2017 (1) TMI 810 - AT - Income Tax

Treatment to salary earned for services rendered in Indonesia as income taxable in India - salary income which is deemed to accrue or arise in India - NRI status is not available - appellant worked at Indonesia (Out of India) for more than 182 days in a given financial year - India Indonesia DTAA - bifurcation of income received in India and outside India - Held that - The assessee has submitted a letter before Assessing Officer offering to withdraw the claim of exemption but the Assessing Officer has not at all considered the said letter offering withdrawal of the claim. He has decided the issue purely on merit by considering the provisions of the direct tax avoidance agreement between India and Indonesia and the rulings from authority of advance ruling. Upon assessee s appeal Learned CIT(Appeals) has erroneously noted that the Assessing Officer has levied the tax only on assessee s concession by withdrawing the claim of exemption. This is an erroneous appreciation of the fact. There is no whisper in the Assessing Officer s order that he is levying the tax on the basis of assessee s concession. In such circumstances Learned CIT(Appeals) reliance upon the decision of Honourable High Court of Karnataka in the case of T. P. Indrakumar (2009 (7) TMI 651 - KARNATAKA HIGH COURT ) is also not applicable, as in the said case it was noted that by offering income for taxation there was nothing else for the Assessing Officer to probe. Here the case is not so. The order of learned CIT(Appeals) is not liable to be sustained. Both the counsel fairly agreed that the issue may be remitted to the file of Learned CIT(Appeals) to consider the issue on merits - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Taxability of salary earned in Indonesia in India.
2. Treatment of concession made by the assessee's counsel.
3. Consideration of the claim for exemption in respect of salary earned in Indonesia.

Analysis:

Issue 1: Taxability of salary earned in Indonesia in India
The appellant contested the taxability of salary earned in Indonesia in India, claiming NRI status and more than 182 days stay outside India. The Assessing Officer rejected the claim citing DTAA provisions and the ruling of the authority of advance ruling. The CIT(A) acknowledged the appellant's stay outside India but upheld the addition based on the appellant's withdrawal of the claim of tax-free income. The ITAT found the CIT(A)'s decision erroneous, noting that the Assessing Officer did not consider the withdrawal letter, deciding solely on merit. The ITAT remitted the issue to the CIT(A) for fresh consideration, emphasizing the need for a speaking order after hearing the appellant.

Issue 2: Treatment of concession made by the assessee's counsel
The appellant challenged the acceptance of the submission made by the counsel as an admission by the CIT(A). The ITAT clarified that the Assessing Officer did not base the tax levy on the concession, contrary to the CIT(A)'s understanding. The ITAT distinguished a previous judgment cited by the CIT(A), emphasizing that the case did not involve a voluntary offer for taxation by the appellant, necessitating a different approach.

Issue 3: Consideration of the claim for exemption in respect of salary earned in Indonesia
The Assessing Officer disregarded the appellant's submission on withdrawal of the claim for tax-free income from salary earned in Indonesia. The CIT(A) upheld the addition, citing the appellant's offer to buy peace of mind. The ITAT found the CIT(A)'s reliance on a specific judgment misplaced, as the case did not involve a voluntary offer for taxation. Consequently, the ITAT allowed the appeals for statistical purposes, remitting the issue to the CIT(A) for a fresh assessment based on merits and a fair hearing for the appellant.

This detailed analysis provides a comprehensive overview of the judgment, highlighting the key issues addressed and the subsequent decisions made by the authorities involved.