2017 (8) TMI 1730 - AT - Income Tax

Taxability of salary received in India u/s 5(2)(a) - salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship - period of stay in India - Assessee is a Marine Engineer engaged with M/s. OMI Crewing Services - persual of 'Continuous Discharge Certificate' it was found by the AO that assessee was on ship 'M/T Torm Agnes' of Singapore from 10.05.2011 to 11.11.2011 - as argued assessee was outside India for 187 days on employment and qualifies to be a 'Non-Resident'. HELD THAT - CBDT has issued a Circular No. 13/2017, dated 11.04.2017 wherein CBDT has clarified that the salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because the salary has been credited in the NRE account maintained with an Indian Bank by the seafarer. It is well settled that the circular issued by the CBDT are binding on the Revenue authority. This position has been confirmed by the Hon'ble Apex Court in the case of Commissioner of Customs v. Indian Oil Corpn. Ltd. 2004 (2) TMI 66 - SUPREME COURT as held when a Circular issued by the Board remains in operation then the revenue is bound by it and cannot be allowed to plead that it is not valid or that it is contrary to the terms of the Statute. Thus salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because the salary has been credited in the NRE account maintained with an Indian Bank by the seafarer, therefore, based on the reasons mentioned above, the grounds raised by the assessee are allowed.

Summary

Issues:
1. Taxability of salary income received by a non-resident Marine Engineer in India.
2. Interpretation of Section 5(2)(a) of the Income-tax Act regarding income received in India.
3. Applicability and interpretation of CBDT Circular No. 13/2017 in determining tax liability.

Issue 1: Taxability of Salary Income:
The appeal pertains to the taxability of salary income of a non-resident Marine Engineer for the assessment year 2012-13. The Assessing Officer (AO) added Rs. 36,96,150 to the assessee's income based on the salary received in India from a foreign employer. The AO considered the income as taxable in India under Section 5(2)(a) of the Income-tax Act. The assessee contended that the entire salary was earned outside India and remitted to his NRE account in India, thus not subject to tax in India.

Issue 2: Interpretation of Section 5(2)(a):
The main contention revolved around the interpretation of Section 5(2)(a) regarding income received in India. The assessee argued that the salary received in his NRE account should not be considered as income received in India, as the services were rendered outside India and the payment was made in foreign currency. The AO and the Commissioner of Income-tax (Appeals) upheld the tax liability, citing various judgments against the assessee.

Issue 3: CBDT Circular No. 13/2017:
The assessee relied on CBDT Circular No. 13/2017, which clarified that salary accrued to a non-resident seafarer for services outside India on a foreign ship shall not be included in total income if credited to the NRE account in India. The Circular emphasized that mere crediting of salary in the NRE account does not make it taxable in India. The Appellate Tribunal, considering the binding nature of CBDT Circulars, ruled in favor of the assessee, citing the Circular and Supreme Court precedents.

In conclusion, the Appellate Tribunal allowed the appeal, emphasizing the non-taxability of salary income received by a non-resident seafarer for services rendered outside India, as clarified by CBDT Circular No. 13/2017. The decision highlighted the significance of Circulars issued by the CBDT and their binding nature on Revenue authorities, ultimately determining the tax liability in favor of the assessee.