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TMI Blog2017 (6) TMI 644X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - I.T.A. No.69/Kol/2016 - - - Dated:- 2-6-2017 - SHRI A. T VARKEY, JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER For The Appellant : Shri Manoj Kataruka, Advocate For The Respondent : Shri N. B. Som, ACIT, Sr. DR ORDER Per M. Balaganesh, AM 1. This appeal by assessee is arising out of order of CIT(A) -22, Kolkata vide Appeal No. 134/CIT(A)-22/KOL/14-15 dated 2.11.2015. Assessment was framed by DDIT, International Taxation 3 (1), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for AY 2011-12 vide his order dated 29.1.2014. 2. The only issue to be decided in this appeal of assessee is as to whether the remuneration received by the assessee in the sum of ₹ 23,71,727/- which was directly remitted from foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Mercator Lines Ltd, Singapore 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 Non Resident those income were not taxable u/s 5 of the Act. 6. The Ld. AO examined the reply of the assessee together with the bank statements of the assessee and observed that the provisions of section 5(2)(a) of the Act states that income from whatev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly 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. CIT(A) as below: (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 paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 not taxable as income u/s 5(2)(a) of the Act. 10. In response to this, the Learned DR argued that as per Section 5 of the Act, so far as non-residents are concerned, total income includes all income from whatever source derived which: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 receive his salary and nothing else. It has no relation with location or place of services rendered or to where the amount has become due . Thus, what is important for charging an amount to tax under section 15(a) is whether it is in the nature of salary an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 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 OF - CLARIFICATION REGARDING LIABILIT Y- ITNOC OINMCEO -M AEC-TCARXU AINL 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, for services rendered outside India on-board foreign ships, are being subjected to tax in India for the reason that the salary has been received by the seafarer into the NRE bank account maintained in India by the seafarer. 2. The matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 vs 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 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. 12. In the result, the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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