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TMI Blog2016 (3) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... SA DTAA depends on the country where services are rendered which in this case is undisputedly USA. The application of article 16(1) of Indo-USA DTAA cannot be denied to assessee merely because the salary check was paid by an Indian entity and the undisputed fact that no service was rendered by assessee for the impugned period in India. The Hon'ble Supreme Court in the case of Kedar Nath Jute Mnf. Co Ltd. Vs. CIT (Central) Kolkata [1971 (8) TMI 10 - SUPREME Court] has held that actual and legal nature of the transaction will decided the taxability and not mere book entries or assumptions. In view thereof, judgments in the case of CIT Vs. Nippon Limited (1998 (4) TMI 121 - CALCUTTA High Court), CIT Vs. Khambaty (1985 (10) TMI 91 - BOMBAY High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stems Inc, Boston, USA (FIS) to act as a lead software engineer, accordingly he left India on 30.05.2007 in connection with his US employment. Hence, for the period from 1/4/2007 to 30.05.2007 he was an employee of FBSI and with effect from 31.05.2007, he started working for FIS. Provisions of section 5(2) starts with the expression subject to the other provisions of the Act... .as a result of section 5(2), it follows that salary is to be taxed in India subject to other provisions of the Act. Other provisions of the Act is the context of salary income refers to the following provisions: i) Section 15 Chargeability of Salary ii) Section 9(i)(ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n India on receipt basis. d) He was a resident in USA for the PY 2007-08. e) While discussing the provisions of DTAA from the India Taxation perspective, it is necessary to consider the Indian financial year as the year . f) Salary is considered to be accrued in the State where the employee exercises the employment and therefore, his salary accrued in USA. g) By applying the provisions of Article 16(1) of the treaty also, the salary is not taxable in India. h) Hence, by applying Indian Income-tax Act, as well as Treaty, salary income shall not be taxable in India. As such the assessee is entitled for full exemption in respect of salary since it relates to overseas employment. Ld. AO proposed to assess th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be received in India in such year by or on behalf of such person on accrues or arises to him in India during such year. Since, the salary is received in India by the employee through a credit to his salary account due from his India employer in India, the same will be taxable in India irrespective of the residential status, in accordance with Section 5 of the Income Tax Act, 1961. The claim of exemption of income amounting to ₹ 8,25,792/- out of the above on the basis of Article 16(1) of India USA Double Taxation Avoidance Agreement by the assessee is not correct. The term residence used in DTAA provisions is not similar to the term residential status used in the Income Tax Act, therefore, the assessee was not entitled to use the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary in question is not taxable in India being clearly exempt u/a 16(1) of DTAA. Further reliance in placed on the following judicial precedents:- (i) CIT Vs. Nippon Limited 233 ITR 158 (Cal) (ii) CIT Vs. Khambaty 159 ITR 203 (Kar). (iii) Ranjit Kumar Bose Vs. ITO 18 ITD 230 (Cal Trib) (iv) Authority for Advance Rulinigs in Revenue: Sreenivas Kumar Sistla (AAR No. 514 of 2000) (v) CIT Vs. Eli Lilly Company (India) Pvt. Ltd. 312 ITR 225 (SC). (vi) Union of India Vs. Azadi Bachao Andolan (2003) 263 ITR 706 (SC). (vii) CIT Vs. PVAL Kulandagan Chettiar (2004) 267 ITR 654. (viii) CIT Vs. Estienne Andreas ors (2000) 242 ITR 422 (Bom) (ix) (2000) 241 ITR (St) 124. (x) DIT Anr. Vs Prahlad Vijendra Rao 198 Taxma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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