2019 (9) TMI 306 - AT - Income Tax

Income accrued in India - sending amount from USA to India for maintenance of family members - period of stay in India / outside India - becoming non-resident - salary payment from foreign employer, which was already taxed in USA - DTAA between USA and India - HELD THAT - Assessee was away from India and was working in USA from 01.08.2003 to 31.07.2004; which includes the period from 01.08.2003 to 31.03.2004 forming part of Previous Year relevant to AY 2004-05 with which we are concerned in the present appeal. Assessee was outside India for the period of more than 182 days during Previous Year relevant to Assessment Year 2004-05 and was a non resident within the meaning of Section 6 of Income Tax Act. During the aforesaid period on 01.08.2003 to 31.03.2004 the assessee was an employee of Tekelec, Inc. NC 27560, USA in a full time capacity in the role of Business Development Director based at Releigh, NC, USA. Perusal of the impugned order of the Ld. CIT(A) shows that the assessee had sent money through City Bank, USA for the maintenance of his son and wife in Delhi; that later on, there was divorce suit filed by the wife of appellant and they got separated in 2006, through court proceeding; that in the Court proceedings, the appellant also got a blow from his opponent lawyer and lost his left eyesight; that the separation happened in 2006; that the wife of the assessee wrote a Tax Evasion Petition ( TEP ) to Income Tax Department based on which assessment was made by the AO; and that the assessee had earned the aforesaid amount of ₹ 2,32,09,544/- as salary payment from aforesaid foreign employer, which was already taxed in USA and was not to be taxed in India again as per Double Taxation Avoidance Agreement between USA and India. These facts are also substantiated by the contents of the Paper Book referred to already in foregoing paragraph No. (C) of this order. Nothing has been brought to our notice by the Ld. DR to warrant any interference by us in the aforesaid impugned order dated 31.01.2013 of Ld. CIT(A) for Assessment Year 2004-05 - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition of ?2,32,09,544/- made by the Assessing Officer (AO) on the basis of information in his possession.
2. Acceptance of the assessee's contention of earning income from his employer without proper evidence.
3. Right to alter, amend, add, or substitute the grounds of appeal.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?2,32,09,544/-:
The Revenue appealed against the order of the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)], who deleted the addition of ?2,32,09,544/- made by the AO. The AO had treated all credit entries in the assessee’s City Bank Account as the assessee’s income and assessed it accordingly. The Ld. CIT(A) found that the assessee was a non-resident during the relevant period and had earned the income as salary from Tekelec Incorporation, USA, which was already taxed in the USA. According to the Double Taxation Avoidance Agreement, this income was not to be taxed again in India. The ITAT upheld the Ld. CIT(A)’s decision, noting that the Revenue did not provide any evidence to counter the assessee’s claims.

2. Acceptance of the Assessee's Contention:
The Ld. CIT(A) accepted the assessee's contention that the income was earned from his employer, Tekelec Incorporation, USA, and was already taxed in the USA. The assessee provided evidence, including employment letters and bank statements, to support his claim. The ITAT found that the AO did not investigate the source of funds credited to the NRI account and had made the addition based on the Tax Evasion Petition (TEP) filed by the assessee's estranged wife. The ITAT agreed with the Ld. CIT(A) that the assessee had sufficiently explained the source of the funds and that the income was not taxable in India due to the Double Taxation Avoidance Agreement.

3. Right to Alter, Amend, Add, or Substitute the Grounds of Appeal:
The Revenue's appeal included a ground to alter, amend, add, or substitute the grounds of appeal. However, this point was not elaborated upon during the proceedings, and the ITAT focused on the main issues of the addition of ?2,32,09,544/- and the acceptance of the assessee's contention regarding the source of income.

Conclusion:
The ITAT dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s order to delete the addition of ?2,32,09,544/-. The ITAT found that the assessee had provided sufficient evidence to prove that the income was earned as salary from a foreign employer and was already taxed in the USA. The ITAT also noted that the Revenue did not provide any counter-evidence to dispute the assessee's claims. The decision was pronounced in the open court on 03/09/2019.