2023 (3) TMI 1183 - AT - Income Tax

Income taxable in India - period of stay in India - Submission of additional evidence by assessee - as submitted employees of the assessee did not stay in India for a period exceeding 90 days, so as, to construe that assessee s income is taxable under Article 15 of the India - USA Double Taxation Avoidance Agreement (DTAA) - AO refused to accept assessee s claim on the ground that the assessee was unable to establish through proper documentary evidences that the employees of the assessee did not stay in India for more than 90 days, thus brought to tax the amount claimed as non-taxable under Article 15 of the Tax Treaty. HELD THAT - As before learned DRP the assessee by way of additional evidence furnished number of documentary evidences including passport of the concerned employees to demonstrate that the period of stay in India was less than 90 days. However, learned DRP has failed to consider the documentary evidences furnished by the assessee and simply disposed of the objections - This in our view is in gross violation of principles of natural justice. We are inclined to restore the issue to learned DRP for deciding assessee s objections afresh after examining the documentary evidences furnished by the assessee. Grounds are allowed for statistical purposes.

Summary

Issues Involved:
Appeal challenging final assessment order under Section 143(3) read with section 144C(13) for assessment years 2018-19 due to failure to establish non-taxable income under India-USA DTAA Article 15 based on employee stay duration in India.

Analysis:
The appeal challenged a final assessment order under Section 143(3) read with section 144C(13) for the assessment years 2018-19, where the assessee, a law firm resident in the USA, received fees for representing the Government of India in arbitration proceedings. The dispute arose from the claim of a certain amount as non-taxable in India under Article 15 of the India-USA Double Taxation Avoidance Agreement (DTAA). The Assessing Officer rejected this claim due to the inability of the assessee to prove that its employees did not stay in India for more than 90 days, resulting in the taxation of the claimed amount. The assessee, citing the COVID-19 pandemic, had difficulty providing documents during the assessment but submitted additional evidence before the Dispute Resolution Panel (DRP) to establish the employees' stay duration. However, the DRP failed to consider these documents and upheld the AO's decision without proper examination, leading to a violation of natural justice principles.

The Tribunal noted that the DRP's failure to consider the documentary evidence provided by the assessee was a violation of natural justice principles. Consequently, the issue was restored to the DRP for a fresh decision after examining the furnished evidences, similar to a previous case where the Tribunal had directed a reevaluation based on evidence. The Tribunal allowed the grounds for statistical purposes and dismissed the stay application as it became irrelevant due to the decision on the appeal. Ultimately, the appeal was allowed for statistical purposes, and the stay application was dismissed. The order was pronounced in open court on 16th November 2022.