2016 (8) TMI 364 - AT - Income Tax

Taxability of income in India - overseas income i.e. interest income, dividend income and capital gain - Held that - In CIT vs. P.V.A.I. Kulandagan Chettiar 2004 (5) TMI 8 - SUPREME Court Hon ble Supreme Court held that the assessee not having permanent establishment in India are Not assessable in India. Thus CIT(A) was justified in applying the provision of Indo-US Tax Treaty The fact that income was derived outside India is not disputed by AO, thus the same is not taxable in India. Hence we confirm the findings of the CIT(A) and dismissing this ground of appeal raised by Revenue. - Decided in favour of assessee Granting exemption u/s. 10(10CC) in respect of tax on perquisite provided by Siemens AG - Held that - The CIT(A) while considering the ratio and the case of special bench in case of RBF Rig Corporation LLC (supra) held that tax borne by employer is paid directly to the tax authority and there is no payment to the tax employee, the tax so borne is a non-monetary transaction and the same is exempted u/s 10(10CC) of the Act, and further relied upon the judgment of Delhi High Court in case of Balmukund Acharya in 2008 (12) TMI 88 - BOMBAY HIGH COURT and held that ground/claim raised before the AO was maintainable and allowed the benefit of section 10(10CC). It is well settled law that assessee is entitled to raise not only additional legal submission before the appellate authorities, but also entitled to raise additional claim before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. We have seen that Ld CIT(A) properly appreciated the provision of section 10(10CC) and accepted the claim of assessee which was denied by the AO on wrong premises, hence, we do not find any merit in this ground raised by the Revenue and the same is dismissed.- Decided in favour of assessee Disallowance of expenses paid to the broker in US for managing the portfolio - Held that - This ground is directly linked with the ground No.1 raised in the present appeal which we have already decided against the Revenue and in favour of assessee holding that the foreign income to the assessee is not taxable in India. Hence the expenses relating to earning to the foreign income does not require any adjudication. Hence, this ground of appeal is also having no merit and the same is dismissed.- Decided in favour of assessee

Issues Involved:
1. Taxability of overseas income (interest, dividend, and capital gain) in India.
2. Granting exemption under Section 10(10CC) for tax on perquisite provided by Siemens AG.
3. Allowing expenses paid to a broker in the USA for managing the portfolio.
4. Computation of long-term capital gains on shares of US companies and applicability of cost inflation index.
5. Claim of foreign tax credit for taxes paid in Germany and the USA.

Detailed Analysis:

1. Taxability of Overseas Income:
The Revenue contested the CIT(A)'s decision to exclude overseas income (interest income of ?3,28,765/-, dividend income of ?9,60,167/-, and capital gain of ?1,18,798/-) from taxable income in India. The assessee argued that he was a resident of the USA and his worldwide income was subject to tax in the USA. The CIT(A) concluded that the assessee had a permanent home in the USA, following the provisions of the Indo-US Tax Treaty and the Supreme Court decision in CIT vs. P.V.A.I. Kulandagan Chettiar, which held that income derived outside India is not taxable in India. The Tribunal upheld the CIT(A)'s decision, confirming that the overseas income was not taxable in India.

2. Exemption Under Section 10(10CC):
The Revenue challenged the CIT(A)'s decision to grant exemption under Section 10(10CC) for tax on perquisite provided by Siemens AG amounting to ?38,04,684/-. The assessee argued that this amount should not be included in salary income as per the Delhi Tribunal decision in RBF Rig Corporation LLC. The CIT(A) agreed, noting that the tax borne by the employer is a non-monetary transaction and exempt under Section 10(10CC). The Tribunal upheld this decision, stating that the CIT(A) properly applied the law and allowed the exemption.

3. Expenses Paid to Broker in the USA:
The Revenue objected to the CIT(A)'s decision to allow expenses of ?2,38,709/- paid to a broker in the USA for managing the portfolio. The assessee claimed these expenses were incurred for earning dividend income from shares purchased in the USA. The Tribunal linked this issue with the first ground, noting that since the foreign income was not taxable in India, the related expenses did not require separate adjudication. Consequently, this ground was dismissed.

4. Computation of Long-Term Capital Gains:
The assessee's cross objection included a ground that the CIT(A) erred in not deciding the issue of computing long-term capital gains on shares of US companies and not allowing indexation benefits. The Tribunal noted that the CIT(A) had already deleted the addition of capital gains by applying the Indo-US Tax Treaty, and thus, the objection was declared infructuous.

5. Claim of Foreign Tax Credit:
The assessee also raised an objection regarding the denial of foreign tax credit for taxes paid in Germany and the USA. The Tribunal observed that the CIT(A) had not specifically addressed this issue, but since the primary ground of taxability of foreign income was decided in favor of the assessee, the objection regarding foreign tax credit did not require further adjudication and was declared infructuous.

Conclusion:
The Tribunal dismissed the Revenue's appeal and declared the assessee's cross objections as infructuous. The CIT(A)'s order was upheld, confirming the exclusion of overseas income from taxable income in India, granting exemption under Section 10(10CC) for tax on perquisite, and allowing the expenses paid to the broker in the USA.

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