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TMI Blog2019 (11) TMI 1031X X X X Extracts X X X X X X X X Extracts X X X X ..... our notice that the issue involved is, no longer res integra and, therefore, after hearing both the parties, we are inclined to dismiss all the stay applications filed by the assessee and dispose of all the appeals in ITA Nos. 1304, 1306, 1308. 1311, 1314 & 1315/Kol/2019.The common facts permeating in all the appeals, are that all the assessee's are the employees of IBM India Pvt. Ltd. (hereinafter referred to as "IBM") who have been sent to Switzerland on company's foreign assignment. The undisputed facts are that the residential status of all the assessee's for the relevant year is "non-resident" in terms of Section 6 of the Act and that they actually rendered services outside India during the period under consideration. The employer viz., IBM deducted tax at source u/s 192 on the entire gross salary earned by the assessee's. The assessee's however claimed in their respective returns of income that the foreign assignment allowance component inter alia included in the gross salary was received by them outside India and that too for the services rendered outside India and therefore fell outside the ambit of total income u/s. 5(2) of the Act. In the assessments completed u/s 143(3), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or complete scrutiny under CASS wherein one of the parameters for selection was that the income declared under the head 'Salary' in the return of income was lower than the 'salary' reported in Form 26AS. In the course of assessment the AO called for several details in his notice issued u/s 142(1) dated 11.11.2016 along with write-ups on the issues for which the assessee's case was selected under CASS. Before the AO the assessee explained the modalities of receipt of foreign assignment allowance through his TCC issued by Axis Bank which showed that the foreign assignment allowance was received outside India. The assessee also furnished a certificate from his employer that such allowance was paid for the services rendered outside India. Additionally, the assessee furnished the Switzerland tax documents for 2013 & 2014 evidencing that the foreign assignment allowance had been taxed in Switzerland. Taking note of the replies furnished by the assessee, the AO in his assessment order dated 23.12.2016 had accepted the Return of Income ('ROI') filed by the assessee claiming the assignment allowance received by the assessee at Switzerland, as not taxable in India in terms of Section 5(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order was passed without examining the legal issues involved and interpretation, examination of material on record etc. and accepting the assessee's claim that the income of Rs. 42,97,092/- had not been received in India. Invoking Explanation (2) of Section 263of the Act, the ld. CIT set aside the assessment order of the AO directing him to pass a fresh assessment order after making necessary enquiries on all the issues, including the points on which the assessee has not furnished as discussed supra, after examining the various case laws and correct interpretation of the law in the facts of the case to examine and decide the issue of exemption from taxation on salary amounting to Rs. 42,97,092/-. Being aggrieved by the order of the ld. CIT, the assessee is in appeal before us. 7. In the grounds taken in the appeal, the assessee has challenged the legal validity of usurpation of revisional jurisdiction by the ld. CIT u/s 263 of the Act. According to assessee the ld. CIT has wrongly exercised the revisional jurisdiction u/s 263of the Act since the AO's order on this issue cannot be held to be erroneous as well as prejudicial to the interest of the revenue. It is the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is caused to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous i.e. (i) if the Assessing Officer's order was passed on assumption of incorrect facts; or assumption of incorrect law; (ii) Assessing Officer's order is in violation of the principles of natural justice; (iii) if the AO's order is passed by the without application of mind; or (iv) if the AO has not investigated the issue before him. In the circumstances enumerated above only the order passed by the Assessing Officer can be termed as erroneous for the purpose of S.263 of the Act. Coming next to the second limb, the AO's erroneous order can be revised by the Ld. CIT only when it is shown that the said order is prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction with an "erroneous" order passed by the Assessing Officer. The Hon'ble Supreme Court, held that for invoking powers co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consequently therefore there appeared difference between the salary income reported in Form 26AS with the salary income declared in the return of income. As a result the assessee's case was selected for scrutiny assessment for making enquiries about such differential amount. We note that in the notice u/s 142(1) of the Act dated 11.11.2016, the AO raised specific query requiring the assessment to explain the said difference and furnish his explanation along with supporting documents. In response, the ld. AR of the assessee furnished detailed replies through letters dated 30.11.2016, 05.12.2016&15.12.2016. In his letter dated 30.11.2016, available at Pages 54 to 55 of paper book, the AR explained during the relevant year the assessee was physically present outside India for more than 182 days and therefore he was a 'non-resident' under Section 6 of the Act. Drawing attention to Section 5(2) of the Act, he submitted that the assessee being a non-resident, the income would be taxable in India only if the income was received or deemed to be received or accrued or deemed to accrue in India. The assessee submitted that since foreign assignment allowance of Rs. 42,97,092/- was received ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Limited (,IBM), MrSudiptaMaity (copy enclosed as Annexure 2) wherein Axis Bank has clarified the methodology of transfer of funds to the Axis Travel Card of employees of IBM from its Nostro Account with ZurcherKantonal Bank (ZKB) outside India. The letter states that the funds are transferred to the international travel card of the employee outside India upon instruction of IBMfrom the Nostro Account maintained outside India. The modality of payment as confirmed by Axis Bank Ltd for SudiptaMaity is same for the captioned assessee......." 10. From the foregoing discussion it is abundantly clear that prior to completion of the assessment u/s 143(3)of the Act, the AO had required the assessee to furnish his explanations with regard to his claim for exclusion of foreign assignment allowance from the ambit of his taxable total income in India. In response the ld. AR of the assessee had furnished before the AO the relevant documentary evidences and also substantiated his explanations in support of his contentions by placing reliance on the relevant applicable legal provisions of the Act. The ld. AR of the assessee had also furnished before the AO requisite documentary evidences whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar that the assessing officer wanted the assessee to "furnish in writing and verified in the prescribed manner information called for as per annexures and on the points or matters specified therein before me at my office at 18, RabindraSarani, Poddar Court, 5th Floor, on 04.02.2008 at 11.30 AM.". The annexure to the notice under Section 142(1) of the Act reads as follows:-- 'Requisition u/s 142(1) of the IT Act '61. M/s. J. L. Morison (India) Ltd. - AY 06-07. (1) A write-up on receipt of Rs. 18 crore from foreign co. (2) ...... 77. Mr. Poddar also drew our attention to the reply dated 19th March 2008 given by the assessee to the notice, dated 21st January 2008, under Section 142(1) of the Act. He contended that all the requisite particulars were furnished together with documents. Thereafter, the matter was heard from time to time by the assessing officer as would appear from the List of Dates submitted by Mr. Nizamuddin, learned advocate for the appellant. From the list of dates it appears that on 21st January, 2008 notice under Section 142(1) was issued. On 4th February, 2008 the Assessee appeared and filed details and particulars. On 18th February, 2008, 4th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. In such circumstances, the view taken by the A.O. cannot be said to be prejudicial to the Revenue nor can it be said to be erroneous simply because in his order the A.O. did not make any elaborate discussions in that regard." 80. Mr. Poddar contended that neither before the Tribunal nor in the present appeal has any question has been suggested that the assessment order was bad because the same did not disclose any reasons. The contention raised and the judgments cited by Mr. Nizamuddin, as regards exercise of power u/s. 263 of the Act, are misconceived, and also out of the context. 81. Mr. Poddar contended that the finding of the learned Tribunal that the order dated 28th March, 2008 was not passed without application of mind has not been challenged before this Court. No attempt far less any serious attempt was made on behalf of the revenue to demonstrate that the order passed on 28th March, 2008 by the Assessing Officer was wrong either on facts or law. The appellant has also not been able, nor in fact has made any attempt to establish that the finding of the learned Tribunal that the order dated 28th March, 2008 was not passed without the application of mind is based othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2003] 263 ITR 437/131 Taxman 535, wherein the following views were expressed:-- "The expression "record" has also been defined in clause (b) of the Explanation so as to include all records relating to any proceedings available at the time of examination by the Commissioner. Thus, it is not only the assessment order but the entire record which has to be examined before arriving at a conclusion as to whether the Assessing Officer had examined any issue or not. The assessee has no control over the way an assessment order is drafted. The assessee on its part had produced enough material on record to show that the matter had been discussed in detail by the Assessing Officer. The least that the Tribunal could have done was to refer to the assessment record to verify the contentions of the assessee. Instead of doing that, the Tribunal has merely been swayed by the fact that the Assessing Officer has not mentioned anything in the assessment order. During the course of assessment proceedings, the Assessing Officer examines numerous issues. Generally, the issues which are accepted do not find mention in the assessment order and only such points are taken note of on which the assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact the order was passed by the assessing officer after due application of mind. 90. The judgments cited by Mr. Nizamuddin do not really support his contention. The judgment in the case of Meerut Roller Flour Mills (P.) Ltd. (supra) does not apply because the High court in that case was satisfied that the assessment order was passed without enquiry. 91. The judgment of Cochin Bench of Income Tax Appellate Tribunal in ITA No. 116 /Coch/ 2012 relied upon by Mr. Nizamuddin is evidently based on an erroneous impression that "the proceedings before the Assessing Officer are judicial proceedings". This impression, which is patently contrary to the views expressed by Apex Court in the case of S.S. Gadgill (supra), was responsible for the views taken by the Tribunal. When t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the assessment order, the following facts and circumstances appear:-- "Return was filed on 29/11/06 showing total income of Rs. 3,80,66,940/-. In response to notices u/s. 143(2) and 142(1) of the I. T. Act, 1961, Sri P. R. Kothari, A/r appeared from time to time and explained the return. Necessary details and particulars were filed. The business of the assessee is manufacturing and trading of cosmetics and dental care products as in earlier years. In view of above total income is computed is under:" 98. Unless the aforesaid recital is factually incorrect or the computation is legally wrong, it is not possible to hold that the assessment order was passed without application of mind. On the top of that when the Assessing Officer accepted the contention of the assessee there was no occasion for him to make any discussion in his order. 99. If the assessing officer cannot be shown to have violated any form prescribed for writing an assessment order, it would not be correct to hold that he acted illegally or without applying his mind. The third question is, for the reasons discussed above, answered in the negative." 12. We note that the sheet anchor on which the ld. CIT has fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wrong facts. 14. In the impugned order the ld. CIT placed emphasis on the fact that the allowance in question was received by the assessee from an entity established in India. He further emphasized on the fact that the assessee's employment contract was with Indian company and the contract of the employment which gave rise to the payment in question was executed in India. Accordingly the assessee's right to receive remuneration inter alia including foreign assignment allowance had accrued in India and consequently therefore the assessee was liable to pay tax on such allowance in India. The ld. CIT further observed that the allowance in question was computed in INR denomination which clearly showed that the payment was intended to be made in India. The ld. CIT also found that the payment of the allowance was made from the employer's Deustche Bank Account which was located in India. In his opinion, the 'point of payment' was the 'point of receipt' and consequently therefore the income was deemed to be received at the place where the payment originated. According to the ld. CIT the payment of allowance from Deustche Bank, Bangalore to Axis Bank's Nostro A/c outside India and therea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d which is preceded and succeeded by services rendered in India and forms part of the service contract of employment, shall be regarded as income earned in India 16. From the foregoing provision it is quite evident that the income under the head 'Salaries' is deemed to be earned in India only if such income is paid for services rendered in India. In other words, rendering of services to the employer in India is sine qua non for invoking deeming provisions of Section 9(1)(ii) of the Act. In the present case it is not denied by the ld. CIT that for the relevant assessment year the status of the assessee was non-resident because his physical stay in India was less than 182 days. He also did not deny the fact that the services were rendered by the assessee in Switzerland and for which the impugned allowance was received. Once these are the admitted facts, then the same clearly takes the assessee's case outside the ambit of Section 9(1)(ii) of the Act and thereby the said allowance was not includible in the total income of the assessee for the purposes of tax in India. 17. We also do not see any merit in the ld. CIT's finding that the assessee had received the impugned sum in India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on the instructions of the employer. We therefore do not find any merit in the ld. CIT's finding that the impugned allowance was first received by the assessee in India and thereafter at his instance the amounts were remitted outside India in the form of TCC. 20. Another issue which weighed on the ld. CIT's mind was that the impugned allowance did not suffer any tax in the country of residence i.e. Switzerland and therefore it was a case of double non-taxation which could not be permitted in law. In the first instance we do not find much force in this plank of the ld. CIT's reasoning. The question for determination by the ld. CIT was whether in law the amount received by the assessee for rendering services outside India was legally chargeable to tax in India. For deciding this question, it was wholly immaterial whether or not, such income suffered tax in the country of residence i.e. Switzerland. Double taxation of income is not alien phenomenon in cross border transactions. In the circumstances in deciding the issue of taxability of the particular receipt in India, it was wholly irrelevant whether or not such receipt suffered tax in the other jurisdiction. We therefore hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... international waters and his salary from the employer was admittedly deposited in his bank account maintained in India. Further such salary did not suffer any tax in any other country. On these facts, the Tribunal held that the income was chargeable to tax in India since the salary was deposited in bank account maintained in India. In the present case however, as noted in the preceding paragraphs, no money was found deposited in assessee's account maintained in India and the foreign assignment allowance received for services rendered in Switzerland, the due taxes were paid in that country. Moreover, Section 9(1)(ii) makes it abundantly clear that income chargeable under the head 'Salary' constitutes income deemed to accrue in India only if the services are rendered in India. Since in the present case, admittedly no services were rendered in India for which the foreign assignment allowance was received by the assessee, the same was not chargeable to tax in India even in terms of the deeming provisions of Section 9(1)(ii) of the Act. 22. We note that in the impugned order the ld. CIT has not made any discussion with regard to application of Section 9(1)(ii) which was the most appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to exemption claimed by him towards foreign assignment allowance, which was paid by crediting the assessee's Travel Currency Card (TCC) . The assessee also furnished a certificate from IBM India Private Limited stating that the assessee had received Rs. 51,84,489/- outside India for rendering services in Switzerland. In the said certificate, it was also mentioned by IBM that taxes to the tune of Rs. 16,04,063/- was deducted at source including on the portion of foreign assignment allowance because the residential status as well as the tax residency of the assessee was not known." 23. With reference to the foregoing facts, the issue for adjudication before the Tribunal was whether the Ld. CIT(A) was justified in deleting the addition made of Rs. 51,84,489/- which was brought to tax by the AO by applying the provisions of section 5(2) of the Act. So, we note that this issue, on similar facts and applicable provisions of law, was adjudicated in respect of an assessee who was working with the same company IBM as that of the assessee in this case; and the AO had taxed the foreign assignment allowance by invoking provisions of Section 5(2) of the Act, which was deleted by the Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d receipt of income happens outside India. Hence the same is outside the ambit of tax as per the provisions of section 5(2) of the Act. The services of the assessee are also utilized only outside India. g) This foreign assignment allowance is duly subjected to tax in the country of Switzerland and the assessee had duly paid the said tax to the Swiss Government. h) The assessee had paid taxes in India in respect of salary received by him in India, which is not in dispute. 7.2. We find that the ld DR had argued that the foreign assignment allowance given to the assessee is nothing but salary and that the same is first deposited in India and thereafter it gets loaded into the TCC by Axis Bank as instructed by IBM. In this regard, we find from the account statement of TCC enclosed in pages 130 to 145 of Paper Book for the period 30.11.1999 to 14.12.2015 , that the assessee is sent outside India with a TCC containing zero balance and the same is loaded/reloaded periodically as per the requirement . This loading or reloading of funds in TCC happens when the assessee was rendering services outside India and was staying outside India. Hence the funds get deposited / loaded / reloaded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn. The learned Assessing Officer submitted that the amount of Rs. 17,27,360/- was received by the appellant in Netherlands from his employment on account of foreign allowances, for which he produced certificate from the employer. The employer was non-resident during the year and provisions of Section 6(1) of the Act is applicable. Therefore, foreign allowances received by him outside the India for services rendered outside India are not liable to be taxed in India U/s 5(2) of the Act. He also relied on the various case laws, which were relied upon before the learned CIT(A), therefore, he prayed to confirm the order of the learned CIT(A). 6. We have heard the rival contentions of both the parties and perused the material on record. The appellant was non-resident during the year under consideration and allowances were received by him in Netherlands. The employer wrongly deducted TDS, the appellant had claimed refund on it. The Indian income has been considered by the appellant as taxable but the allowances paid outside the India are not taxable u/s 5(2) of the Act in the case of non-resident. The case law relied upon by the learned CIT(A) are squarely applicable in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard. Accordingly, the grounds raised by the revenue are dismissed." 24. From the aforesaid decision rendered by the Coordinate Bench of this Tribunal dated 11.07.2018, we find that the issue involved before us is no longer res integra. We note that the claim of the assessee in the present case for exclusion of foreign assignment allowance, which was accepted by the AO, was in consonance with the view of Ld. CIT(A) in Shri SudiptaMaity's case (supra) which has been upheld by the Tribunal. In light of the decision of the coordinate Bench of the Tribunal with which we are in agreement, we hold that the action of the AO cannot be held to be erroneous in so far as prejudicial to the interest of the revenue as held by the Hon'ble Supreme Court in Malabar Industrial Co. ltd. (supra). 25. We note that in the impugned order, the Ld. CIT has fortified his usurpation of revisionary jurisdiction u/s 263 of the Act, by relying on the amendment to Section 263 whereby second Explanation to sub-section (1) of sec. 263 of the Act was inserted with effect from 01.06.2015. The said amendment inserted the words "in the opinion of Principal commissioner or Commissioner". According to ld. CIT, aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matterof any appeal [filed on or before or after the 1st day of June, 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] [Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, directions or instructions issue by the CBDT u/s 119 of the Act, (d) theAssessing Officer passed the order not in accordance to the decision of the Hon'ble Jurisdictional High Court or the Hon'ble Supreme Court, which is prejudicial to the assessee, which is rendered either in the assessee's case or any other person. 27. So, the amendment brought by the Finance Act, 2015, by way of insertion of Explanation-2, can come to the aid of the ld. Pr. CIT or ld. CIT only when any of the four conditions is satisfied and there is a clear finding of fact to that effect is recorded by the Ld. CIT, then only the legal consequence that AO's order is erroneous insofar as prejudicial to the revenue can be deemed or else it cannot be deemed. Then in that case only the assessment order framed by the Assessing Officer can be deemed to be erroneous insofar as prejudicial to the interest of the Revenue, not otherwise. To say it differently, the "opinion of Ld. Pr. CIT or CIT" cannot be read in isolation, and it has to be read with the four conditions stipulated under Explanation-2 as (a) to (d) and has to be read along with it. And only in the event that any one of the situation is satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive manner and not arbitrarily or subjectively since he is discharging quasi-judicial powers vested in him while doing so. Thus according to us, Explanation (2) inserted by the Parliament u/s. 263 cannot override the main section i.e. sec. 263(1) of the Act. The Ld. CIT can exercise his revisional jurisdiction in the event the assessment order is erroneous as well as prejudicial to the interest of the Revenue as discussed above and not otherwise. 29. As we discussed above, the opinion of the Ld. CIT based on the deeming provision of Explanation 2 to sec. 263 of the Act should be on the bedrock of the finding of fact that AO's order falls in the infirmities/condition stipulated under the Explanation 2(a) to (d) and then only the opinion of the ld. CIT should prevail and not that of any other person. Therefore, when the issue of assumption of jurisdiction of the Ld.CIT is tested on the backdrop of the judicial precedent of the subject, we note that the AO had called for documents from the assessee vide notice issued u/s. 142(1) dated 11.11.2016 and has passed the order on 23.12.2016 after perusal of replies of assessee, as discussed. The AO had acknowledged to have received the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m any infirmity. Instead we note that the ld. CIT ultimately merely set aside the assessment order directing AO to pass the order afresh in accordance with law which in our opinion was nothing but giving the AO second innings without establishing that the AO's order was erroneous as well as prejudicial to the interests of the Revenue. Our findings in this regard find support in the following judgments: - DIT vs Jyoti Foundation reported in 357 ITR 388 (Del) - ITO vs DG Housing Projects Ltd reported in 343 ITR 329 - CIT vs Ashish Rajpal reported in 320 ITR 674 (Del) - CIT vs Sunbeam Auto Ltd reported in 332 ITR 167 (Del) - CIT vs R.K.Construction Co. reported in 313 ITR 65 (Guj) 31. In the light of the above, we are of the firm view that not only did the AO enquire into the issue of taxability of foreign assignment allowance received by the assessee but had consciously applied his mind to the facts made available before him and adopted the permissible view in law. For these reasons, we are of the considered view that the assessment order is not the result of non-enquiry or non-application of mind or assumption of wrong facts. We are also of the considered opinion that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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