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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 ..... d by the assessee in India. It is necessary to examine whether the salary is deemed to accrue or arise in India by applying the Sec.9(1) and Explanation thereto. In my opinion, the Explanation to 9(1)(ii) says that where the salary is payable for services rendered in India, the same shall be regarded as income earned in India. The effect of Explanation is that it is no longer open to an assessee to say that though he rendered services in India, since the contract of employment was entered into outside India, the salary could not be said to have accrued or arisen in India. In such a case, the Explanation deems the salary as having accrued or arisen in India, notwithstanding that the contract of employment was entered into outside India. From the Explanation it is not permissible to infer the corollary, viz. that in all cases where services are rendered outside India, the salary cannot be deemed to accrue or arise in India. The Explanation deals with a different situation and its scope should not be extended to cases which are not contemplated by it. AO has rightly applied the first part of sec.5(2)(b). He held that since the contract of employment had been entered into in India and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of the case and in law in disallowing the exemption of INR 28, 44, 650 claimed by the appellant for AY 2014-15 in respect of the services rendered in Switzerland under Article 15(1) of the Double Taxation Avoidance Agreement between India and Switzerland (DTAA) read with Section 90 of the Act. 2. The Hon'ble CIT(A) has grossly erred in the facts and circumstances of the case and in law in wrongly invoking the provisions of Article 23(1) of the DTAA -to 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaty. Aggrieved by the order of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A). On appeal, Ld.CIT(A) following the decision of Chennai Tribunal in the case of ITA No. 299/Mds./2016 dated 05.08.2016, observed that the assessee has been paid salary in India by an Indian Company, in Indian rupees and in asavings bank maintained in India. Therefore, the the salary received in India is taxable in accordance with the provisions of the section 5 and 9 and 192 of the Act as it is received in 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-re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT in Bholanath Pal Vs. ITO (ITA No.l0/Bang/2011) - salary amount received by the appellant during stay outside India is not taxable as salary is accrued where employment services are rendered. 2.8 In the case of Authority for Advance Rulings in British Gas India Private Limited (2006) 155 Taxman 326 (AAR), the learned AAR while examining Article 16(1) of the Indo-UK DTAA, observed that since the non- resident individuals who are seconded to UK are drawing their salary in respect of employment being exercised in the UK, they shall be 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.co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the appellant is entitled to invoke the provisions of Indian tax laws or that of the DTAA, whichever is beneficial to him. 3.2 Article I of the DTAA provides that provisions of the DTAA shall apply to persons who are residents of one or both the countries. The Appellant qualifies to be a Non Resident of India for t e AY 2014-15 and a tax resident of Switzerland for the years 2013 and 2014 (i.e., corresponding Indian AY 2014-15) and is accordingly entitled to the beneficial provisions of the DTAA. 3.3 As per Article 15(1) of India-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 hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent of Switzerland is taxable only in Switzerland in respect of employment exercised in Switzerland. (e) There is no specific nexus between Article 15(1) and Article 23 of the DTAA. (f) The exemption claimed under Article 15(1) of the DTAA has been allowed, in identical facts and circumstances, in the cases of Arjun Bhowmik (ITAT Delhi), Neeraj Badaya (ITAT Jaipur) J and Bholanath Pai (ITAT Bangalore), Sunil Chittaranjan Munsif (ITAT, Ahmedabad). Ld.A.R pleaded that in view of the above points, the exemption claimed be granted. 4. On 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x, in any case consisting at least of the deduction cit the tax levied in India from the gross amount of the dividends, interest, royalties or fees for technical services. Switzerland shall determine the applicable relief and regulate the procedure in accordance with the Swiss provisions relating to the carrying out of international Conventions of the Swiss Confederation for the avoidance of double taxation. (C) [****j 3. Article 21 renumbered as article 23, by Notification No. GSR 74(E), dated 7-22001 4. 'and (ci)" 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Section 5 and 9 and 192 of the Income-tax Act, 1961 as it is received in India and taxable in India. The assessee's claim of exemption of salary under Article 15 of the DTAA between India and Switzerland is not In accordance with law, hence not entertained and disallowed. 5. I have heard both the parties and perused the material on record. In this case, the main argument of the ld.A.R is that the salary was accrued outside India as such in view of the judgement of Kolkatta High Court in the case of Utanka 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 taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll rights flowing there from were also enforceable in India, the salary must be held to have accrued or arisen to the assessee in India. He had not, therefore, considered it necessary to address the question as to whether the salary could be 'deemed' to accrue to the assessee in India. 5.4 Sec. 9(1) provides for certain situations where the income may be "deemed" to accrue or arise in India. The later part of s. 5(2)(b) and s. 9(1) can be resorted to only when the income is not normally to be considered as having accrued or 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 salar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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