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2024 (12) TMI 896 - AT - Income TaxApplicability of tie-breaker test - income earned by the assessee in USA is taxable in India or not? - applicability of Article 4 of India US DTAA to the case of the assessee - if the income is assessable in India then whether having regard to the provisions of section 90 of the Act, credit of taxes paid by the assessee abroad is to be given - HELD THAT - While examining the test of tie-breaker test one has to see the centre of vital interest, when we see the facts of the present case, it is abundantly clear that centre of vital interest in the present case has remained in India. The case laws relied upon by the AR of the assessee are on different facts and in fact the counsel for the assessee has also fairly accepted that the cases relied upon are distinguishable on facts. Hence no infirmity in the orders of authorities below. We hold that benefit of tie-breaker test is not available to the present assessee and hence the income earned by him in US is includable in total income within the meaning of section 5 of the Income Tax Act. We find force in the contention of the assessee raised in additional grounds of appeal that is credit of taxes already paid abroad. Therefore, we direct the AO to grant the benefits of taxes paid abroad by the assessee vis-a-vis the income earned to avoid double taxation of same income.
Issues:
1. Delay in filing the appeal 2. Applicability of Article 4 of India US DTAA 3. Denial of benefit under Article 16 of India US DTAA 4. Additional grounds seeking benefits under section 90 of the Indian Income Tax Act 5. Taxability of income earned in the USA 6. Credit of foreign taxes paid by the assessee abroad Delay in filing the appeal: The appeal by the assessee was delayed by 164 days due to a communication gap between the assessee and the Chartered Accountant handling tax matters. The delay was condoned by the tribunal after considering the reasons provided by the assessee and the affidavit sworn by the assessee. Applicability of Article 4 of India US DTAA: The assessee challenged the applicability of Article 4 of the India US DTAA, claiming split residency benefits due to family members in the USA during the relevant period. However, the Assessing Officer (AO) observed that the tie-breaker test did not apply as the center of vital interest remained in India. The tribunal upheld this decision, stating that the income earned in the USA was taxable in India. Denial of benefit under Article 16 of India US DTAA: The assessee also challenged the denial of exemption under Article 16 of the India US DTAA, claiming that the salary income was taxable only in the contracting state. The AO denied this benefit due to the assessee's Indian house properties and investments. The tribunal agreed with the AO's decision, denying the benefit under Article 16. Additional grounds seeking benefits under section 90 of the Indian Income Tax Act: The assessee filed additional grounds seeking benefits under section 90 of the Indian Income Tax Act for the credit of foreign taxes paid abroad. The tribunal directed the AO to grant the benefits of taxes paid abroad to avoid double taxation of the same income. Taxability of income earned in the USA: The tribunal examined whether the income earned by the assessee in the USA was taxable in India under the tie-breaker test. Despite arguments regarding family and property ties in the USA, the tribunal found that the center of vital interest remained in India. Therefore, the income earned in the USA was deemed includable in the total taxable income in India. Credit of foreign taxes paid by the assessee abroad: The tribunal acknowledged the assessee's right to claim credit for taxes paid abroad to prevent double taxation. It directed the AO to grant the benefits of taxes paid abroad by the assessee concerning the income earned, thereby partially allowing the appeal. In conclusion, the tribunal upheld the denial of split residency benefits and exemption under the India US DTAA while allowing the credit of foreign taxes paid by the assessee to avoid double taxation.
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