2008 (2) TMI 459 - AT - Income Tax

Summary

Issues Involved:
1. Determination of whether the period of 41 days spent by the assessee in Pakistan, Sri Lanka, and the UK was for the performance of duties outside India.
2. Examination of the validity of the CIT(A)'s decision to treat the visits to Sri Lanka and Pakistan as work-related without the submission of a contract/appointment letter by the assessee.
3. Assessment of whether separate tax treatment should be given to on-period and off-period salaries under Explanation to section 9(1)(ii) of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Performance of Duties Outside India
The primary issue was whether the 41 days spent by the assessee in Pakistan, Sri Lanka, and the UK were for the performance of duties outside India. The assessee, employed by The Economist, argued that the salary for these days should be exempt from Indian tax as it was earned outside India. The CIT(A) agreed, concluding that the remuneration for the period spent in Pakistan and Sri Lanka was for work done outside India. However, the Tribunal found that the assessee's visits were incidental to his assignment in India, and thus, the salary earned during these visits was taxable in India.

Issue 2: Submission of Contract/Appointment Letter
The CIT(A) held that the visits to Sri Lanka and Pakistan were on account of work done in those countries, despite the assessee failing to submit copies of the contract/appointment letter before the Assessing Officer. The Tribunal noted that the absence of an appointment letter made it challenging to ascertain the exact terms of the assessee's employment. The Tribunal emphasized that the onus was on the assessee to prove that his duties outside India were under a separate arrangement, which he failed to do.

Issue 3: Separate Tax Treatment for On-Period and Off-Period Salaries
The CIT(A) had held that separate tax treatment should be given to on-period and off-period salaries. The Tribunal disagreed, referencing section 9(1)(ii) of the Act and the Uttaranchal High Court decision in the case of CIT v. Halliburton Offshore Services Inc. The Tribunal concluded that the salary for the period spent outside India was for services rendered in connection with the assessee's assignment in India, and thus, taxable in India.

Conclusion:
The Tribunal set aside the CIT(A)'s order and restored the Assessing Officer's decision, holding that the salary earned by the assessee during his visits to Pakistan, Sri Lanka, and the UK was taxable in India. The Tribunal emphasized that the visits were incidental to his assignment in India and that the assessee failed to provide sufficient evidence to prove otherwise. The appeal filed by the revenue was allowed.