PRITPAL SINGH BASAN,JAMSHEDPUR V. .COMMISSIONER OF INCOME TAX - APPEALS, KOLKATA

ITA 1003/KOL/2024

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The case involves Pritpal Singh Basan, a marine engineer employed by a foreign shipping company, who appealed against the orders of the Commissioner of Income Tax (Appeals) and the Assessing Officer, which taxed his salary received from abroad. The primary legal issue was whether the income earned by the assessee, a non-resident, and credited to his NRE account in India, was taxable in India. The Tribunal considered the provisions of the Income Tax Act, relevant judicial precedents, and the CBDT Circular No. 13/2017, which clarified the tax treatment of salaries received by non-resident seafarers. The Tribunal found that the income was not taxable in India as it was accrued and received outside India and merely credited to an NRE account in India.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 469568 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Other Referred Cases: CIT Versus Ogale Glass Works Limited [1954] 25 ITR 529, Tapas Kumar Bandopadhyay Vs DDIT (Int. Tax)-3(1), Kolkata in ITA No. 70/Kol/2016 dated 01.06.2016, Tapan Kumar Patanaik Vs DDIT(IT)-3(1), Kolkata in ITA No. 68/Kol/2016 dated 10.06.2016, Smt. Sumana Bandopadhyay & Another Vs The Deputy Director of Income Tax (International Taxation) GA 3745 of 2016, ITAT 374 of 2016 reported in 2017(7) TMI 503-Calcutta High Court
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Condonation of delay; Reasonable cause; Salary income; Rectification of order; Services rendered outside India; Residential status
• Section: 144; 250; 154; 90; 13; 5(2); 6(6)

Judgement Text

"आयकर अपीलीय अधिकरण कोलकाता 'ए' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA श्री प्रदीप क ुमार चौबे, न्याधयक सदस्य एवं श्री राक ेश धमश्रा, लेखा सदस्य क े समक्ष Before SRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER & SRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. Nos.: 957 & 1003/KOL/2024 Assessment Years: 2012-13 & 2014-15 Pritpal Singh Basan Vs. DCIT, Circle-2(1), IT, Kolkata (Appellant) (Respondent) PAN: ACZPB3606L Appearances: Assessee represented by :Sumanta Saha, AR & Kirti Kapoor, AR. Department represented by : Pradip Kumar Biswas, Add. CIT. Date of concluding the hearing : November 11th, 2024 Date of pronouncing the order : December 26th, 2024 ORDER PER BENCH: Both the appeals filed by the assessee pertaining to the Assessment Years (in short ‘AY/AYs’) 2012-13 & 2014-15 are directed against the separate orders passed u/s 250 of the Income Tax Act, 1961 (in short, the ‘Act’) by the Commissioner of Income Tax (Appeals)-22, Kolkata [hereinafter referred to as the ‘ld. CIT(A)’] dated 14.02.2017 & 30.03.2017 respectively. Since the issues raised in both these appeals are common and the facts are identical, therefore, they were heard together and are being decided vide this common order for the sake of convenience and brevity. Page | 2 I.T.A. Nos.: 957 & 1003/KOL/2024 Assessment Years: 2012-13 & 2014-15 Pritpal Singh Basan. Page 2 of 11 1.1. The Registry has informed that both the appeals filed by the assessee are barred by limitation of time by 2573 and 2529 days respectively. An application seeking condonation of delay has been filed by the assessee along with Form No. 36 which, for A.Y. 2012-13, is stating as under: We are writing to you to request the condonation of delay in filing an application to the Appellate Tribunal against the appellate order dated 14-02- 2017. Due to circumstances beyond our control, there has been a delay in submitting the application for appeal. Brief facts of the case: 1.1 The assessee earning income by way of salary from a foreign shipping company. As per Section 6(6) the residential status of assessee is NRI in Assessment year 2012-13. The income earned by the ways of salary is accrued and received to taxpayer outside India. 1.2 But unfortunately, an order u/s 144 was passed on 20.03.2015, wherein the Learned AO has taken view that amount transmitted by employer and credited in NRE account of assessee in India is income received in India as per Section-5(2)(a) and accordingly income was charged to tax and demanding tax of Rs. 20,81,665/-. 1.3 Aggrieved by the order, the assessee has filed an appeal on 26.04.2016 with the CIT (A). 1.4 However, the Appellate Order was issued by your office on 14.02.2017 without considering the facts and grounds of appeal as filed by the assessee. 1.5 In the meantime, CBDT has issued a Circular No. 13/2017 dated 11.04.2017 whereby, it is clarified that - “the salary accrued to a non- resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income because the said salary has been credited in the NRE account maintained with an Indian bank by the seafarer”. The reasons for the delay in filing appeal with the ITAT are as follows: i. Shortly after the circular was issued, the assessee requested the Commissioner of Income Tax (Appeals) (CIT(A)) to rectify the order based on the CBDT circular. ii. Following instructions from the relevant officer, the assessee submitted the required documents periodically. Reassured by the officer, the Page | 3 I.T.A. Nos.: 957 & 1003/KOL/2024 Assessment Years: 2012-13 & 2014-15 Pritpal Singh Basan. Page 3 of 11 assessee was informed that the order would be rectified. However, just before issuing the rectified order, the officer in charge was transferred. iii. The assessee once again submitted and explained all relevant matters to the new officer in charge. Despite these efforts, no fruitful outcome was achieved. iv. The series of correspondence and communication with the concerned authority is tabulated here below. Particulars Dates Rectification Petition Filed with the circle office of the DCIT 10.03.2017 Rectification Petition Filed with the CIT (A) 27.03.2017 Rectification Petition Filed with the CIT (A) based on the CBDT circular No. 13/2017 dated 11.04.2017 17.04.2017 An updation to the rectification filed 18.07.2017 Physical rectification request submitted with the CIT (A) along with all the supporting documents submitted 22.03.2021 & 24.03.2021 Again, a rectification petition was filed with the jurisdictional office 16.01.2024 The assessee has diligently pursued all available avenues to adhere to the corrective measures mandated by the provisions of the Income Tax Act. However, rectification of the order has not been possible from your office despite our efforts. At present, the assessee is unable to file the rectification petition on the income tax portal as the rectification rights has been transferred to the jurisdictional AO. Having explored all possible avenues, the taxpayer now intends to appeal to the ITAT as the sole recourse to mitigate the demand and rectify the aforementioned order. While we acknowledge a significant delay in approaching the ITAT, we assure you that the delay was not intentional and was caused by genuine reasons beyond our control. We also understand the importance of adhering to timelines set by the Tribunal and regret any inconvenience caused by the delay. We humbly request your kind consideration in condoning the delay and allowing the submission of the application for appeal. We assure you of full cooperation and compliance with all necessary procedures going forward.” 1.2. During the course of the hearing, the assessee has also filed an affidavit, the contents of which are as under: Page | 4 I.T.A. Nos.: 957 & 1003/KOL/2024 Assessment Years: 2012-13 & 2014-15 Pritpal Singh Basan. Page 4 of 11 In the matter of Pritpal Singh Basan, PAN: ACZPB3606L, Asst Year 2012- 13 We, Sumanta Saha & Kirti Kapoor, the Authorised Representatives of the assessee, Pritpal Singh Basan, hereby solemnly affirm & declare as under: 1. That the assesse received the order u/s 250 of the Income tax Act on 14.02.2017; 2. That the appeal was to be filed by 14.04.2017; 3. That despite a series of communication and correspondences presented before the CIT(A) and jurisdictional AO from time to time, the said order was not rectified or rejected; 4. That the assesse has filed an appeal on 29.04.2024 and 5. That the delay in filing the appeal was not intentional and was caused by genuine reasons beyond our control as cited in the condonation letter also. We further declare that the above statements are true and correct to the best of our knowledge and belief. For Pritpal Singh Basan -Sd- Sumanta Saha & Kirti Kapoor (Authorized Representatives) 1.3 A similar application with slight modification has been filed for the A.Y. 2014-15. Considering the peculiar facts of the case, the condonation of delay application and the reasons stated therein and the non-disposal of the rectification application filed on 10.03.2017 which was to be decided within 6 months from the end of the month in which the application was received as per the provisions of sub-section (8) of section 154 of the Act but has not been decided, we are satisfied that the assessee was prevented by sufficient and reasonable cause from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit both the appeals for adjudication on merits. Page | 5 I.T.A. Nos.: 957 & 1003/KOL/2024 Assessment Years: 2012-13 & 2014-15 Pritpal Singh Basan. Page 5 of 11 2. We will take up ITA No. 957/KOL/2024 for A.Y. 2012-13 as the lead case. The assessee has taken the following grounds of appeal in A.Y. 2012-13: ITA No. 957/KOL/2024 “1. For that given the facts and circumstances of the case learned CIT(A) erred by confirming the order of the Learned AO, ignoring undisputed facts that the assessee was an NRI, worked out of India, the salary was earned, accrued & received out of India and the same being credited by the employer in their books of account maintained out of India in favour of assessee, in foreign exchange, and after such receipt out of India, a part of salary was remitted in foreign exchange amounting to USD 84580.16 and then credited in NRE Bank account in India in Indian Rupees by the bank. 2. For that learned CIT(A) was wrong in holding that the amount credited in the NRE Bank account on conversion of salary remitted from abroad, in foreign exchange was received in India and was taxable as per S. 5(2)(a) of the Income-tax Act, 1961. 3. For that findings of learned CIT(A) are wrong and contrary to the law as laid down in the case of CIT Versus Ogale Glass Works Limited [1954] 25 ITR 529. 4. For that applying the law laid down in the case of Ogale Glass (supra.) learned AO may be directed to delete the addition on account of salary remitted and then credited in NRE Bank account in India amounting to Rs. 4078283/-. 5. For that despite several submissions and rectification petitions filed on various dates with the CIT (A) by the assessee/AR based on the CBDT Circular No. 13/2017 dated 11.04.2017 along with the corrigendum to Circular No. 13/2017 dated 11.04.2017, the learned CIT (A) has not revised the order/rejected the petition. 6. For that during pendency of the appeal recovery of disputed demand may be stayed. 7. For that honorable Tribunal may allow the cost of appeal in favour of the assessee. 8. For that appellant seeks kind permission to raise new contentions and grounds of appeal.” 3. Brief facts of the case of the assessee as per the statement of facts are that the assessee is a marine engineer and remained for most of time out of India and totally relied on persons looking after filing of Page | 6 I.T.A. Nos.: 957 & 1003/KOL/2024 Assessment Years: 2012-13 & 2014-15 Pritpal Singh Basan. Page 6 of 11 return of income and representation. During the year, the assessee was employed in a foreign company based at Singapore as an Engineer on board on vessels plying in international waters and earned salary which was accrued and credited in the account of the assessee by the employer and thus was received out of India as claimed. Records before the Ld. AO showed that the income earned out of India was credited in an NRE account of the assessee in foreign exchange. However, the Ld. AO has taken a view that in computation of income, the assessee has claimed exemption u/s 90 while the assessee had not claimed any exemption in his return of income and the assessee had not submitted any copy of agreement/contract with the employer and the relevant bank accounts of the assessee. As such the Ld. AO has treated the salary as taxable in India. The assessee’s contention was that the salary income in foreign exchange to a non-resident assessee whose salary is accrued/ received outside India and remitted to India is to be treated as foreign income of the assessee which is not taxable in India. By the process of remittance of funds from out of India to the NRE account of the assessee, the amount was credited in NRE account of the assessee. This process was subsequent to the process of accrual of salary, crediting of account of the assessee by the employer and payment made by the bank of employer out of India and then transmitted from out of India to an account in India. It is contented that the Ld. CIT(A) was incorrect in holding that the salary was received in India and thereby upholding the order of the Ld. AO. Aggrieved with the order of the Ld. CIT(A) where part relief was allowed on other issues, the assessee has filed the appeal before the Tribunal. Page | 7 I.T.A. Nos.: 957 & 1003/KOL/2024 Assessment Years: 2012-13 & 2014-15 Pritpal Singh Basan. Page 7 of 11 4. In the statement of facts, the assessee has relied upon several judicial pronouncements and has also enclosed a copy of the Circular No. 13/2017 along with the Corrigendum to the Circular. 5. The assessee filed a rectification petition u/s 154 of the Act on 27.03.2017 by relying upon the decision in the case of CIT Vs. Ogale Glass Works Ltd. [1954] 25 ITR 529 (SC) and attaching the Circular No. 13/2017 dated 11.04.2017 and corrigendum to the Circular No. 13/2017 wherein line 4 of paragraph 2 of the Circular, ‘foreign ship’ was to be read as ‘foreign going ship (with Indian flag or foreign going flag)’. Since the rectification petition has not been decided, therefore, the assessee has filed the appeal belatedly. 6. Rival contentions were heard and the submissions made and the record have been examined. The Ld. CIT(A) while deciding the appeal had issued directions to the Ld. AO to verify the claim of the assessee that the total salary income of ₹44,60,630 was received, instead of the income returned at ₹47,76,015 and the same could be verified for ₹40,78,283 only and the Ld. AO was directed to reconcile the same after providing an opportunity to the appellant while giving effect to the appellate order. As regards the taxability of the income, the Ld. CIT(A) relied upon the decisions in the case of Tapas Kumar Bandopadhyay Vs DDIT (Int. Tax)-3(1), Kolkata in ITA No. 70/Kol/2016 dated 01.06.2016 by the “C” Bench, Kolkata and Tapan Kumar Patanaik Vs DDIT(IT)-3(1), Kolkata in ITA No. 68/Kol/2016 dated 10.06.2016 and upheld the action of the Ld. AO. However, a perusal of the Circular No. 13/2017 dated 11.04.2017, which is clarificatory in nature, shows that the salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because the said salary has been credited in the NRE account Page | 8 I.T.A. Nos.: 957 & 1003/KOL/2024 Assessment Years: 2012-13 & 2014-15 Pritpal Singh Basan. Page 8 of 11 maintained with an Indian bank by the seafarer. The relevant extracts of the Circular No. 13/2017 dated 11.04.2017 and the corrigendum issued vide Circular No. 17/2017 dated 26.04.2017 are as under: Circular No. 13/2017 F. No: 500/07/2017-FT & TR-V Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Foreign Tax & Tax Research- FT & TR-V Division New Delhi, dated 11.04.2017 Subject: Clarification regarding liability to Income-tax in India for a non-resident seafarer receiving remuneration in NRE (Non Resident External) account maintained with an Indian Bank. Representations have been received in the Board that income by way of salary, received by non- resident seafarers, for services rendered outside India on-board foreign ships, are being subjected to tax in India for the reason that the salary has been received by the seafarer into the NRE bank account maintained in India by the seafarer. 2. The matter has been examined in the Board. Section 5(2)(a) of the Income-tax Act provides that only such income of a non-resident shall be subjected to tax in India that is either received or is deemed to be received in India. It is hereby clarified that salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because the said salary has been credited in the NRE account maintained with an Indian bank by the seafarer. (Subbash Jangala) Under Secretary (FT&TR-V) {emphasis supplied} 6.1 The corrigendum issued vide circular No. 17/2017 mentions that in Line 4 of Paragraph No. 2 of the captioned Circular, the word \"foreign Page | 9 I.T.A. Nos.: 957 & 1003/KOL/2024 Assessment Years: 2012-13 & 2014-15 Pritpal Singh Basan. Page 9 of 11 ship\" may be read as \"foreign going ship (with Indian flag or foreign flag)\". 7. In view of the CBDT Circular, the assessee is entitled to the claim of relief from the applicability of the provisions of section 5(2)(a) of the Act, which is also allowable to the income accrued outside India in view of the decision of the jurisdictional High Court in the case of Smt. Sumana Bandopadhyay & Another Vs The Deputy Director of Income Tax (International Taxation) GA 3745 of 2016, ITAT 374 of 2016 reported in 2017(7) TMI 503-Calcutta High Court wherein it is held that “We concur with the ratio of the decision of the Karnataka High Court and in our opinion the interpretation be given to sub Section (b) of Section 5(2) of the Act would also apply to Section 5(2)(a) of the Act. The Circular is clarificatory in nature and is applicable for construing the aforesaid provision for the relevant assessment year. In our opinion the authorities under the Income Tax Act did not properly apply the provisions of law to the case of the assessee. We are of the view that the Assessing Officer was wrong in adding the aforesaid sum to the income chargeable to tax of the assessee for the relevant assessment year. We accordingly allow the appeal and answer the question framed by us in favour of the assessee.” Hence, the salary received/accrued outside India will not be taxable as per the provisions of section 5(2)(a) or 5(2)(b) merely because the same has been credited in an NRE account in India. 8. Hence, in view of the Circular No. 13/2017 read with the corrigendum thereof and the order of the Hon’ble jurisdictional High Court in the case of Smt. Sumana Bandopadhyay & Another (supra), Ground Nos. 1 & 2 of the appeal are allowed and the income is held to be not taxable merely because it is credited in the NRE account of the assessee and the Page | 10 I.T.A. Nos.: 957 & 1003/KOL/2024 Assessment Years: 2012-13 & 2014-15 Pritpal Singh Basan. Page 10 of 11 findings of the Ld. CIT(A) in this regard are reversed. Other grounds of appeal being general in nature or related to Ground Nos. 1 & 2 are not being adjudicated upon separately. 7. Since the issues in ITA No. 1003/Kol/2024 for A.Y. 2014-15 are also similar, the findings of A.Y. 2012-13 will mutatis mutandis apply for A.Y. 2014-15 as well. 8. In the result, both the appeals filed by the assessee are allowed. Order pronounced in the open Court on 26th December, 2024. Sd/- Sd/- (Pradip Kumar Choubey) (Rakesh Mishra) Judicial Member Accountant Member Bidhan (P.S.) Page | 11 I.T.A. Nos.: 957 & 1003/KOL/2024 Assessment Years: 2012-13 & 2014-15 Pritpal Singh Basan. Page 11 of 11 Dated: 26th December, 2024 Copy of the order forwarded to: 1. Pritpal Singh Basan, Mercury-31, Aastha Space Town, Sankosai Dimna Road, Mango Jamshedpur, Jharkhand, 831018. 2. DCIT, Circle-2(1), IT, Kolkata. 3. CIT(A)-22, Kolkata. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata "