1983 (4) TMI 104 - AT - Income Tax

Summary

Issues:
- Inclusion of foreign salary income for rate purposes in total income under the Income-tax Act, 1961.
- Interpretation of the Agreement for Avoidance of Double Taxation between India and France.

Analysis:
1. The appeal concerns the inclusion of foreign salary income for rate purposes in the total income of an individual assessee under the Income-tax Act, 1961 for the assessment year 1976-77.
2. The primary contention revolves around whether the salary earned in France by the assessee can be included in the total income for rate purposes while making the assessment in India.
3. The assessee argued that the income earned in France is exempt from tax and should not be included in the total income for rate purposes, citing an agreement between India and France for the Avoidance of Double Taxation.
4. The Assessing Officer included the foreign income in the total income for rate purposes, leading to an appeal by the assessee to the AAC.
5. The AAC referred to the agreement between India and France, which states that salaries earned for services rendered may be taxed only in the Contracting State where the services are rendered, and directed the exclusion of foreign income for rate purposes.
6. The department appealed the AAC's decision, arguing that the agreement does not mandate the exclusion of foreign income from total income for rate purposes, citing relevant provisions of the Income-tax Act and the agreement.
7. The tribunal analyzed the provisions of the Income-tax Act and the agreement, emphasizing that foreign income of a resident assessee must be included in the total income for rate purposes, as per the agreement's article XIX(4).
8. The tribunal distinguished previous cases and upheld the department's contention, vacating the AAC's order and restoring that of the Assessing Officer.
9. The decision was based on the clear language of the agreement and the absence of provisions similar to article XIX(4) in other agreements cited by the assessee.

This comprehensive analysis highlights the interpretation of the Agreement for Avoidance of Double Taxation in the context of including foreign income in total income for rate purposes under the Income-tax Act, 1961, ultimately leading to the tribunal's decision to uphold the department's appeal.