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TMI Blog2016 (6) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... MUMBAI and respectfully following the same , we hold that the salary received in India is taxable in India in terms of section 5(2)(a) - Decided against assessee. - ITA No.68/Kol/2016 - - - Dated:- 10-6-2016 - Shri P. M. Jagtap, A.M. Shri S.S.Viswanethra Ravi, J.M Appellant by : Shri Manish Tiwari, FCA Respondent by : Shri A.H.Choudhury, JCIT, Sr,DR ORDER This appeal filed by the assessee is directed against the order of ld. CIT(A)-22, Kolkata, dated 02.11.2015 for the assessment year 2011-12 and the solitary issue involved therein relates to the addition of ₹ 21,56,683/- made by the AO and confirmed by the ld. CIT(A) to the total income of the assessee on account of the amount remitted to his bank account by M/s. BW Fleet Management Ltd., Singapore 2. The assessee in the present case is an individual who is a Marine Engineer. During the year under consideration, he was engaged with M/s. BW Fleet Management Ltd., Singapore in the capacity as a Marine Engineer and was a non-resident in India, as per the Income Tax Act. The return of income for the year under consideration was filed by him on 11.05.2011 declaring total income of ₹ 1,193/-. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench of the Tribunal in the case of Capt. A.L.Fernandes vs- ITO 81 ITD 203, wherein it was held that the salary received by the assessee in India was taxable under the provisions of section 5(2)(a) of the Income Tax Act on receipt basis. Accordingly, the amount in question was added by the AO to the total income of the assessee in the assessment completed under section 143(3) vide order dated 20.12.2013. 4. Aggrieved by the order passed by the AO, an appeal was preferred by the assessee before the CIT(A). During the course of the appellate proceedings before the CIT(A), the following submissions were made by the assessee in support of its case that the amount in question remitted to his NRE account in India by M/s. BW Fleet Management Pvt. Ltd. is not taxable in India under section 5(2)(a) of the Income Tax Act, 1961. The interpretation of the department that the income is received in India as because the payments have been made by the foreign company in the non-resident assessee s NRE account is against the intention of the legislature to render benefit to a non-resident not chargeable to tax. The point of contention is that any non-resident shall be receiving the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 247 ITR 260(Bom) and the order of the Ld.CIT(A) in the case of Mr. Gautam Bhattacharya dated 4.8.2014 in I.T.Appeal No.7/CIT(A)-VI/lntI.Tax/00IT-(IT)-1(1)/2014-15/Kol. The appellant has also relied on the Hon'ble supreme Court, in the case of CIT vs. Hyundai Heavy Industries Limited (291 ITR 482), which dealt with the connotations of this expression income accruing or arising in India' under Section 5(2). The appellant has summarised his arguuments as under: a) The assessee is a non resident and rendering services outside India. (b) The payments are being made by a foreign company outside India and the foreign company does not have any permanent establishment in India. (c) The point of payment is to be taken into consideration for determining the provisions of clause 5(2)(a) of the Income Tax Act and the point of payment shall be considered as the point of receipt. (d) It is immaterial that the payment is being transferred by the foreign company or remitted by the foreign company to the NRE account in foreign exchange in India as because payment have been made by the foreign company outside India and the point of payment is to be taken as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1965] 56 ITR 42 (SC) that Income is said to be received when it reaches the appellant. Thus the term 'received' has to be understood in the context of salary having been received and not beyond. 6.1 Another of the appellant's contention that lithe amount which is received by the assessee from the foreign company is in foreign exchange and therefore income cannot be said to have been received in India where payments have been received in foreign currency is again contrary to the provisions of the statute. The Income Tax Act nowhere stipulates the nature of currency to be determinative of income of the appellant. The scheme of the Act is such that charge of tax is made independent of territoriality and residency and currency. All the separate charging sections are also made free of territorial nexus and status based on residence. Income from whatever source (including from 'salaries') can accrue or arise anywhere in the world and on the basis of section 5(2)(a) has to be included in the total income of a non-resident if it is received in India. 7. The case law cited by the appellant in the case of DIT (lntl.Tax) Anr vs. Prahlad Vijendra Roa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this factual backdrop the entire salary income was held exigible to tax in India. The order of the AO was later confirmed by Ld. CIT(A) also. 7.3 On further appeal, Ld. Judicial Member, in his order, referred to section 9(l)(ii) read with the Explanation and held that the amount of salary in question which was received by the assessee for rendering services on the board of a ship, while the ship was floating outside the territorial water of India, was not taxable in the facts of the present case. However, Ld. A.M. referred both to section 5(2)(a) and section 9(l)(ii) and held that the appeal of the assessee needed to be dismissed. 7.4 The matter was referred to Ld. President who appointed Ld. Third Member to resolve the issue. Ld. TM held that: 8. In my opinion, the salary is includible in the assessment under Section 5(2)(a) of the Act, which says that any income received by a non-resident in India is taxable in India. There is a clear finding in the order of the learned AM, that there is no dispute that the salary was received in India. This should put an end to the controversy. I may add, that the learned AM has not disputed the correctness of the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he NRE account of the assessee in India, the provisions of section 5(2)(a) of the Act are not applicable. 5.1 In support of his contention, the ld. Counsel for the assessee relied mainly on the decision of Agra bench of this Tribunal in the case of Arvind Singh Chauhan vs- ITO 147 ITD 509. As regards Third Member decision of Mumbai bench of this Tribunal in the case of Captain A.L. Fernandez vs- ITO ( supra ) relied upon by the CIT(A) in his impugned order, he contended that the same is distinguishable on facts in as much as the employer in the said case was Central Govt. Undertaking and the amount in question towards salary was received by the assessee in India. He contended that the ld. CIT(A) however has not appreciated this distinguishable features and wrongly placed reliance on the decision in the case of Captain A.L. Fernandez ( supra ) ignoring completely the fact that the amount in question towards salary was initially received by the assessee outside India. 6. The ld. DR, on the other hand, submitted that there is no proof brought on record by the assessee to establish that the amount in question towards salary was received by him outside India. In this regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Arvind Singh Chauhan, supra argued that the said decision had not considered the Third Member decision, cited supra and hence to be ignored. 10.1. We find that the assessee was only trying to introduce one more layer to the entire transaction that the assessee had the control over his money in the form of salary income in international waters and for the sake of convenience, he instructed the foreign employer to send the monies to his NRE account in India. It was argued by the assessee that income was actually earned by the assessee outside India and assessee had only brought those amounts into India. In other words, what was brought into India is not the salary income but only the salary amount. But we find that no evidence has been brought on record to prove that the assessee had the control over his salary income in international waters. Moreover, we find that if this argument of the assessee is to be accepted, then the assessee goes scot free from not paying tax anywhere in the world on this salary income. The provisions of section 5(2)(a) of the Act are probably enacted keeping in mind that income has to suffer tax in some tax jurisdiction . We believe that such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s account outside India to the assessee s NRE account in India. In such circumstances, it is difficult to accept the contention of the Learned AR that salary was not received in India. The decision rendered by the Agra Tribunal in the case of Arvind Singh Chauhan vs ITO in ITA Nos. 319 320/Agra/2013 dated 14.2.2014 is based on the decision rendered by the Hon ble Madras High Court in the case of CIT vs A.P.Kalyankrishnan 195 ITR 534 (Mad) . The facts before the Hon ble Madras High Court were that the assessee in that case received pension from the Malaysian Govt and claimed it as not taxable. The AO found that the assessee received the pension in India through the Accountant General Madras directly and hence the pension received is liable to tax in India on receipt basis. The first appellate authority found that the pension amount received by the assessee had been subjected to assessment in Malaysia in the status of non-resident and that clearly pointed out that the pension had accrued to the assessee only in Malaysia. It was further held that pension had accrued to assessee only in Malaysia and the Accountant General Madras was merely authorized to arrange for the payment of pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.3.1. The above explanation would clearly prove that the facts before the Hon ble Madras High Court (supra) are distinguishable from the facts of the present case in as much as the income in the present case did not suffer tax in any other jurisdiction nor was it received in any other tax jurisdiction. The receipt in the NRE account in India is the first point of receipt by the assessee and prior to that it cannot be said that the assessee had control over the funds that had deposited in the NRE account from the employer. 10.4. The facts in the case decided by the Agra Tribunal supra were that the assessee received salary cheques by way of credit to his bank account with HSBC Mumbai. The Agra Tribunal took the view that the assessee had a lawful right to receive the salary as an employee at the place of employment i.e at the location of its foreign employer and it was a matter of convenience that the monies were thereafter transferred to India. As we have already seen that in section 5(2)(a) of the Act, right to receive salary is not the relevant criterion but the relevant criterion is the receipt of payment which is admittedly in India. Therefore, we have our own doubts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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