2023 (6) TMI 1270 - AT - Income Tax

Income accruing or arising in India - bonus is received by the assessee form the Singapore Company in respect of employment services rendered by the assessee in Singapore - Denying relief u/s 90 - HELD THAT - Assessee herein was a non resident when he was rendering employment in Singapore Company in pursuance of which employment, the assessee was given bonus in June 2011. Also during the period for which bonus is received, the assessee was serving only in Singapore and not in India. On perusal of the provisions of section 5(1) of the Act, the said bonus income would have to be construed as income accruing or arising to him in India and it is also received during the year by the assessee. Hence, the bonus received by the assessee, being a resident would be taxable for the year under consideration in India. As in terms of section 90 entire taxes paid by the assessee in Singapore for the very same salary and bonus component, would be eligible for tax credit for the assessee. We are unable to apprehend ourselves to accept to the tax credit calculation determined by the ld. AO in the instant case by working out @5.92% which has no support from the provisions of Act or in DTAA. Hence, the said determination of foreign tax credit by the AO is hereby rejected. Direct the ld AO to allow the foreign tax credit in full in respect of tax paid in Singapore for the very same salary and bonus income. Ground raised by the assessee are allowed.

Summary

Issues involved:
The appeal concerns the denial of relief under section 90 of the Income Tax Act 1961 and the jurisdiction of the Assessing Officer and Commissioner of Income Tax (Appeals) in passing the assessment order.

Issue 1: Denial of relief under section 90 of the Income Tax Act:
The assessee, a resident individual, had claimed relief under section 90 of the Act in relation to a bonus received from a previous employer in Singapore. The Assessing Officer (AO) granted relief only to a certain extent, leading to a disallowance of a portion of the relief claimed. The Commissioner of Income Tax (Appeals) upheld this decision, stating that the bonus, though related to services rendered in Singapore, was received during the year under consideration by the assessee, a resident at that time. The bonus was deemed to have accrued and arisen to the assessee during the relevant year, making it taxable in India. However, the AO's calculation of foreign tax credit at 5.92% was deemed incorrect, and the Tribunal directed the AO to allow the full foreign tax credit for the tax paid in Singapore on the salary and bonus income.

Key points from the judgment:
- The bonus declared by the Singapore Company on June 1, 2011, was received by the assessee during the relevant year.
- The bonus, treated as part of the salary, was included in the return of income, and tax was deducted by the Indian employer.
- The Double Taxation Avoidance Agreement between India and Singapore was referenced to determine the taxability of the bonus income.
- The Tribunal rejected the AO's calculation of foreign tax credit at 5.92% and directed the full tax credit to be allowed for the tax paid in Singapore.
- The bonus received by the assessee, a resident during the relevant year, was held taxable in India, with the foreign tax credit to be provided in full.

Decision:
The Tribunal allowed the appeal for statistical purposes and directed the AO to provide the full foreign tax credit for the tax paid in Singapore on the salary and bonus income.