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TMI Blog2017 (11) TMI 2030X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that only a Resident of India can qualify for exemption under Article 15(1) of the DTAA. 3. The brief facts of the case are that the assessee had worked with Alcatel Lucent India Limited (All.). During the Financial Year (FY) 2013-14, the assessee was seconded to Switzerland to work with Alcatel Lucent Schweiz Ag, Zurich (Alcatel Switzerland) with effect from July 29, 2013. During FY 2013-14, the assessee was in India for less than 182 days and qualified as a Non Resident as per explanation (a) to section 6(1) of the Act. Accordingly, the assessee had electronically filed his return of income on July 31, 2014, admitting an income of Rs. 11,86,040 and claimed exemption of salary under Article 15(1) of the Double Taxation Avoidance Agreement (tax treaty) between India and Switzerland amounting to Rs 28,44,650. The particulars of income and taxes disclosed in tax return by assessee are as given below. Income as per Tax Return Rs. 11,86,040/- Tax as per Tax Return Rs. 1,91,384/- TDS as per Tax Return Rs. 10,67,415/- Tax Refund claimed as per Tax Return Rs. 8,76,030/- 3.1 During the course of assessment proceedings, the case was selected for limited scrutiny assessment t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India and taxable in India. The Ld.CIT(A) rejected the assessee's claim of exemption of salary under Article 15 of DTAA between India and Swiss Confederation. Against the order of Ld.CIT(A), now the assessee is in appeal before us. 4. Before us, ld.A.R submitted that Salary income is not taxable in India in respect of employment exercised outside India for a nonresident per the provisions of the Act and drew my attention to the following points. 2.1 As per Section 6(1) of the Act, it is not disputed that the Appellant qualified to be a Non-Resident in India for the AY 2014-15. 2.2 The provisions of Section 5(2) of the Act defines scope of total income in case of non-residents as under: "Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which (a) is received or is deemed to be received in India in such year by or on behalf of such person or (b) accrues or arises or is deemed to accrue or arise to him in India during such year." 2.3 The expression "subject to" used in the opening para of the sub-section (2) indicates that the provisions of Section 5(2) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxable in that country. Thus the salary paid by the applicant shall not be taxable in India as the same has been offered to tax in the UK in pursuance of the DTAA and the applicant is not liable to deduct tax at source on such salary payments. 2.9 Reference is also made to Circular 13 of 2017 holding that" salary accrued to a non-resident seafarer for services rendered outside India on a foreign going ship shall not be taxed in India merely because the amount has been credited to NRE account maintained with an Indian Bank by the sea-farer. 2.10 The Hon'ble Calcutta High Court has held in Utanka Roy v. Director of Income-tax (2017 82 Taxman.com 113) that " Explanation 2 of Section 5(2) clarifies that income will not be treated to be received in India solely on the basis that such income was received or deemed to be received in / India. It has to be found out where the income to the person concerned had accrued. For the i purpose of finding out the place of accrual of income, the place where the services have been rendered become material." 2.11 The Kolkata Tribunal decision in the case of Tapas Kumar Bandhophdyay v. DDIT [2016 159 lTD 309 has been wrongly applied to the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Switzerland DTAA, the remuneration derived by the Appellant as resident of a country (i.e. Switzerland) in respect of employment exercised in such other count (Switzerland) shall be taxable only in such other country (Switzerland) unless employment exercised in another country (i.e. India). The appellant would be taxable in India only if h exercised his employment in India (Pages 51-53 and Page 77-79 of the paper-book) 3.4 The Appellant has derived salary income of INR 28,44,650 for work days! services rendered i Switzerland and was a resident in Switzerland. Hence, the provisions of Article 15(1) of the India Switzerland DTAA are applicable to him. 3.5 Paragraph I of 2005 model OECD commentary provides the general rule relating to taxation f income from employment that such income is taxable in the State where the employment is actually exercised. Employment is exercised in the place where the employee is physically present when performing the activities for which the employment income is paid. 3.6 A plain reading of Article 1 and Article 15 clearly envisages that the provisions of the DTAA ar applicable to a person who is a resident of at least one of the countries. The DTA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the other hand, ld.D.R drew my attention that the assessee claimed exemption in India in accordance with the provisions of Article-15 of the DTAA between India and Swiss confederation. The assessee's claim under Article 15(1) of the DTAA is not in order since as per Article 23 of DTAA, only Residents are allowed to claim relief under the DTAA. In this case, the assessee is a resident of Switzerland, and hence the assessee is not eligible to claim relief under 15(1) of the DTAA. The Article-23 of Double Taxation elaborately is reproduced as under:- [ARTICLE 23] ELIMINATION OF DOUBLE TAXATION 1.(a) Subject to any provisions of the law of India, which may from time to time be in force and which relates to the relief of taxes paid in a country outside India, where a resident of India derives income which, in accordance with the provisions of this Agreement, may be taxed in Switzerland, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income-tax paid in Switzerland whether directly or by deduction. Such deduction shall not, however, exceed that part of the income-tax (as computed before the deduction is given) which is attributabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omitted, by Notification No. GSR 74(E), dated 7-2-2001. 1. Substituted for 'included" by Notification No. GSR 74(E), dated 7-2-2001. 2. Sub-paragraph (c) omitted by Notification No. GSR 74(E), dated 7-2-2001. 3. Omitted by Notification No.SC) 2903(E), dated 27-12-2011. Prior to its omission, subparagraph (c); as amended by Notification No. GSR 74(E), dated 72-2001, read as under: '(c) Where a resident of Switzerland derives interest dealt with in sections 10(4), 10(4B), 10(15 )(iv) and 8OL of the Indian Income-tax Act, 1961 (43 of 1961) and referred to in sub-paragraph (d ) of paragraph 3 of Article 11, Switzerland shall allow, upon request, a relief to such resident of an amount equal to 10 per cent of the gross amount of the interest." As per Clause 2 (a) of the Article 15 of the DTAA between India and Swiss Confederation, a resident of Switzerland derives income, which in accordance with the provisions of this agreement may be taxed in India, Switcherland shall, subject to the provisions of sub paragraph (b)(c) exempt such income from tax. The exemption under Article 15 (1) of the DTAA between India and Swiss confederation is applicable only to Resident md ans. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Roy Vs. I.T.O reported in 390 ITR 109 (Calcutta) wherein held that income received by the assessee towards salary for an employment outside India to be considered as income received out of India and not to be taxable in India. Further, the assessee relied on the judgment of CIT Vs.Avtar Singh Wadhwan in (2001) 247 ITR 260(Bom.) & Arvind Singh Chauhan in (2014) 147 ITD 409. Accordingly, he submitted that salry was accrued outside India and by arrangement, was remitted to India and received in India that constitute receipt of salary is outside India. 5.1 On the other hand, the contention of ld.D.R is that salary for services rendered outside India would be taxable in India, if it was received in India as per Sec.5(2)(a) of the Act. As seen from the facts of the case of the assessee was continued to be in the pay-roll of Indian company M/s.ALCATEL LUCENT India Ltd., New Delhi and salary was paid and credited in Indian rupees to the assessee's bank account with HDFC bearing No.04931130003475 at Mugaperu, Chennai. It is also noted that in accordance with the provisions of the section 192 of the Act, the company was already deducted the tax at source from the salary paid to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arisen to the assessee in India. These provisions can be resorted to only to find out whether the law has provided for deeming the income in question as having accrued or arisen in India. The deeming provisions cannot be looked into when under general principles, the income has accrued or arisen to the assessee in India. The salary received by the assessee has accrued or arisen to the assessee in India, for the reasons given by A.O with which I fully agree and it is, therefore, not necessary to examine the question whether the salary is also deemed to accrue or arise to the assessee by applying s. 9(1) and the Explanation thereto. Therefore, the salary received by the assessee in India was taxable u/s.5(2)(a) on receipt basis and also as having accrued or arisen to him in India u/s.5(20(b). Sec.9(1)(ii) read with Explanation thereto was not relevant for the controversy. 5.5 Further, the assessee has taken one more plea that in view of Article 15(1) of the DTAA with Switzerland, the said salary is not taxable in India. I have gone through Article 15(1) of the DTAA. In my humble opinion, Article-15 of DTAA with India and Switzerland, exemption allowable to only resident Indian and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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