2019 (4) TMI 759 - AT - Income Tax

Salary earned in USA - Global income - Income accrued in India - On becoming a dual resident India & USA the question arises as to which country has the right to tax his income - entire global income is liable to tax in India - Article 4(2) of DTAA with USA - tiebreaker rule for Centre of Vital Interests - HELD THAT - It is no doubt true that the Tax Residency Certificate TRC was filed by the assessee only before the CIT (A) but we are of the view that the CIT(A) has made only a passing reference to the TRC and has not based his conclusion that the assessee is a tax resident of USA for the period between 11.08.2012 to March 2013 on the basis of the same. CIT(A) has applied the test of closer personal and economic relations (centre of vital interest) as he found that the assessee had a permanent home in India as well as US. His conclusions on the basis of the facts presented by the assessee that supporting evidence cannot be faulted with. We are therefore of the view that there is no merit in ground raised by the revenue.

Summary

Issues Involved:
1. Acceptance of fresh evidence by CIT(A) without remand report.
2. Determination of assessee's residential status.
3. Concept of split residency.
4. Exemption claim under Article 16(1) of the DTAA.

Issue-wise Detailed Analysis:

1. Acceptance of Fresh Evidence by CIT(A) Without Remand Report:
The revenue argued that the CIT(A) erred in accepting fresh evidence, specifically the Tax Residency Certificate (TRC), without calling for a remand report from the Assessing Officer (AO) or allowing its verification. The Tribunal noted that although the TRC was submitted before the CIT(A), the CIT(A)'s conclusion that the assessee was a tax resident of the USA for the period between 11.08.2012 to March 2013 was not solely based on the TRC. Instead, the CIT(A) applied the test of closer personal and economic relations (centre of vital interest) and found supporting evidence for the assessee's claims. Therefore, the Tribunal found no merit in the revenue's objection on this ground.

2. Determination of Assessee's Residential Status:
The AO determined that the assessee was a resident of India for the Assessment Year (AY) 2013-14 based on his physical presence exceeding 182 days. The AO dismissed the assessee's claim of closer personal and economic relations to the USA during the period from 11.08.2012 to March 2013, arguing that personal and economic relations are qualitative and cannot be compartmentalized. The CIT(A), however, concluded that the assessee's centre of vital interest was closer to the USA for the period in question, based on the second tie-breaker test under Article 4(2) of the Indo-US DTAA. The Tribunal upheld the CIT(A)'s findings, noting that the test of residency was correctly applied based on the DTAA provisions rather than the Income Tax Act, 1961.

3. Concept of Split Residency:
The AO rejected the concept of split residency, stating that it is not recognized under the provisions of the Income Tax Act, 1961, or the DTAA. The CIT(A) did not specifically address this concept but focused on the tie-breaker rules under the DTAA to determine the assessee's residency status. The Tribunal did not find it necessary to delve into the concept of split residency, as the determination of residency was adequately addressed through the DTAA provisions.

4. Exemption Claim Under Article 16(1) of the DTAA:
The AO held that the assessee did not satisfy the conditions for claiming exemption under Article 16(1) of the DTAA, as he failed to produce the TRC or Form 10F. The CIT(A) considered the TRC submitted by the assessee and concluded that the assessee was a resident of the USA under the DTAA for the relevant period, thus qualifying for the treaty exemption. The Tribunal agreed with the CIT(A)'s application of the DTAA provisions and the determination of the assessee's residency status, thereby upholding the exemption claim.

Conclusion:
The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s order that the assessee was a resident of the USA for the period from 11.08.2012 to March 2013 under the DTAA provisions, and thus, the income earned in the USA during this period was not taxable in India. The Tribunal found no merit in the revenue's grounds of appeal concerning the acceptance of fresh evidence, the determination of residential status, the concept of split residency, and the exemption claim under the DTAA.