2023 (7) TMI 27 - AT - Income Tax

Income Taxable in India - Income deemed to accrue or arise in India - foreign assignment allowance received by the assessee for the services rendered outside India - assessees received salary which includes the component of the foreign allowance received outside India - assessees are the employees of IBM India Private Limited, which is an Indian company who sent the assessees on long term assignment to various countries - HELD THAT - In the case of Bodhisattva Chattopadhyay 2019 (11) TMI 1031 - ITAT KOLKATA the facts are identical wherein assessee was found to be a non-resident and the assessee received the foreign assignment allowance which the employer transferred from the employer s bank account held in Bangalore to Axis Bank nostro account for top up to the TCC and also that the employer affected TDS on the entire remuneration that was paid to the assessee both in India and abroad - the foreign assignment allowance that was topped up to the TCC of the assessee, though it was transferred by the employer from their bank account in India to the Axis bank s nostro accounts, is not taxable in India. The Tribunal repelled contentions of the Revenue as to the double non-taxation of this amount, because it was not subjected to any tax in the host country, stating that such a fact is immaterial to decide the issue, because the question effectively is whether such foreign assignment allowance is taxable in India or not? For such question, the subjection of the said amount to tax in the host country is totally irrelevant. Since the issue involved in these appeals has consistently been dealt with by the Tribunal and also by the higher fora, we respectfully follow the view taken in all the cases. We accordingly accept the contentions of the assessees and reject the plea taken by the Revenue.

Summary

Issues involved:
The central issue in this case is whether the foreign assignment allowance received by the assessee for services rendered outside India could be taxed in India.

Summary:

Issue 1 - Taxability of foreign assignment allowance:
The assessees, employees of an Indian company sent on long-term assignments abroad, received salary including foreign allowance. The Assessing Officer considered the situs of employment to be in India, as TDS was deducted in India and the employer paid the foreign allowance through Indian banks. The CIT(A) upheld this view, citing the primary evidence of TDS and the terms of the assignment contract. The assessees contended that as non-residents, the foreign allowance received outside India should be exempt income. The Tribunal referred to similar cases and held that income derived by non-residents for services outside India cannot be taxed in India under section 5(2) of the Act.

Issue 2 - Situs of employment and payment location:
The Revenue argued that since the assessees were on the payroll of the Indian company and TDS was deducted in India, the situs of employment was in India. They contended that even though the assessees worked abroad temporarily, the income accrued in India. However, the Tribunal found that the point of receipt was not in India, as the foreign allowance was transferred from Indian bank accounts to foreign accounts for use abroad. The Tribunal relied on previous decisions to conclude that the foreign assignment allowance was not taxable in India.

Separate Judgment:
The Tribunal, after considering submissions from both sides and previous decisions, concluded that the foreign assignment allowance received for services rendered outside India was not taxable in India. The Tribunal rejected the Revenue's arguments regarding the situs of employment and payment location, following the precedent set in similar cases. As a result, all appeals were allowed, and the foreign assignment allowance was deemed exempt from taxation in India.