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TMI Blog2017 (6) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... es not specify as to whether the Circular covers either of the situations or both the situations contemplated above. Hence we deem it fit to give the benefit of doubt to the assessee by holding that the Circular covers both the situations referred to above. The result of such interpretation of the Circular would be that the provisions of Sec.5(2)(a) of the Act is rendered redundant. Be that as it may, it is well settled that the Circulars issued by CBDT are binding on the revenue authorities. This position has been confirmed by the Hon'ble Apex Court in the case of Commissioner of Customs v. Indian Oil Corporation Ltd (2004 (2) TMI 66 - SUPREME COURT OF INDIA) wherein their Lordships examined the earlier decisions of the Apex Court with regard to binding nature of the Circulars and laid down that when a Circular issued by the Board remains in operation then the revenue is bound by it and cannot be allowed to plead that it is not valid or that it is contrary to the terms of the statute. Accordingly, the grounds raised by the assessee are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... dential status of the assessee as non resident after verification of copy of passport and other details submitted. The assessee claimed that as per provision of law, salary income, which is received outside India in foreign currency will not be taxable u/s. 5 of the Act. The Ld. AO issued show cause notice to the assessee as to why the remuneration received in India should not be brought to tax in terms of section 5(2)(a) of the Act. 5. The assessee replied to the show cause notice stating that the payments have been made to the assessee as remuneration by M/s Wallem Ship Management Ltd, Hongkong as per the contract and the entire consideration was received in USD outside India and on request of the assessee, it was remitted to the Savings Bank NRE Account held with HSBC from time to time. It was also pleaded by the assessee that the entire amount of income in USD were received by him from outside India and that income in USD shall not be deemed to be received in India and it was also submitted that other than foreign currency, any amount could not be deposited in NRE A/c. It was stated that the amounts which were credited in his NRE A/cs in India were received outside and being & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of salary was made by the foreign company in US$ and remittance was made to the NRE account of the assessee in India. The assessee claimed that the meaning of the word 'received in India' within the meaning of section 5(2)(a) of the Act should be interpreted only in the context of income received in Indian currency in India. There is a distinction between receiving money and transfer of money. The distinction is that where a foreign company makes payment to the non-resident for services rendered outside India, the foreign company is transferring the money or remitting the money in foreign currency to the assessee who is a non-resident, and the money is being received by the assessee not in India as because the point of payment by the foreign company is in foreign land and the point of receipt by the assessee should be taken from the point of payment. Mere remittance or transfer of the payments by the foreign company in the NRE account of the assessee in India that also in foreign exchange shall not be considered as income received in India and any larger interpretation to the section would render it otiose. The various arguments of the assessee were summarized by the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the circumstances of the case the application of decision of Captain A.L. Fernandez vs. ITO 81 ITD 203 (Mum) (TM) by the Ld. CIT(A) to treat as income of ₹ 3347112/- u/s 5(2)(a) of the Income Tax Act is based on incorrect application of case law and the addition is arbitrary and excessive. 4. That the order of the Ld. CIT(A) upholding the order of the AO is arbitrary, excessive and unjustified and bad in law. 5. That the above grounds of appeal will be argued in details at the time of hearing and the appellant craves leave to submit additional grounds of appeal, if any, at or before the time of hearing." 9. The Ld. AR reiterated the submissions made before the lower authorities. He argued that the facts in the present case are squarely covered by the following decisions: (i) DIT (International Taxation) v. Prahlad Vijendra Rao [2011] 198 Taxman 551/10 taxmann.com 238 (Kar.), (ii) CIT v. Avtar Singh Wadhwan [2001] 247 ITR 260/115 Taxman 536 (Bom.) He stated that the issue is now squarely covered in favour of the assessee by the CBDT Circular No. 13/2017 dated 11.4.2017 wherein it has been categorically clarified by CBDT that the subject mentioned receipt is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act also follow the same scheme as does the main charging section (section 4). It was further argued by the Learned DR that the main point of contention here, is whether the language of the statute as contained in section 15(a) reflects any locational preference. There is no such preference in section 15(a). Salary can become due to an 'assessee' anywhere in the world. The moot question here is the meaning of the phrase 'due from an employer ... whether paid or not'. This phrase was present in section 7(1) of the 1922 Act also. Hon'ble Supreme Court of India had occasion to determine the meaning of this phrase in the case of CIT v. L. W. Russel [1964] 53 ITR 91 (SC). Hon'ble Apex Court held that: "The expression 'due' followed by the qualifying clause 'whether paid or not' shows that there shall be an obligation on the part of the employer to pay that amount and a right on the employee to claim the same." Thus, as explicitly and unequivocally determined by the Hon'ble Apex Court, the term "due" as qualified by the phrase "whether paid or not" is connected with the contractual right of the employee to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f salary for services rendered on board a ship outside the territorial waters of any country would be sufficient to give the country where it is received the right to tax the said income on receipt basis. Such a provision is found in section 5(2)(a) of the Act which was applied in the aforesaid decision. It is trite that decision of a Third Member would be equivalent to a decision of a Special Bench and thereby would become a binding precedent on the division bench. However, we find that the impugned issue has been duly addressed by the CBDT Circular No. 13/2017 dated 11.4.2017 as rightly relied upon by the ld AR. For the sake of convenience, the said Circular is reproduced hereunder:- SECTION 5 OF THE INCOME-TAX ACT, 1961 - INCOME - ACCRUAL OF - CLARIFICATION REGARDING LIABILITY TO INCOME-TAX IN INDIA FOR A NON-RESIDENT SEAFARER RECEIVING REMUNERATION IN NRE (NON-RESIDENT EXTERNAL) ACCOUNT MAINTAINED WITH AN INDIAN BANK CIRCULAR NO.13/2017 [F.NO.500/07/2017-FT&TR-V], DATED 11-4-2017 {AS CORRECTED BY CIRCULAR NO. 17/2017 [F.NO.500/07/2017-FT&TR-V], DATED 26-4-2017} Representations have been received in the Board that income by way of salary, received by non-resident seafarers, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpression "merely because" used in the Circular refers to the former type of remittance or the latter. To this extent the Circular is vague. 11.2 In the instant case, the employer has directly credited the salary, for services rendered outside India, into the NRE bank account of the seafarer in India. In our considered opinion, the aforesaid Circular is vague in as much as it does not specify as to whether the Circular covers either of the situations or both the situations contemplated above. Hence we deem it fit to give the benefit of doubt to the assessee by holding that the Circular covers both the situations referred to above. The result of such interpretation of the Circular would be that the provisions of Sec.5(2)(a) of the Act is rendered redundant. Be that as it may, it is well settled that the Circulars issued by CBDT are binding on the revenue authorities. This position has been confirmed by the Hon'ble Apex Court in the case of Commissioner of Customs v. Indian Oil Corporation Ltd reported in 267 ITR 272 (SC) wherein their Lordships examined the earlier decisions of the Apex Court with regard to binding nature of the Circulars and laid down that when a Cir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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