2023 (1) TMI 566 - AT - Income Tax

Income deemed to accrue or arise in India - Residential Status of Individual - permanent home test - habitual abode - number of days of stay in India - resident of India for Global Taxation purposes and for the purpose of provisions of India-Singapore DTAA - Appellant have permanent home in India - whether the appellant is liable to be taxed in India qua the income earned during that period in Singapore - appellant sought exclusion of the income earned from 15th December, 2014 to 31st March, 2015 in Singapore, mainly on the ground that the Appellant resided in India for a period of 182 days or more and therefore, as per section 6(1)(a) of the Act, the Appellant has to be considered, as to be a resident of India - HELD THAT - Case of the appellant is that the he is resident of both India and Singapore and have Tax Residency Certificate from Singapore Revenue Authorities for the calendar Year 2014-15. Also, the appellant is having Singapore Driving License and Overseas Bank Account and house in India was not available to the Appellant during Singapore assignment period, as the same was on rent. Therefore, the permanent home test for the period i.e. 6th December, 2014 to 31st March, 2015 goes in favour of the appellant. Further vital interest of Appellant was also lying in Singapore, because he shifted there with his family and started employment and earnings and savings there from. Accordingly, the Appellant qualified as ultimate Tax Resident of Singapore from 15th December, 2014 onwards as per Article 15(1) of the Treaty. Tie-Breaker Questionnaire, the Appellant specifically mentioned to have apartment on rent in Singapore as well and his wife and two daughters were also living along with him in the country of assignment, i.e., Singapore. The Appellant also held Driving License in both the countries and both the countries have been shown as country of residence on various official Forms and documents for the period from December, 2015 to June, 2016, further paid taxes in Singapore while working there from. Further mentioned that all income which will be paid in future (i.e., bonus for period Jan. 2016 to June 2016) for the work period in Singapore, will be taxable in Singapore. No doubt the tie-breaker questionnaire having importance in determining the residency of a person, but cannot be exclusively taken into consideration as a base for deciding the residency. The permanence of home can be determined on qualitative and quantitative basis. It is not in controversy that the Appellant for the period under consideration has shown the income earned in Singapore and paid the taxes in Singapore. Therefore, as per Treaty, he cannot be subjected to tax in India in order to avoid double taxation. Commissioner on the basis of tie-breaker questionnaire held that there is no doubt that even the centre of vital interest of the appellant are with India only and not with Singapore, as the majority of the savings, investments and personal bank accounts are in India, whereas it is a fact that the appellant has worked in Singapore during the period under consideration and stayed therein only. Therefore, his personal and economic relations (Centre of vital interests) at that particular time/period cannot be brushed aside, as the Appellant went to Singapore along with his family for earning income and consequently his personal and economic relations remained in Singapore only. As per Article 4(2)(b), habitual abode is also available for consideration in deciding the residency of a person. Habitual abode does not mean the place of permanent residence, but in fact it means the place where one normally resides. During the period under consideration, the Appellant resided in Singapore and had habitual abode therein only. Therefore, on this reason as well, the Appellant could be treated as resident of Singapore. Sub-section (4) of section 90 of the Act prescribes, an Appellant, not being a resident, to whom an agreement referred to in sub-section (1) applies, shall not be entitled to claim any relief under such agreement unless a certificate of his being a resident in any country outside India or specified territory outside India, as the case may be, is obtained by him from the Government of that country or specified territory. It is not the case here that the provisions of section 90(2) of the Act are not applicable to the instant case and the provisions of the Treaty and actions of the Appellant are contrary to the laws of the land and the Appellant has failed to produce the Tax Residency Certificate issued by the Singapore Authorities and not paid the relevant taxes in that country for the income earned during the period under consideration. On the aforesaid deliberations and analyzations and in the cumulative effects, we are unable to sustain the addition under challenge. Consequently, the addition is deleted and the Assessing Officer is directed to accept the revised return of income filed by the appellant.

Summary

Issues Involved:
1. Determination of the Appellant's residency status for the assessment year 2015-16.
2. Taxability of income earned by the Appellant in Singapore under the India-Singapore Double Taxation Avoidance Agreement (DTAA).

Issue-wise Detailed Analysis:

1. Determination of the Appellant's Residency Status:

The Appellant filed a return of income declaring Rs.1,59,36,999/- earned from DBOI Global Services Pvt. Ltd. in India and J.P. Morgan Chase & Co., Singapore. The return was later revised, claiming only Rs.47,82,630/- as taxable in India, excluding income earned in Singapore. The Assessing Officer (AO) determined that the Appellant was a resident of India for the financial year 2014-15 as he was physically present in India for 182 days or more, per Section 6(1)(a) of the Income-tax Act, 1961. The AO rejected the revised return, assessing the income as declared in the original return.

The Appellant argued that he was a resident of both India and Singapore and that his residency should be determined under Article 4(2) of the India-Singapore DTAA. The Commissioner of Income-tax (Appeals) held that the Appellant had a permanent home in India, thus deeming him a resident of India. The Commissioner also noted that the Appellant's personal and economic relations (center of vital interests) were closer to India.

2. Taxability of Income Earned in Singapore:

The Appellant contended that he relocated to Singapore with his family on 6th December 2014 and became a resident of Singapore for the calendar year 2014-15. He claimed that his permanent home was in Singapore during his employment there, and his home in India was let out. The Appellant produced a Tax Resident Certificate from Singapore Revenue Authorities and argued that under Article 4(2) of the DTAA, he should be considered a resident of Singapore.

The Department Representative (DR) pointed to the tie-breaker questionnaire, which indicated the Appellant's ties to India, including savings, investments, and personal bank accounts. The authorities below concluded that the Appellant was liable to be taxed in India for the income earned in Singapore.

Tribunal's Analysis:

The Tribunal considered the rival submissions and the material on record. It noted that the Appellant had shifted to Singapore with his family and rented an apartment there. The Appellant also held a Singapore Driving License and had paid taxes in Singapore. The Tribunal observed that the tie-breaker questionnaire should not be the sole basis for determining residency and emphasized the importance of the DTAA provisions, which prevail over general provisions of the Income-tax Act.

The Tribunal referred to a similar case, Raman Chopra vs. DCIT, where the Appellant's residency was determined based on the tie-breaker analysis under the India-USA DTAA. It highlighted that the Appellant had a permanent home and habitual abode in Singapore during the period under consideration, thus qualifying as a resident of Singapore.

The Tribunal concluded that the Appellant's personal and economic relations were in Singapore during the relevant period, and habitual abode was also in Singapore. Therefore, under Article 4(2) of the DTAA, the Appellant should be considered a resident of Singapore. It directed the AO to accept the revised return of income filed by the Appellant, excluding the income earned in Singapore from Indian taxation.

Conclusion:

The Tribunal allowed the appeal, holding that the Appellant was a resident of Singapore for the period from 15th December 2014 to 31st March 2015 and that the income earned in Singapore during this period was not taxable in India. The AO was directed to accept the revised return of income filed by the Appellant.