2018 (3) TMI 1645 - AT - Income Tax

Income accrued in India - rectification of mistake - Income from services rendered to clients outside India - taxability in India or not? - Held that - We find merit in the arguments of the Ld.AR for the assessee, for the reason that the Tribunal having held that only income earned from services in India is taxable in India and also observed that order that the details of income attributable to services in India and outside India were furnished before the AO, erred in setting aside the issue to the file of the AO for verification of facts. Therefore, we are of the view that there is a mistake apparent in the order of the Tribunal insofar as setting aside the issue to the file of the AO and hence, we are of the considered view that it requires rectification u/s 254(2) of the Act. Accordingly, we modify the order passed by the Tribunal and direct the AO to delete addition made towards income received from services rendered outside India. - Decided in favour of assessee.

Summary

Issues:
Rectification of order passed by ITAT regarding taxation of income from services rendered in India and outside India.

Analysis:
The assessee filed a miscellaneous application seeking rectification of the order passed by ITAT, Mumbai regarding the taxation of income from services rendered in India and outside India for AY 2011-12 under section 254(2) of the Income-tax Act, 1961. The Ld.AR for the assessee argued that the Tribunal erred in setting aside the matter to the AO for examination of facts despite the details of income attributable to services in India and outside India being furnished before the AO. The Ld.DR, on the other hand, supported the ITAT's decision, stating that the assessee failed to provide the bifurcation of income earned from services in India and outside India.

The Tribunal had to determine whether income from services rendered to clients outside India is taxable in India. The ITAT, following its decision for AY 1998-99, held that only income earned from services rendered in India is taxable in India. However, the Tribunal set aside the matter to the AO for further examination of facts regarding the rendering of services in India. The assessee contended that the Tribunal's decision to set aside the matter was based on an oversight, as all relevant details were provided to the AO during assessment proceedings and before the DRP. The Tribunal acknowledged that the details of income attributable to services in India and outside India were indeed submitted before the AO and found to be in order.

After hearing both parties, the Tribunal found merit in the arguments of the Ld.AR for the assessee. The Tribunal concluded that there was a mistake apparent in its order as it erred in setting aside the issue to the AO for verification of facts, despite the details of income being furnished and found to be in order. Therefore, the Tribunal allowed the miscellaneous application filed by the assessee, directing the AO to delete the addition made towards income received from services rendered outside India. The order was pronounced in the open court on 12th March 2018.