2024 (8) TMI 355 - AT - Income Tax

Assessing of income of the appellant - period of stay in India - Addition of the foreign allowances to the total income of the appellant which was received outside India for services rendered in United Kingdom - HELD THAT - Appellant qualified as a Non-resident in India during the Previous 2015-16 as evident from his stay in India during the relevant PY. A non-resident would be taxable in India only in respect of income received/deemed to be received in India or the income accrued / deemed to accrue in India. In the present case the Appellant being a Non-Resident, has received the foreign allowances in United Kingdom for services rendered in United Kingdom. Hence we are in this view that the foreign allowance does not fall within the scope of total income u/s 5(2) of the Act. Thus taxable income of the appellant as made by the AO confirmed by the CIT(A) is unjustified and accordingly, the same is deleted. Addition of receipts of stock option prerequisites - value of stock option prerequisites accrued to the appellant for the services rendered outside India from the date of grant to the date of vesting hence, the same does not form part of the scope of the total income of the non-resident and accordingly it is not taxable in India. Disallowance of exemption claimed by the appellant in this context, we find that Section 90(2) of the Act purely attracts in this case as we have already held that appellant satisfied the requisite condition to be eligible to claim the exemption as per the DPS Clause of India-UK DTAA. Appellant has filed copy of tax residency certificate and in this way, appellant qualified to be a tax resident of United Kingdom during United Kingdom tax year and accordingly, we are of this opinion that salary income as claimed be exempted under Article 16(1) of the India-UK DTAA. Disallowing the deduction claimed under Chapter VI-A and disallowing the long-term capital gain exemption u/s 10(38) of the Act have been allowed by the ld. CIT(A) in appeal subject to the above verification and directed the AO to verify the matter. So, it is needless to discuss the above grounds.

Issues Involved:
1. Delay in filing the appeal.
2. Assessment of income and addition of foreign allowances.
3. Addition of stock perquisite.
4. Disallowance of exemption under Article 16(1) of the India-UK Double Taxation Avoidance Agreement (DTAA).
5. Arbitrary assessment under Section 144.
6. Disallowance of exemption under Section 10(38) on long-term capital gains.
7. Disallowance of exemption under Section 10(34) on dividend income.
8. Levy of interest under Sections 234A, 234B, and 234D.
9. Initiation of penalty proceedings under Section 271(1)(c).

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was filed with a delay of 344 days. The appellant's counsel argued that the delay was due to the appellant's relocation to the United Kingdom and was not intentional. The Tribunal, referencing the Supreme Court's stance that cases should be decided on merit rather than technicalities, condoned the delay and admitted the appeal for adjudication.

2. Assessment of Income and Addition of Foreign Allowances:
The appellant, a non-resident Indian during AY 2016-17, received foreign allowances of INR 48,39,078 for services rendered in the UK. The Tribunal noted that the foreign assignment allowances were credited to an international travel card outside India, thus not falling within the scope of total income under Section 5(2) of the Act. The Tribunal cited several judicial precedents, including the Karnataka High Court's decision in DIT (International Taxation) vs. Prahlad Vijendra Rao, supporting the non-taxability of such foreign allowances in India. Consequently, the addition of INR 48,39,078 to the appellant's taxable income was deemed unjustified and deleted.

3. Addition of Stock Perquisite:
The appellant received stock options amounting to INR 1,76,123 during the previous AY 2015-16, with INR 1,59,053 representing the value accrued for services rendered outside India. The Tribunal held that this amount does not form part of the total income of a non-resident and is not taxable in India.

4. Disallowance of Exemption under Article 16(1) of the India-UK DTAA:
The appellant claimed an exemption of INR 57,93,857 under Article 16(1) of the India-UK DTAA. The Tribunal found that the appellant satisfied the conditions to claim this exemption, supported by a tax residency certificate from the UK. Therefore, the salary income of INR 57,93,857 was exempted under the DTAA.

5. Arbitrary Assessment under Section 144:
The Tribunal noted that the Assessing Officer (AO) proceeded with the assessment under Section 144 due to non-compliance by the appellant. However, the Tribunal found the assessment arbitrary and not in line with the principles of best judgment assessment.

6. Disallowance of Exemption under Section 10(38) on Long-term Capital Gains:
The appellant claimed long-term capital gains exemption of INR 2,30,238 under Section 10(38). The Tribunal directed the AO to verify the appellant's claims and make necessary adjustments.

7. Disallowance of Exemption under Section 10(34) on Dividend Income:
The appellant claimed an exemption of INR 31,378 under Section 10(34) for dividend income. The Tribunal directed the AO to verify the claims and adjust the computation of total income accordingly.

8. Levy of Interest under Sections 234A, 234B, and 234D:
The Tribunal observed that the levy of interest under Sections 234A, 234B, and 234D is consequential and mandatory. The AO was directed to compute the interest correctly at the time of giving effect to the Tribunal's order.

9. Initiation of Penalty Proceedings under Section 271(1)(c):
The Tribunal did not specifically address the initiation of penalty proceedings under Section 271(1)(c), focusing instead on the substantive grounds of appeal.

Conclusion:
The appeal was partly allowed, with significant relief granted on the grounds of foreign allowances, stock perquisites, and exemptions under the India-UK DTAA. The Tribunal directed the AO to verify and adjust other claims related to deductions and exemptions.

← Previous Next →