9911796707
TMI Blog2012 (7) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Income Tax Act, 1961 as well as Double Taxation Avoidance Agreement between India and Japan. iii) That the learned CIT(A) erred in confirming the action of the Assessing Officer for levy of interest under section 243D of the Act. 3. Brief facts of the case are as follows:- The assessee is an individual. He is a former employee of Motorola India Private Limited (Motorola India). During May, 2000, the assessee joined Motorola Japan Limited (Motorola Japan) as the Managing Director and he was working with Motorola Japan until April, 2006. He was transferred to Motorola Japan from Motorola India as part of intra group transfer. During the entire period between May, 2000 and April, 2006, the assessee was working wholly and exclusively for Motorola Japan (Courtesy page no.54 of the paper book filed by the assessee). The salary, for administrative convenience, was paid by Motorola India on behalf of Motorola Japan. It was submitted that this was mainly because of personal and other obligations which the assessee had to discharge in India. The salary was credited to the assessee's bank account in India. Taxes were deducted under section 192 of the Act. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was Rs.22,86,91/-. The Assessing Officer accepted the interest income that was disclosed by the assessee after considering the deduction under Chapter VIA and arrived at the total income at Rs.23,71,251/-. 5. Aggrieved by the assessment, the assessee carried the matter in appeal before the first appellate authority. 6. Elaborate written submissions filed before the learned CIT(A), are extracted from pages 3 to 23 of his impugned order under consideration. 7. The CIT(A) partly allowed the appeal of the assessee. The CIT(A) had held as under :- (a) April 1, 2005 to December 31, 2005 brought to tax 15 days salary (amounting to Rs.1,72,013/-); (b) the entire salary for the period January 1, 2006 to March 31, 2006 was held to be taxable in India. The relevant finding of the CIT(A) in respect of assessment of income for the period 1/4/2005 to 31/12/2005 reads as under:- "6.2 The appellant was working as Managing Director of Motorola, Japan. He was a full time employee of M/s Motorola. Since he was of Indian origin, both in connection with his official duties, as also in connection with annual leave passage, he visited I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non resident in Japan. DTAA is applicable only for the persons who are residents of one or both the contracting states. In the appellant's case, for this period of 3 months, he was non resident in India as also he was non resident in Japan. Apparently, for this reason the relief applicable under DTAA is not allowable and, accordingly, it is held that the Assessing Officer was perfectly correct in taxing the entire sum of Rs.17,70,151/- as per provisions of Section 5(2) of the I T Act and the said addition is confirmed". 8. Being aggrieved by the order of the CIT(A), the assessee is in appeal before us. 9. Elaborate written submissions were filed by the learned AR. However, the summary of the same reads as follows:- a) The appellant was a non resident in India during the P.Y. 2005-06. b) The appellant was a resident in Japan for the India P.Y. 2005-06. c) While discussing the provisions of DTAA from the India taxation perspective, it is necessary to consider the Indian financial year as the 'year'. d) By applying the provisions of Article 15(1) and 15(2) of the treaty also, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id by or on behalf of The assessee is an employer of M/s Motorola India Electronics Page 9 of 18 ITA 9 No.10/Bang/2011 an employer of that other contracting state. Pvt. Ltd. its office at Bagmane Tech Park, No.66/11, Plot No.05, C.V.Raman Nagar, Post, Bangalore-560093 from which he was receiving salary. The salary for the financial year 2005-06 was paid by Motorola India accordingly TDS certificate also issued by the company. Thus the employer company is not a resident of company of Japan. 15.2(c) The remuneration is not born by a permanent establishment or a fixed base which the employer has in that other contracting state. M/s Motorola India Electronics Pvt. Ltd. (the employer company) incorporated in India under the Companies Act 1956 and its Registered Office is in India. The assessee was expatriation for the period from May 2000 to April, 2006. From the above analysis the assessee is non resident of Japan during the period from 01.01.2006 to 31.12.2006, hence, the AO as well as the CIT(A) has rightly held that DTAA relief on income tax or tax is not applicable to the assessee for the period from 01.01.2006 to 31.12.2006 and same may be sustained". 10.1 The learned DR also d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere it was upheld by the CIT that the appellant was a full time employee of Motorola Japan. 4. The learned DR in page no.5 of his submissions has further contended that the assessee is an employee of Motorola India and thus the employer company is not a resident of Japan. Rebuttal: Again, the above contention is factually incorrect. As already mentioned earlier, the appellant was an employee of Motorola Japan and salary was disbursed through Motorola India only as a matter of convenience. 5. The learned DR in page no.3 of his submissions has relied on a ruling by the Authority for Advance Rulings ('AAR') in the matter of DHV Consultants B V in re (2005) 277 ITR 97. In this matter, the applicant wanted the determination of applicability of Clause 2 of Article 15 of the Double Taxation Avoidance Agreement ('DTAA') between India and the Netherlands. The learned DR has further submitted that clause 2 of Article 15 of DTAA between India and the Netherlands is identical to the one in the DTAA between India and Japan. Further, the learned DR, in page no.4 of his submissions, has relief on the decision of the Allahabad High Court in the matter of CIT v Elitos S.P.A. (2006) 280 ITR 495. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year, namely, from 1/4/2005 to 31/3/2006, the assessee was a tax resident in Japan and salary was earned in Japan for which taxes were paid in Japan. In terms of Article 1 of the DTAA between India and Japan, DTAA shall apply to persons who are residents of one or both the countries. The assessee qualifies to be a non resident of India for the P.Y.2005-06. However, the assessee qualifies to be a non permanent tax resident of Japan (for the corresponding Indian P.Y. 2005-06) in accordance with the domestic tax laws of Japan. 12.1 Admittedly, the assessee is a non resident of India for the entire previous year and was a tax resident of Japan. The assessee, therefore, entitled to the benefits of the India-Japan DTAA as a tax resident of Japan (and non resident of India). 12.2 Article 15(1) of India Japan Treaty DTAA provides for the following :- "Subject to the provisions of articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that Contracting State unless the employment is exercised in the other Contracting State. If the employment is so exercised, suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the provisions of this Act, the total income of any previous year of a person who is a non resident includes all income from whatever source derived which (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year". 12.6 The provisions of section 5(2) start with the expression "subject to the provisions of this Act". Hence, the provisions of section 5(2) are subject to other provisions contained in the Act and other provisions of the Act will have significant impact on the interpretation of Section 5(2). Reference is made to "The Law and Practice of Income Tax" by Kanga, Palkhivala and Vyas (Vol.I, Ninth Edition, page 311). Reference is also to the following judgements:- CIT v Nippon (1998) 233 ITR 158 (Calcutta) at page 162; CIT v Khambaty (1985) 159 ITR 203 (Bom.) at pages 207-208. 12.7 As per section 15, salary is not taxable on receipt basis except in case of advance salary or arrears salary. Regular salary under section 15(1)(a) is taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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