1989 (5) TMI 94 - AT - Income Tax

Summary

Issues:
1. Whether salary income earned by the assessee from a foreign employer outside India constitutes a separate source of income and can be taxed in a different previous year.
2. Whether the assessee is entitled to claim relief under section 80 RRA for the salary earned from the foreign employer.

Analysis:

Issue 1:
The primary issue in this case is whether the salary income earned by the assessee from a foreign employer outside India constitutes a separate source of income and can be taxed in a different previous year. The assessee argued that the salary earned from the foreign employer should not be taxed for the assessment year 1979-80 as it was a new source of income. The Income Tax Officer (ITO) included the foreign salary income in the assessment, stating that any income arising to a resident and ordinarily resident (R.O.R) individual is taxable in India. The Appellate Assistant Commissioner (AAC) upheld the addition made by the ITO, stating that the source of income remained the same, and therefore, the option for a change in the previous year could not be accepted. However, the ITAT, Bombay Bench 'A' in a similar case held that employment with a foreign employer constitutes a different source of income, allowing the assessee to opt for a different previous year. The ITAT further emphasized that the assessee maintaining accounts for the foreign salary income was crucial in exercising this option. The ITAT ultimately ruled in favor of the assessee, directing the exclusion of the foreign salary income from the taxable income for the assessment year 1979-80.

Issue 2:
The second issue pertains to the assessee's claim for deduction under section 80 RRA for the salary earned from the foreign employer. The AAC did not give any finding on this claim, and the ITAT noted that the ground did not arise from the AAC's order. The ITAT highlighted that the assessee could have requested a decision on this claim through an application under section 154 to the AAC. However, since the AAC did not consider this ground, the ITAT rejected the assessee's plea to address this claim. Consequently, the ITAT partially allowed the appeal, directing the deletion of the foreign salary amount from the assessee's income for the relevant assessment year.

In conclusion, the ITAT ruled in favor of the assessee, allowing the exclusion of the salary income earned from the foreign employer from the taxable income for the assessment year 1979-80. However, the claim for deduction under section 80 RRA was rejected as it did not arise from the AAC's order.