1981 (8) TMI 148 - AT - Income Tax

Summary

Issues:
1. Taxability of salary received from the Commonwealth Secretariat in India.
2. Interpretation of notifications regarding tax exemptions for Indian nationals employed with the Commonwealth Secretariat.
3. Application of United Nations (Privileges and Immunities) Act to the Commonwealth Secretariat.
4. Adequacy of grounds for appeal by the revenue.

The judgment deals with the taxability of the salary received by an individual from the Commonwealth Secretariat in India. The Commissioner initially held that the salary was not taxable in India. The individual was employed as a Transport Advisor attached to the Commonwealth Secretariat in Nigeria. The Income Tax Officer (ITO) argued that 25% of the salary remitted to India should be added to the individual's total income. However, the Commissioner (Appeals) found that the individual did not maintain a dwelling place in India to be treated as a resident for tax purposes. Additionally, a notification granted Indian nationals employed with the Commonwealth Secretariat tax exemptions similar to those of United Nations officials.

The appellate tribunal noted that the revenue failed to provide substantial reasons to challenge the Commissioner's order. It emphasized that income earned abroad by an individual employed overseas does not accrue in India. The tribunal highlighted that mere remittance of a portion of the salary to India does not constitute income received in India unless the individual is ordinarily resident in India. As the individual did not meet the residency criteria under the Income-tax Act, the salary was deemed exempt from Indian taxation. The tribunal also explained the significance of a notification equating the salary from the Commonwealth Secretariat to that of the United Nations, granting tax immunity to Indian nationals.

Regarding the application of the United Nations (Privileges and Immunities) Act to the Commonwealth Secretariat, the tribunal elucidated that the government's declaration of tax immunity for salaries paid by the Commonwealth Secretariat aligns with the provisions of the Act. The tribunal emphasized that the notification declaring the equivalence of salaries paid by the Commonwealth Secretariat to those of the United Nations aimed to remove any ambiguity and clarify the tax treatment. It criticized the revenue for not seeking clarification from the Ministry of External Affairs if there were doubts about the notification's intent.

Ultimately, the tribunal upheld the Commissioner (Appeals) decision, dismissing the revenue's appeals. It concluded that the salary received from the Commonwealth Secretariat was not taxable in India due to the individual's non-resident status and the legal provisions granting tax immunity to Indian nationals employed by the Commonwealth Secretariat. The tribunal emphasized the importance of respecting government notifications and declared laws in determining tax liabilities.