2004 (1) TMI 324 - AT - Income Tax

Summary

Issues:
1. Challenge to CIT(A) order by Revenue regarding exclusion of salary for periods stayed outside India.
2. Interpretation of taxability of income earned outside India for foreign nationals with headquarters in India.
3. Application of provisions of IT Act regarding income from salaries earned in India.
4. Comparison of judgments by Delhi High Court and Uttaranchal High Court on taxation of salaries earned abroad.

Analysis:
1. The Revenue challenged the CIT(A) order directing the Assessing Officer (AO) to exclude salary for periods stayed outside India. The AO assessed the income for the entire assignment period in India, arguing that services were rendered from the headquarters in India even when the individuals were abroad. The assessees contended that income accrued outside India should not be taxable in India as they were foreign nationals. However, the AO disagreed, deeming the salaries earned abroad as taxable in India.

2. The assessees appealed to the CIT(A), citing the provisions of the IT Act for non-residents and arguing that income from salaries earned outside India should not be included in total income unless derived from a business controlled in India. The CIT(A) agreed, referencing the Delhi High Court judgment and held that income from salary cannot be deemed to arise in India unless services are rendered in India. The Revenue appealed this decision.

3. During the appeal hearing, the Departmental Representative relied on a judgment by the Uttaranchal High Court regarding taxation of salaries for off periods worked in India. The authorized representative pointed out the appointment letter specifying work responsibilities in and outside India, arguing that salaries earned abroad by residents in India should not be taxable. Referring to previous Tribunal orders, it was established that salaries earned outside India were not taxable in India.

4. The Tribunal differentiated the present case from the Uttaranchal High Court judgment, emphasizing that the issue here concerned salaries earned while working in other countries, not for off periods in India. Relying on previous Tribunal decisions, the Tribunal dismissed the Revenue's appeals, stating that salaries earned abroad by the assessees were not taxable in India. The Tribunal's decision was based on the distinction between salaries earned in India and those earned outside India, aligning with the interpretation of the IT Act provisions and previous Tribunal rulings.

In conclusion, the Tribunal upheld the CIT(A) decision to exclude salary for periods stayed outside India from taxable income, emphasizing the distinction between salaries earned in India and abroad, as per the provisions of the IT Act and previous judicial interpretations.