The ITO(Inlt.Taxn.), Baroda V. Shri Nitin Prataprai Shah, Baroda

ITA 884/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76792 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 24-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: NIRAV M SHAH
• Keywords: Salary income; Double taxation relief; Permanent establishment; Advance ruling; Assessment record
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTA NT MEMBER THE ITO (INTL. TAXN.), BARODA, 208, SECOND FLOOR, AAYAKAR BHAWAN, RACE COURSE CIRCLE, BARODA (APPELLANT) VS SRI NITIN PRATAPRAI SHAH, 4/D, ANAND BAUG TENAMENTS, NEW SAMA ROAD, BARODA-390008 PAN:AFBPS6348K (RESPONDENT) REVENUE BY: SRI O.P. BATHEJA, SR.D.R. ASSESSEE BY: SRI NIRAV M SHAH, A.R. DATE OF HEARING : 05-05-2014 DATE OF PRONOUNCEMENT : 30-05-20 14 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE REVENUES APPEAL AGAINST THE ORDER OF LD. CIT(A), GANDHINAGAR DATED 31-12-2010. 2. REVENUE HAS TAKEN ONLY ONE GROUND WHICH READS AS UNDER:- ITA NO. 884/AHD/2011 ASSESSMENT YEAR 2007-08 I.T.A NO.884/AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. NITIN PRATAPRAI SHAH 2 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 18,82,764/- MADE BY THE ASSESSING O FFICER ON ACCOUNT OF SALARY INCOME RECEIVED FROM GENERAL ELEC TRIC INTERNATIONAL INC. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A N ON-RESIDENT AND HIS MAIN SOURCE OF INCOME IS SALARY RECEIVED FROM THAIL AND AS WELL AS GENERAL ELECTRICAL INTERNATIONAL INC. ON VERIFICATION OF T HE RETURN, AO NOTICED THAT THE MAIN SOURCE OF INCOME I.E. SALARY WAS NOT SHOWN IN THE RETURN FILED BY THE ASSESSEE AND ASSESSEE HAS CLAIMED REFUND OF TDS MADE FROM THE SALARY MADE BY THE EMPLOYER. ON FURTHER VERIFICATI ON OF FROM NO. 16 ISSUED BY THE EMPLOYER I.E. GENERAL ELECTRONIC INTE RNATIONAL INC, THE GROSS SALARY WAS SHOWN AT RS. 18,82,764/- AND AFTER ALLOW ING THE DEDUCTION UNDER THE ACT, THE NET TAXABLE SALARY WORKED OUT AT RS. 17,76,310/- AND TDS ON IT OF RS. 5,41,806/- HAS BEEN MADE BY THE EM PLOYER ACCORDINGLY. IT WAS SEEN FROM THE STATEMENT OF INCOME FILED WITH RETURN THAT THE SALARY AND ALLOWANCES OF RS. 18,82,764/- WERE CLAIMED EXEM PTED UNDER ARTICLE 15(1) OF THAILAND-INDIA DTAA AND WORKED OUT TAXABLE INCOME AT NIL. AFTER TAKING INTO CONSIDERATION THE EXPLANATION OF ASSESS EES WIFE AS THE ASSESSEE HIMSELF WAS OUT OF THE COUNTRY DURING THE ASSESSMENT PROCEEDINGS DISALLOWED THE CLAIM AND ADDED TO THE I NCOME OF THE ASSESSEE. 4. BEFORE LD CIT(A) ASSESSEES CONTENTION WAS THAT HE WAS AWAY FROM INDIA DURING THE ASSESSMENT PROCEEDINGS AND COULD N OT PRESENT HIS CASE PROPERLY BEFORE THE AO, THEREFORE LD. CIT(A) OBTAIN ED REMAND REPORT OF THE AO ON THE SUBMISSION OF THE ASSESSEE DATED 6 TH MAY, 2010 WHICH READS AS UNDER:- I.T.A NO.884/AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. NITIN PRATAPRAI SHAH 3 'AT THE OUTSET, I SUBMIT THAT DURING THE YEAR, I WA S WORKING ON INTERNATIONAL ASSIGNMENT FOR GE INTERNATIONAL IN THAILAND. MY POS ITION WAS PLANT MANAGER IN RAYONG TOWN OF THAILAND. EXCEPT FOR 37 D AYS IN PREVIOUS YEAR UNDER APPEAL I WAS IN THAILAND ON JOB DUTIES. ACCOR DINGLY, I WAS RESIDENT OF THAILAND DURING THIS YEAR. A NECESSARY PROOF REG ARDING THIS WAS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS AND COP IES THEREOF ARE ENCLOSED. BEING RESIDENT OF THAILAND AND WORKING IN THAILAND MY INCOME WAS ASSESSABLE IN THAILAND. NOW COMING TO THE LEGAL ASPECTS OF THE CASE, I SUBM IT THAT AS I WAS RESIDENT OF THAILAND AS PER THAI TAX LAWS I AM ENTI TLED TO RELIEF UNDER ARTICLE 15(1) OF DOUBLE TAXATION AVOIDANCE AGREEMEN T (DTAA'). THEREFORE, AS PER THE DETAILED LEGAL PROVISIONS AND FACTS UNDER THE HEAD NOTES ON DTAA EXEMPTION CLAIMED IN RETURN SUBMITTED DURING THE ASSESSMENT PROCEEDING AND SUBMISSIONS IN NOTES ENCL OSED WITH THE RETURN, COPY OF WHICH IS ENCLOSED HEREWITH. I AM NO T LIABLE TO TAX ON MY INCOME IN INDIA WHICH IS TAXED IN THAILAND. THE SALARY AS MENTIONED BY THE AO PAID IN INDIA AMO UNTING TO RS. 18,82,764/- IS INCLUDED IN RETURN OF INCOME SUBMITT ED IN THAILAND AND TAX HAS BEEN PAID AS PER THAI TAX LAWS. COPY OF THE IN COME-TAX CERTIFICATE PROVES THIS BEYOND DOUBT. COPIES OF THESE DOCUMENT S ARE ENCLOSED. THESE DOCUMENTS INCLUDE COPIES OF INCOME TAX RETURN , TAX CALCULATION OF RETURN FILED IN THAILAND ETC. FROM THIS IT IS CLEA R THAT AO HAS ERRED BOTH ON FACTS AND IN LAW WHILE COMING TO THE CONCLUSION THA T YOUR APPELLANT HAS BEEN PAID SALARY OF RS. 18,82,764/- OVER AND ABOVE THE INCOME DECLARED IN THAILAND TAX RETURN. 5. ASSESSING OFFICER FILED HIS REMAND REPORT AS UND ER:- '(I). IN THIS CASE, THE RETURN OF INCOME WAS FILED ON 23.08.2007 BY E- FILING, VIDE RECEIPT NO. 11 84023G807 DECLARING TOTAL INCOM E AT RS. NIL WITH THE ITO, WARD 8(3), BARODA. THE CASE WAS SELECTED UNDER SCRUTINY. THEREAFTER, THIS CASE WAS RECEIVED ON TRANSFER TO T HIS OFFICE FROM THE INCOME-TAX OFFICER, WARD 8(3), BARODA ON 09.11.2009 . THE ASSESSEE IS A NON-RESIDENT AND HIS MAIN SOURCE OF INCOME IS SALAR Y RECEIVED FROM THAILAND AS WELI AS GENERAL ELECTRIC INTERNATIONAL INC. SITUATED AT GURGAON, HARYANA (INDIA). (II) ON VERIFICATION OF THE RETURN OF INCOME FILED, IT WAS NOTICED THAT THE MAIN SOURCE OF INCOME IS SALARY BUT THE SAME IS NOT SHOW N IN THE RETURN OF INCOME, HOWEVER, HE HAS CLAIMED REFUND OF RS.5,41,8 06/- ON TDS MADE FROM THE SALARY BY THE EMPLOYER. FURTHER, ON VERIFI CATION OF FORM NO 16 ISSUED BY THE EMPLOYER I.E. GENERAL ELECTRIC INTERN ATIONAL INC. SITUATED AT GURGEON, HARYANA (INDIA), THE GROSS SALARY IS SHOWN RS.18,82,764/- AND AFTER ALLOWING THE DEDUCTION UNDER THE ACT, THE NET TAXABLE SALARY WORKED I.T.A NO.884/AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. NITIN PRATAPRAI SHAH 4 OUT IS RS.L7,76,310/- AND TDS OF RS.5,41,806/- HAS BEEN MADE BY THE EMPLOYER ACCORDINGLY. IT WAS NOTICED FROM THE STATE MENT OF INCOME FILED WITH THE RETURN OF INCOME THAT THE SALARY AND ALLOW ANCES RS.18,82,764/- ARE CLAIMED EXEMPTED UNDER THE ARTICLE 15(1) OF THA ILAND INDIA DTAA AND WORKED OUT TAXABLE INCOME AT RS NILL. (III) A SHOW CAUSE NOTICE NO. BRD/ITO (INTL.TAXN,)/ 2009-10 DATED 24- 12.2009, ISSUED TO THE ASSESSEE ASKING AS TO WHY CL AIM OF SALARY AND ALLOWANCES EXEMPTED UNDER ARTICLE 15(1) OF THAILAND -INDIA DTAA AMOUNTING TO RS.18,82,764/- SHOULD NOT BE DISALLOWE D AND ADDED TO HIS TOTAL INCOME. AFTER CAREFULLY CONSIDERING THE EXPL ANATION GIVEN BY ASSESSEE'S WIFE, THE SAME WAS NOT FOUND TO BE ACCEP TABLE. THE ASSESSING OFFICER FINALIZED THE ASSESSMENT ON THE BASIS OF DE TAILS/DOCUMENTS/ MATERIALS AVAILABLE ON RECORD. (IV) IN VIEW OF THE ABOVE, THE ASSESSEE IS A RESIDE NT OF THAILAND. AS PER INCOME TAX PAYMENT CERTIFICATE ISSUED BY THE DIRECT OR PLANNING AND EVALUATION DIVISION THAILAND HE HAD EARNED 43,83,41 0.11 BAHT DURING THE YEAR 2006; ALSO EARNED 42,00,900.46 BAHT DURING YEA R 2007 AND ACCORDINGLY HE HAD PAID TAX OF 11,45,231.74 BAHT FO R THE YEAR 2006 AND 10,77,703.17 BAHT FOR THE YEAR 2007 ON THE INCOME E ARNED IN THAILAND. 2. AFTER PERUSAL OF ASSESSMENT RECORDS AND THE DET AILS FILED BEFORE YOUR HONOUR DURING APPELLATE PROCEEDINGS, IT IS NOT ICED THAT ASSESSES INCOME FROM SALARY EARNED IN INDIA IS TAXABLE IN IN DIA. HOWEVER, THE ASSESSEE COULD HAVE CLAIMED DEDUCTION IN RESPECT OF TDS MADE ON HIS INCOME IN INDIA WHILE FILING HIS TAX RETURN IN THAI LAND IF THE INCOME DECLARED IN THAILAND IS INCLUSIVE OF INCOME EARNED IN INDIA. FURTHER FACTS IN SUPPORT OF TAXABILITY OF SALARY INCOME OF RS. 18,82 , 764/- IN INDIA ARE AS UNDER: (A) ON VERIFICATION OF MONTHLY PAY SLIP ISSUED BY T HE EMPLOYER I.E. GENERAL ELECTRIC INTERNATIONAL INC., BRANCH OFFICE, GURGAO N, HARYANA, IT IS NOTICED THAT THE LOCATION OF PLACE OF EMPLOYMENT IS SHOWN I NDIA. (B) ASSESSEE HAS WORKED FOR INDIAN LOCATION AS WELL AS HE HAS RECEIVED SALARY FROM INDIAN PERMANENT ESTABLISHMENT (PE) I.E . FROM GENERAL ELECTRIC INTERNATIONAL INC,, SITUATED AT GURGAON , HARYANA. (C) ON VERIFICATION OF BANK STATEMENT SUBMITTED BY THE ASSESSEE, IT WAS FOUND THAT SALARY EARNED IN INDIA WAS BEING DEPOSIT ED IN HIS SAVING BANK ACCOUNT NO. 379829(1NR) WITH ABN AMRO BANK, BARODA THROUGH CHEQUE, EVERY MONTH BY THE EMPLOYER GENERAL ELECTRI C INTERNATIONAL INC. I.E. INDIAN PERMANENT ESTABLISHMENT (PE) SITUATED A T GURGAON , HARYANA. (D) ON VERIFICATION OF THE COPY OF FORM NO, 16 SUBM ITTED BY THE ASSESSEE, FURTHER IT IS NOTICED THAT NAME AND ADDRESS OF THE EMPLOYER SHOWN IS GENERAL ELECTRIC INTERNATIONAL INC., BRANCH OFFICE, BLOCK 4A, MEHRAULI- GURGAON ROAD, GURGAON, HARYANA-122002 I.E. INDIAN P ERMANENT ESTABLISHMENT (PE) SITUATED IN HARYANA (INDIA) AND ON THE SECOND PAGE PLACE SHOWN IS NEW DELHI. THUS, TAX ON SALARY HAS A LSO BEEN DEDUCTED I.T.A NO.884/AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. NITIN PRATAPRAI SHAH 5 UNDER SECTION 192 OF THE I. T. ACT, 1961 BY THE EMP LOYER AND THE SAME HAS ALSO BEEN DEPOSITED IN INDIA. (E). ON PERUSAL OF SCHEDULE TDS-1 IN RETURN FORMAT LTR-2 FILED BY ASSESSES FOR AY 2007-08, IT IS NOTICED THAT NAME AN D ADDRESS OF THE EMPLOYER MENTIONED IS' GENERAL ELECTRIC INTERNATION AL INC. SITUATED AT MEHRAULI-GURGAON ROAD, GURGAON, HARYANA-122002 I.E. DURING THE PERIOD UNDER REFERENCE, THE ASSESSEE WAS ALSO EMPLOYED BY PE OF GENERAL ELECTRIC INTERNATIONAL INC, , SITUATED AT MEHRAULI-GURGAON ROAD, GURGAON, HARYANA-122002 (F) FROM THE ABOVE FACTS, IT IS CLEAR THAT SHRI NIT IN PRATAPRAI SHAH HAS GOT SALARY FOR WORKING FOR INDIAN LOCATION AS WELL, AS HE HAS RECEIVED SALARY FROM GENERA! ELECTRIC INTERNATIONAL INC. I.E. INDIA N PERMANENT ESTABLISHMENT (PE) SITUATED IN GURGAON, HARYANA (IN DIA). UNDER THE CIRCUMSTANCES, SALARY EARNED AND RECEIVED IN INDIA IS TAXABLE IN INDIA WHEREAS SALARY EARNED IN THAILAND IS NOT TAXABLE IN INDIA IN VIEW OF THE INDIA- THAILAND DTAA. (G) IN VIEW OF THE ABOVE, SALARY AND ALLOWANCES OF RS. 18 , 82 , 764/- PAID BY GENERAL ELECTRIC INTERNATIONAL INC. SITUATED AT GUR GAON, HARYANA, WHICH IS CLAIMED EXEMPTED UNDER ARTICLE 15(1) OF INDIATHAIL AND DTAA, IS TAXABLE IN INDIA. 3. TO FURTHER ENQUIRE THE ISSUE, NOTICE U/S 133(6) OF THE ACT WAS SENT TO GENERAL ELECTRIC INTERNATIONAL INC. SITUATED AT GUR GAON, HARYANA BY SPEED POST, BUT THE SAME HAS BEEN RECEIVED AS UNSERVED.' 6. AFTER TAKING INTO CONSIDERATION THE SUBMISSION O F THE ASSESSEE AND THE REMAND REPORT OF THE ASSESSING OFFICER LD. CIT( A) DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 5. I HAVE GONE THROUGH THE FACTS OF THE CASE, THE CONTENTIONS OF THE ASSESSING OFFICER AND ASSESSEE AND THE TERMS OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN THAILAND AND INDIA. TH E IMPORTANT FACTS OF THE CASE ARE - A) THE ASSESSEE WAS A RESIDENT OF THAILAND DURING T HE YEAR UNDER QUESTION AND HAD SPENT ONLY 37 DAYS IN INDIA. B) THE SALARY WAS PAID TO HIM BY AN ENTERPRISE SITU ATED IN INDIA AND WAS PAID IN INDIA AND TDS WAS DEDUCTED ON IT. C) THE ASSESSEE WORKED DURING THE YEAR IN THAILAND AS PLANT MANAGER IN RAYONG TOWN AND WAS WORKING UNDER THE DI RECT SUPERVISION AND CONTROL OF THE THAILAND COMPANY. THE ASSESSING OFFICER HAS RELIED HEAVILY ON THE FAC T THAT THE SALARY WAS PAID IN INDIA, BY INDIAN CONCERN. THERE IS NO D OUBT THAT UNDER THE I.T.A NO.884/AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. NITIN PRATAPRAI SHAH 6 INCOME TAX ACT 1961, WITHOUT CONSIDERING THE DTAA, THE SALARY WOULD HAVE BEEN TAXABLE IN INDIA. HOWEVER THE PROVISIONS OF DO UBLE TAXATION AVOIDANCE AGREEMENT SUPERSEDE THE PROVISIONS OF THE ACT UNLESS SPECIFICALLY PROVIDED TO THE CONTRARY. THEREFORE WE NEED TO GO THROUGH THE PROVISIONS OF ARTICLE 15 OF THE DTAA, WHICH DEALS W ITH EMPLOYMENT. THE RELEVANT PART OF ARTICLE 15 IS REPRODUCED BELOW; 1. SUBJECT TO THE PROVISIONS OF ARTICLES 16, 17, 18 , 19, 20 & 21, SALARIES, WAGES OTHER SIMILAR REMUNERATION DERIVED BY A RESID ENT OF A CONTRACTING STATE IN RESPECT OF AN EMPLOYMENT SHALL BE TAXABLE ONLY IN THAT STATE UNLESS THE EMPLOYMENT IS EXERCISED IN TH E OTHER CONTRACTING STATE. IF THE EMPLOYMENT IS SO EXERCISED, SUCH REMU NERATION & IS DERIVED THEREFORE MAY BE TAXED IN THAT OTHER CONTRA CTING STATE. 2. NOTWITHSTANDING THE PROVISIONS OF PARAGRAPH 1, ' REMUNERATION DERIVED BY A RESIDENT OF A CONTRACTING STATE IN RESPECT OF AN EMPLOYMENT EXERCISED IN THE OTHER CONTRACTING STATE SHALL BE T AXABLE ONLY IN THE FIRST MENTIONED STATE IF :- (A) THE RECIPIENT IS PRESENT: IN THE OTHER STATE FO R 3 PERIOD OR PERIODS NOT EXCEEDING IN THE AGGREGATE 183 DAYS IN THE RELIANT 'PREVIOUS YEAR' OR 'TAX YEAR' CONCERNED, AS THE CA SE MAY BE, AND (B) THE REMUNERATION IS PAID BY, OR ON BEHALF OF, A N EMPLOYER WHO IS NOT A RESIDENT OF THE OTHER STATE/ AND (C) THE REMUNERATION IS NOT BORNE BY AN ENTERPRISE OF THE OTHER CONTRACTING STATE OR BY 3 PERMANENT ESTABLISHMENT O R A FIXED BASE WHICH THE EMPLOYER HAS IN THE OTHER STATE.' IT IS CLEAR THAT THE ASSESSEE WAS A RESIDENT OF THA ILAND DURING THE YEAR. HE WORKED PHYSICALLY IN THAILAND, HE'S WORKING WAS UTI LIZED BY COMPANY OF THAT COUNTRY, THE SUPERVISION AND CONTROL OVER HIS WORK WAS WITH THAT COMPANY AND IT CAN BE SAID WITHOUT ANY DOUBT THAT H E EXERCISED HIS EMPLOYMENT IN THAILAND. IN THE CIRCUMSTANCES THE C ONDITIONS OF ARTICLE 15 (1) ARE SQUARELY APPLICABLE AND THEREFORE THE SALAR Y IS TAXABLE IN THAILAND. THE DECISION OF AUTHORITY OF ADVANCE RULINGS IN CAS E OF BRITISH GAS INDIA (P) LTD 2B7 ITR 162 IS SQUARELY ON THE SIMILAR FACT S AND SALARY WAS HELD NOT TAXABLE IN INDIA. THE CONDITIONS OF ARTICLE 15( 2) TOO WOULD NOT BE MET BECAUSE THE BASIC CONDITION OF EXERCISE OF EMPLOYME NT IN INDIA IS NOT THERE. HE HAS ALREADY PAID TAX IN THAILAND. THE DED UCTION OF TDS IN INDIA WOULD NOT BE OVERRIDING THE PROVISIONS OF THE TREAT Y AND IS NOT A MATERIAL FACT. THEREFORE IT IS HELD THAT THE SALARY INCOME I N QUESTION OF THE APPELLANT IS TAXABLE IN THAILAND. I.T.A NO.884/AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. NITIN PRATAPRAI SHAH 7 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT ASSESSEE WA S A RESIDENT OF THAILAND DURING THE YEAR UNDER APPEAL AND WORKED UNDER THE S UPERVISION AND CONTROL OF THE COMPANY BASED IN THAILAND. ON THESE UNDISPUTED FACTS, THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE CONDITIONS OF ARTICLE 15(1) OF INDIA-THAILAND DTAA WERE SQUARELY APPLICAB LE AND THEREFORE SALARY RECEIVED BY THE ASSESSEE WAS TAXABLE ONLY IN THAILAND AND NOT IN INDIA TAX ON WHICH HAS ALREADY BEEN PAID IN THAILAN D. SINCE THIS FINDING OF LD. CIT(A) REMAINED UNCONTROVERTED BEFORE US BY THE REVENUE, WE FEEL NO NEED TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THE SAME IS HEREBY UPHELD 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 30/05/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,