEAL, TO RENDER SUBSTANTIAL JUSTICE, I DEEM IT FAIR AND REASONABLE TO ADMIT THE ADDITIONAL EVIDENCE. IN FACT, THE TAX RETURNS FILED BY THE ASSESSEE IN USA WAS ALSO PLACED BEFORE THE TRIBU NAL 6 TO SUBMIT THAT THE TDS AMOUNT OF RS. 4,00,736/ - WAS NOT CLAIMED AS DEDUCTION AGAINS T THE TAXABLE INCOME AT USA WHEREAS THE A.O. AS WELL AS THE LD. CIT(A) PRESUMED THAT THE ENTIRE AMOUNT WAS CLAIMED AS CREDIT IN USAS INDIVIDUAL TAX RETURN. 15. ON A CONSPECTUS OF THE MATTER, I AM OF THE VIEW THAT THE A.O. AS WELL AS THE LD. CIT(A) HAVE NOT CONSIDERED THE ISSUE IN PROPER PERSPECTIVE AND INTEREST OF JUSTICE DEMANDS THAT THE A.O. SHOULD REVISIT THE FACTS AND RECONSIDER THE MATTER IN ACCORDANCE WITH LAW BY TAKING INTO CONSIDERATION THE ADDITIONAL EVIDENCE NOW PLACED BEFORE US AND ALSO THE DETAILS FURNISHED IN THE FORM OF US INDIVIDUAL INCOME TAX RETURN ETC. WITH THESE OBSERVATIONS, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 0 1 S T DECEMBER, 2017. S D / - (D. MANMOHAN) VICE PRESIDENT HYDERABAD, DATED: 0 1 S T DECEMBER , 2017 OKK, SR.PS COPY TO 1. KRISHNA REDDY GADDAM, H.NO.1 - 40, KANCHANBAGH, HYDERABAD 500058 2. THE ITO ( INTERNATIONAL TAXATION ) - 1, HYDERABAD. 3. CIT (A) - 10, HYDERABAD. 4. CHIEF COMMISSIONER OF INCOME TAX (IT) (SZ), BENGALURU. 5. THE COMMISSIONER OF INCOME TAX (IT & TP), HYDERABAD. 6. GUARD FILE