2011 (3) TMI 229 - HC - Income Tax

Residential status - Non-resident - The assessee was an Indian, at the relevant point of time he was a non-resident - Working for a foreign company - For the services rendered in the international waters outside the country he was paid salary - He received the salary on board the ship - A particular amount was allocated to be transferred to his NRE account in India - Merely because a portion of his salary was credited to his account in India, that would not render him liable to tax in India when the services was rendered outside India, salary was paid outside India and his employer was a foreign employer - The provisions of the Act were not attracted to the salary of the assessee - Therefore, the Tribunal was justified in upholding the order passed by the CIT(A) and in setting-aside the order passed by the Assessing Officer.

Summary

Issues:
1. Taxability of salary income earned by a non-resident individual working for a foreign company in international waters.
2. Applicability of Indian tax laws on salary received in India by a non-resident individual for services rendered outside India.

Analysis:
1. The case involved a non-resident individual who worked for a foreign company in international waters and received his salary outside India. The Assessing Officer contended that the income fell under the purview of Indian tax laws. However, the Tribunal held that since the individual was not an employee of any Indian company, the salary accrued outside India could not be taxed in India, even if a portion of it was remitted to his NRE account in India. The Tribunal relied on previous judgments and concluded that the provisions of the Income-tax Act were not applicable to the salary earned by the individual in this case.

2. The key point of contention was whether the salary income of the non-resident individual, earned for services rendered outside India, was liable to tax in India merely because a portion of it was transferred to his NRE account in India. The Tribunal upheld that the individual, being a non-resident and working for a foreign employer, was not subject to Indian tax laws for income earned outside the country. The Tribunal's decision was based on the principle that the place of accrual and payment of the salary, as well as the employer being a foreign entity, exempted the individual from tax liability in India. The Tribunal's ruling was further supported by previous judicial precedents, strengthening the case for non-taxability of the individual's salary income in India.

3. In conclusion, the High Court dismissed the revenue's appeal challenging the Tribunal's decision. The Court agreed with the Tribunal's reasoning that the non-resident individual's salary income earned for services in international waters, paid outside India by a foreign employer, and remitted to India, did not attract Indian tax liability. The Court emphasized that the individual's non-resident status and the nature of his employment relationship with a foreign company exempted him from the purview of Indian tax laws, affirming the Tribunal's decision and rejecting the revenue's appeal.