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2024 (4) TMI 798 - AT - Income TaxIncome taxable in India or not - Salary income - incomes deemed to accrue or arise in India as assessee is a non-resident - income earned under head Salaries for services rendered in Australia employment - HELD THAT - In the instant case the assessee neither had any rest period nor leave period which is preceded and succeeded by the services rendered outside India. Since the assessee has rendered services outside India the salary cannot be taxable in India. As per the definition the salary paid or the advances received are to be included in the total income of the person when the salary becomes due. From the concurrent reading of Section 5 dealing with scope of total income Section 15 dealing with computation of total income under the head salary and chargeability thereof and Section 9 dealing with income arising or accruing in India with reference to the salaries and the services rendered in India we hold that no taxability arises on the salary/allowances received by the assessee since the assessee is a non-resident and has rendered services outside India. Thus the Assessee is eligible for exemption on his salary for services rendered in Australia employment exercised in Australia during his Australia assignment period. In the result the appeal of the assessee is allowed.
Issues Involved:
1. Disallowance of exemption claimed under Article 15(1) of the India-Australia DTAA. 2. Erroneous application of Article 15(2) of the India-Australia DTAA. 3. Taxability of salary income under Section 5(2)(a) read with Section 9(1)(ii) of the Act. 4. Addition of refund amount to the income. 5. Initiation of penalty proceedings u/s 270A. Summary: Issue 1: Disallowance of Exemption Claimed under Article 15(1) of the India-Australia DTAA The Assessee, an employee of Nokia India, was on assignment in Australia and claimed an exemption of INR 55,37,591 under Article 15(1) of the India-Australia DTAA. The AO disallowed the exemption on the grounds that the Assessee did not submit a Tax Residency Certificate (TRC) from Australian tax authorities. The Assessee argued that he was a Resident of Australia and provided alternate evidence, including tax returns and passport copies, to support his claim. The Tribunal found that the Assessee met the conditions of Article 15(1) and was eligible for the exemption. Issue 2: Erroneous Application of Article 15(2) of the India-Australia DTAA The AO and DRP applied Article 15(2) instead of Article 15(1). The Tribunal noted that the Assessee was a Resident of Australia and exercised employment in Australia, making Article 15(1) applicable. The Tribunal held that the AO and DRP erred in applying Article 15(2). Issue 3: Taxability of Salary Income under Section 5(2)(a) read with Section 9(1)(ii) of the Act The AO held that the salary received in India was taxable under Section 5(2)(a) and Section 9(1)(ii). The Tribunal, however, found that the Assessee rendered services outside India and was a non-resident. As per Section 9(1)(ii), income earned for services rendered outside India is not taxable in India. The Tribunal upheld the Assessee's claim for exemption. Issue 4: Addition of Refund Amount to the Income The AO added a refund amount of INR 14,994 to the Assessee's income. The Tribunal did not specifically address this issue in detail, focusing instead on the primary issue of exemption under the DTAA. Issue 5: Initiation of Penalty Proceedings u/s 270A The AO initiated penalty proceedings under Section 270A for alleged under-reporting of income. Given the Tribunal's decision to allow the Assessee's appeal, the basis for the penalty proceedings was nullified. Conclusion: The Tribunal allowed the Assessee's appeal, granting the exemption of INR 55,37,591 under Article 15(1) of the India-Australia DTAA and holding that the salary received for services rendered in Australia was not taxable in India. The appeal was allowed, and the order was pronounced in the open court on 12/04/2024.
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