9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (3) TMI 151 - AT - Income TaxIncome deemed to accrue or arise in India - salary received by the assessee in India for the services rendered in USA - overriding effect of section 90 of the Act - INDO-UK DTAA - doubt taxable in India under the provisions of section 5(2)(a) - scope of resident of contracting state - Whether article 16 of the DTAA would prevail over the 5(2)(a) of the Act ? - HELD THAT - Respectfully following the decision of the Hon ble AAR in British Gas India (P) Ltd., In re 2006 (11) TMI 139 - AUTHORITY FOR ADVANCE RULINGS we hold that though the provision under section 5(2)(a) of the Act fastens tax liability on the assessee, but, because of the overriding effect of section 90 of the Act, article 16 of the DTAA would prevail over the 5(2)(a) of the Act and consequently, the salary received by the assessee in India for the services rendered in USA are not liable to tax in India. Consequently, we direct the learned Assessing Officer to delete the addition made. Assessee appeal allowed.
Issues Involved:
1. Applicability of Article 16(1) of the India-US Double Taxation Avoidance Agreement (DTAA). 2. Taxability of salary received in India for services rendered in the USA. 3. Applicability of Section 5(2)(a) and Section 5(2)(b) of the Income Tax Act, 1961. 4. Credit for taxes paid in the USA. Detailed Analysis: 1. Applicability of Article 16(1) of the India-US Double Taxation Avoidance Agreement (DTAA): The assessee argued that under Article 16(1) of the DTAA, the income earned from services rendered in the USA is only taxable in the USA and not in India. The assessee claimed that since he was a tax resident of the USA during the relevant period, he should be eligible to avail the provisions of the DTAA to the extent it is beneficial to him as provided under section 90 of the Act. The Tribunal, referencing the decision in the case of British Gas India (P) Ltd., In re, held that the provisions of the DTAA would prevail over the provisions of the Income Tax Act due to the overriding effect of section 90. Consequently, the salary received by the assessee in India for services rendered in the USA is not liable to tax in India. 2. Taxability of Salary Received in India for Services Rendered in the USA: The assessee contended that the salary income pertaining to his assignment in the USA was received for rendering services outside India and, therefore, does not accrue or arise in India under section 9(1)(ii) and section 15 of the Act. The Tribunal noted that the employment was exercised where the services were rendered, and thus, the salary accrued in the USA. The Tribunal concluded that the salary for services rendered in the USA should not be taxed in India, following the principle that income which falls under the head "salaries" is considered to accrue or arise in India only if the services are rendered in India. 3. Applicability of Section 5(2)(a) and Section 5(2)(b) of the Income Tax Act, 1961: The Revenue argued that the salary was actually received in India and, therefore, under section 5(2)(a) of the Act, the same is chargeable in India. The assessee, however, argued that under section 5(2)(b) of the Act, his salary would be chargeable to tax in India only if it accrued in India. The Tribunal referred to the case of British Gas India (P) Ltd., In re, and held that the salary received in India by employees seconded to a foreign entity is taxable in India under section 5(2)(a) of the Act. However, due to the overriding effect of section 90, the provisions of the DTAA would prevail. 4. Credit for Taxes Paid in the USA: The Dispute Resolution Panel (DRP) directed the Assessing Officer to give credit for the taxes paid in the USA. However, the final assessment order was passed without giving such credit. The Tribunal directed the Assessing Officer to delete the addition made and to give credit for the taxes paid in the USA, as the salary income for services rendered in the USA is not liable to tax in India under the DTAA. Conclusion: The Tribunal allowed the appeal of the assessee, holding that the salary received in India for services rendered in the USA is not liable to tax in India due to the overriding effect of Article 16(1) of the India-US DTAA read with section 90 of the Income Tax Act. The Tribunal directed the Assessing Officer to delete the addition made and to give credit for the taxes paid in the USA.
|
