2016 (8) TMI 1498 - AT - Income Tax

Disallowance of exemption of salary income claimed under Article 15(1) of DTAA between India and China - Assessee is non-resident Indian resident of China - HELD THAT - In view of the specific condition under Article 23 of the India-China DTAA, the assessee is not eligible to claim relief under article 15(1) since the assessee is non-resident and as per Article 23 of DTAA between India and China allows exemption only to a resident Indian. Under the above facts and circumstances, the assessee is not eligible to claim exemption under section 5(2) of the Income Tax Act and accordingly, the ground raised by the assessee is dismissed. Disallowance of rental income from house property - CIT(A) confirming the rental income of the property higher market value of the property during the said period - HELD THAT - Considering the area, location, etc., the value of the property taken by the AO is more or less double for the Medavakkam property, the rental income worked out by the AO should be 50%, as has been rightly claimed by the assessee, which should be accepted. Admittedly, the assessee has not filed any documentary evidence before the Tribunal with regard to the claim of rental income. Moreover, the assessee has not raised such issue before the AO or before the ld. CIT(A). AO needs to verify the correctness of the claim of the assessee - remit the matter to the file of the AO to verify and decide the issue afresh after allowing an opportunity of hearing to the assessee. This ground of appeal of the assessee is allowed for statistical purpose - Appeal filed by the assessee partly allowed for statistical purposes.

Summary

Issues:
1. Disallowance of exemption of salary income under DTAA between India and China.
2. Disallowance of rental income from house property.

Analysis:
1. The appeal concerns the disallowance of exemption of salary income claimed under Article 15(1) of the DTAA between India and China and the disallowance of rental income from a house property. The assessee, a resident of China, claimed relief under Article 15(1) of the DTAA for salary income earned in India. However, the Assessing Officer disallowed the claim as the assessee was a non-resident of India, making him ineligible for the relief under Article 23 of the DTAA. The CIT(A) upheld the disallowance, stating that only residents are entitled to claim such relief. The Tribunal noted that previous case laws cited by the assessee were not applicable to the current scenario. The Tribunal upheld the disallowance, ruling that the assessee, being a non-resident of India, was not eligible for the exemption under the Income Tax Act.

2. Regarding the rental income from a property in Medavakkam, Chennai, the Assessing Officer estimated the income at INR 10,000 per month due to the lack of evidence provided by the assessee. The CIT(A) affirmed this estimation. However, the assessee contended that the property's value considered by the Assessing Officer was for a different property. The Tribunal agreed with the assessee, remitting the matter back to the Assessing Officer for verification. The Tribunal directed the Assessing Officer to reevaluate the rental income issue after providing the assessee with a hearing opportunity. Consequently, the Tribunal partially allowed the appeal for statistical purposes.

In conclusion, the Tribunal upheld the disallowance of the exemption of salary income under the DTAA between India and China due to the assessee's non-resident status. The Tribunal also directed a reevaluation of the rental income issue, emphasizing the need for proper verification and consideration of relevant evidence.