2016 (6) TMI 215 - AT - Income Tax

Remuneration received directly remitted from foreign to the NRE account - accrual of income - Held that - The income in the present case did not suffer tax in any other jurisdiction nor was it received in any other tax jurisdiction. The receipt in the NRE account in India is the first point of receipt by the assessee and prior to that it cannot be said that the assessee had control over the funds that had deposited in the NRE account from the employer. To sum up, the facts of the instant case directly fits into the facts of the Third Member decision relied upon by the Learned DR 2001 (12) TMI 873 - ITAT MUMBAI and respectfully following the same , we hold that the salary received in India is taxable in India in terms of section 5(2)(a) - Decided against assessee.

Issues Involved:
1. Taxability of remuneration received by a non-resident in an NRE account in India.
2. Interpretation of Section 5(2)(a) of the Income-tax Act, 1961 regarding income received in India.
3. Applicability of judicial precedents in determining the taxability of income received in India.

Detailed Analysis:

Issue 1: Taxability of Remuneration Received by a Non-Resident in an NRE Account in India

The core issue in this appeal was whether the remuneration of ?14,79,598 received by the assessee, a non-resident Marine Engineer, directly remitted from a foreign company to his NRE account in India, could be taxed under the Income-tax Act, 1961.

The assessee argued that the income received in foreign currency and remitted to his NRE account should be exempt from taxation under Section 5 of the Act. The Assessing Officer (AO) countered that any income received in India, regardless of the currency, is taxable under Section 5(2)(a) of the Act. The AO added ?14,79,598 to the assessee’s income, asserting that the salary was received in India.

Issue 2: Interpretation of Section 5(2)(a) of the Income-tax Act, 1961

The AO and CIT(A) interpreted Section 5(2)(a) to mean that any income received in India is taxable, irrespective of whether it is in Indian or foreign currency. The assessee contended that the term "received in India" should be interpreted to mean income received in Indian currency within India. The CIT(A) upheld the AO’s addition, emphasizing that the point of receipt of income is crucial and, in this case, the income was received in India.

Issue 3: Applicability of Judicial Precedents

The assessee cited various judicial precedents, including decisions from the Karnataka High Court and Bombay High Court, arguing that income should be considered received at the point of payment by the foreign company, not where it is transferred. The Revenue, represented by the DR, argued that these cases did not directly address the issue under Section 5(2)(a) but rather under Section 5(2)(b), which deals with income accruing or arising in India.

The Tribunal examined the reliance on the Third Member decision in Captain A.L. Fernandez vs. ITO, where it was held that salary received in India is taxable under Section 5(2)(a) regardless of where the services were rendered. The Tribunal found that the assessee’s argument that the salary was received on high seas and then transferred to India was unsupported by evidence.

The Tribunal noted that if the assessee’s interpretation were accepted, it would render Section 5(2)(a) redundant. The Tribunal emphasized that the statutory provision should be interpreted to make it workable rather than redundant.

Conclusion:

The Tribunal held that the salary received in India is taxable under Section 5(2)(a) of the Income-tax Act, 1961. The appeal was dismissed, affirming the AO and CIT(A)’s decision to tax the income received in the assessee’s NRE account in India. The Tribunal preferred the Third Member decision in Captain A.L. Fernandez vs. ITO as a binding precedent and found that the facts of the case directly fit into this decision.

Order Pronouncement:

The appeal of the assessee was dismissed, and the order was pronounced in the open court on 01.06.2016.

← Previous Next →