2015 (9) TMI 1168 - AT - Income Tax

Denial of exemption under section 10(14)(i) - Held that - The entire controversy is almost revenue neutral because even if it is held that assessees were not eligible for exemption under section 10(14)(i) in respect of living allowance, then in view of DTAA with USA, the assessees would become entitled to get tax credit in respect tax paid on living allowance in USA. However, as we have already held that living allowance is not taxable in India, therefore, assessees are entitled for exemption under section 10(14)(i). Therefore, they cannot claim tax credit in respect of tax paid in USA on living allowance because as very fairly pointed out by the ld. senior counsel for the assessees, DTAA would come into play only when a particular receipt is taxable in both the countries - Decision in the case of Saptarshi Ghosh 2011 (9) TMI 397 - ITAT, KOLKATA followed - Decided in favour of assessee.

Summary

Issues:
Delay in filing appeal - Condonation of delay
Exemption under section 10(14) of the Income Tax Act, 1961

Delay in filing appeal - Condonation of delay:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2006-07, which was time-barred by 723 days. The assessee explained the delay citing reasons such as frequent travel outside India for work projects, caring for a spouse post-surgery, and loss of the appeal order. The assessee also obtained a certified copy of the order later. The issue was raised regarding the condonation of the delay, with the department opposing it. The Tribunal, after considering the submissions and the affidavit filed by the assessee, decided to condone the delay and admitted the appeal, emphasizing the need to impart substantial justice to the assessee. The decision was influenced by the fact that the issue raised in the appeal was similar to a previous Tribunal decision, thus allowing the appeal despite the delay.

Exemption under section 10(14) of the Income Tax Act, 1961:
The case involved the denial of exemption under section 10(14) of the Income Tax Act, 1961, concerning the 'living allowance' paid by TCS Limited to its employees while on deputation in the USA. The Assessing Officer disallowed the exemption claimed by the assessee, leading to an addition to the income. The CIT(Appeals) partly confirmed the disallowance, prompting the assessee to appeal to the Tribunal. The grounds of appeal included contentions on the arbitrary nature of the CIT(A) order, denial of exemption under section 10(14)(i), treatment of deputation as a transfer, and the requirement to submit supporting bills for the living allowance. The Tribunal compared the facts of the case with a previous decision and found them to be identical. It referred to the previous decision's analysis, emphasizing that the employees were on tour rather than a transfer, making them eligible for the claimed deduction. The Tribunal also discussed the aspect of actual expenditure and the applicability of Fringe Benefit Tax (FBT). Ultimately, the Tribunal allowed the appeal of the assessee, concluding that the living allowance was not taxable, dismissing the Departmental appeals, and highlighting the revenue-neutral nature of the controversy.

In conclusion, the judgment addressed the issues of delay in filing the appeal and the exemption under section 10(14) of the Income Tax Act, 1961. The Tribunal decided to condone the delay in filing the appeal to ensure substantial justice to the assessee. Regarding the exemption, the Tribunal allowed the appeal of the assessee, highlighting that the living allowance was not taxable and discussing various aspects related to the treatment of deputation, actual expenditure, and the applicability of Fringe Benefit Tax. The decision was influenced by the similarity of the case with a previous Tribunal decision, emphasizing the need to consider the entirety of facts and circumstances in rendering a judgment.