2014 (1) TMI 1317 - AT - Income Tax

Taxability of Income in India - Employment outside India Held that - The decision in British Gas India (P) Ltd. 2006 (7) TMI 582 - AUTHORITY FOR ADVANCE RULINGS followed A careful reading of cl. (c) of s. 6(1) Expln. (a) would show that the requirement of the Explanation is not leaving India for employment but it is leaving India for the purposes of employment outside India - For the purpose of the Explanation, an individual need not be an unemployed person who leaves India for employment outside India - the assessee was not resident during the relevant period as he has left India for the purpose of employment outside India - His stay during the financial year was less than 182 days in India thus, his status was non-resident during the relevant financial year. Relying upon Shri Anurag Chaudhary v. CIT 2010 (2) TMI 15 - AUTHORITY FOR ADVANCE RULINGS - All the evidences establish that assessee was non-resident and earned salary outside India which was received by him outside India and therefore was not taxable in India - order of the CIT(A) upheld Decided against Revenue.

Summary

Issues:
1. Taxability of salary income earned outside India by a non-resident.
2. Application of provisions of Income-tax Act, 1961 to determine tax liability.
3. Interpretation of residential status based on days spent in India during the relevant financial year.

Analysis:
1. Taxability of Salary Income:
The appeal before the Appellate Tribunal ITAT Delhi stemmed from the CIT (Appeals) order regarding the taxability of salary income earned by the assessee outside India. The assessee, a non-resident, contended that the salary accrued and arose in China where he was employed by Whirlpool China. The CIT (A) granted relief to the assessee based on the non-resident status and the fact that the income was earned and received outside India. The Tribunal upheld this decision, emphasizing that income earned outside India by a non-resident is not taxable in India.

2. Provisions of Income-tax Act, 1961:
The Tribunal considered the provisions of the Income-tax Act, 1961 to determine the tax liability of the assessee. It was highlighted that as per Section 6 of the Act, in the case of a non-resident, only income received or deemed to be received in India, or arising or deemed to arise in India, is taxable. The Tribunal analyzed the evidence presented, including the assessee's employment with Whirlpool China, salary credited in Hong Kong, and the duration of stay in India, to conclude that the salary income was rightfully excluded from taxable income.

3. Interpretation of Residential Status:
The issue of residential status was crucial in determining the taxability of the salary income. The Tribunal referred to legal precedents, such as the case of Anurag Chaudhary, to establish that the assessee's non-resident status was justified due to spending less than 182 days in India during the relevant financial year. The Tribunal also cited the case of British Gas India (P) Ltd. to support the interpretation that leaving India for employment outside India leads to non-resident status. Therefore, the Tribunal affirmed that the assessee's status as a non-resident during the relevant period rendered the salary income earned in China non-taxable in India.

In conclusion, the Appellate Tribunal ITAT Delhi dismissed the revenue's appeal, upholding the decision that the salary income earned by the non-resident assessee outside India was not taxable in India. The judgment relied on the provisions of the Income-tax Act, 1961 and legal interpretations of residential status to support the non-taxability of the income.