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2022 (10) TMI 711 - AT - Income TaxIncome deemed to accrue or arise in India - salary income as accrued to the assessee for work performed in UK - Period of stay in India - Scope of India-UK Double Taxation Avoidance Agreement (DTAA) - assessee has stayed in India for 63 days during this year - HELD THAT - We would hold that salary income as accrued to the assessee for work performed in UK would not be taxable in India. However, the salary received for work performed in India would be taxable in India. Accordingly, we direct Ld. AO to re-compute the income of the assessee. The above proposition is also supported by the fact that upon perusal of UK tax return, it could be seen that the assessee has offered earnings from employment for 24184 on net basis which has been tax grossed up for 6046. This is in view of the fact that OFSSL has paid provisional payment of 9062 to UK revenue authorities since the employer has undertaken to meet the UK income tax liability arising from employee s earnings in UK. Accordingly, the assessee has claimed refund of 3016. On the basis of the above, it could be seen that separate tax payment has been made by OFSSL to UK revenue authorities to discharge the tax liability of the assessee in that country. The assessee has also placed on record Tax Residency Certificate - As per this certificate, the assessee has claimed relief for foreign earning not taxable in UK for 7952. The same shall be considered by Ld. AO while computing the quantum of income taxable in India as directed by us in preceding para-7. The appeal stands partly allowed.
Issues:
1. Eligibility for Treaty exemption under India-UK DTAA. 2. Taxability of salary income based on accrual vs. receipt basis. 3. Dismissal of interest withdrawal and levy under sections 244A and 234D. 4. Non-adjudication of penalty proceedings under section 274 of the Act. Eligibility for Treaty exemption under India-UK DTAA: The appeal involved the question of whether the appellant, a UK resident working in India, was eligible for Treaty exemption under Article 16(1) of the India-UK Double Taxation Avoidance Agreement (DTAA). The appellant claimed that the salary earned for work performed in the UK should be exempt in India as per the DTAA. However, the lower authorities held that as the appellant was a resident of the UK, he was not entitled to claim relief under Article 16 of the DTAA. The appellate tribunal analyzed the provisions of the DTAA and relevant sections of the Income Tax Act, ultimately ruling in favor of the appellant. The tribunal held that the salary income accrued for work performed in the UK would not be taxable in India, while the salary received for work performed in India would be taxable in India. Taxability of salary income based on accrual vs. receipt basis: The case also delved into the taxability of the appellant's salary income based on accrual versus receipt basis. The appellant argued that the salary should be taxed on an accrual basis and not on the basis of receipt of income. The tribunal referred to previous judicial decisions and statutory provisions to support the appellant's claim. It was noted that the salary earned for work performed in the UK had been offered to tax in the UK, and therefore, should not be taxable in India. The tribunal directed the Assessing Officer to re-compute the appellant's income accordingly. Dismissal of interest withdrawal and levy under sections 244A and 234D: The tribunal addressed the issue of the dismissal of interest withdrawal under section 244A and the levy of interest under section 234D of the Income Tax Act. The appellant had raised concerns regarding the withdrawal of interest under section 244A and the levy of interest under section 234D. However, the tribunal did not find merit in these grounds and dismissed them. Non-adjudication of penalty proceedings under section 274 of the Act: The appellant also raised a ground regarding the non-adjudication of penalty proceedings under section 274 of the Act. However, the tribunal did not provide a detailed analysis or ruling on this issue in the judgment. In conclusion, the appellate tribunal allowed the appeal partly in favor of the appellant, ruling that the salary income accrued for work performed in the UK would not be taxable in India, while the salary received for work performed in India would be taxable. The tribunal directed the Assessing Officer to re-compute the appellant's income accordingly. The issues related to interest withdrawal and levy under sections 244A and 234D were dismissed, and there was no detailed adjudication on the penalty proceedings under section 274 of the Act.
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