Section 5.2.(a) -second article in view of Circular dated 11.04.2017 – the scope of Circular must be wider to avoid litigation in other cases.

[CA DEV KUMAR KOTHARI]

Link for earlier article webhosted on 21.03.2017 at under title   -

“Section 5(2)(a) - receipt of income is at place where services are rendered. In case of payment by cheque, DD,TT etc. receipt of income is at place where cheque is given or posted or dispatched to payee - and not where cheque is realized and bank account of payee is credited”.

Relevant provisions: Section 5(2) (a) of Income-tax Act, 1961.

Circular No 13/2017  F.No. 500/07/2017-FT & TR-V dt. 11.04.2017

Settled legal position by:

CIT Versus Ogale Glass Works Limited  1954 (4) TMI 3 - SUPREME Court  -  Posting of cheque  in Delhi, in law, amounted to payment in Delhi. ( thus receipt in Delhi)

Some judgment of ITAT which decided issue against assessee:

Capt. A.L. Fernandes Versus Income Tax Officer 2001 (12) TMI 873 - ITAT MUMBAI Other Citation: (2002) 81 ITD 203, [2002] 75 TTJ 714

Shri Tapas Kr. Bandopadhyay Versus Deputy Director of Income-tax, (International Taxation) -3 (1) , Kolkata 2016 (6) TMI 215 - ITAT KOLKATA in I.T.A No. 70/Kol/2016  Dated: - 01 June 2016

Shri Tapan Krishna Pattanaik, ... vs Assesses sing Officer [2016 (6) TMI 1174 - ITAT KOLKATA] dt. on 10 June, 2016

KOLKATA BENCH 'C',KOLKATA(Before Shri P. M. Jagtap, A.M. & Shri S.S.Viswanethra Ravi, J.M.) ITA No.68/Kol/2016

Judgments of ITAT in favour of assessee:

Arvind Singh Chauhan Versus Income Tax Officer 2014 (3) TMI 18 - ITAT AGRA

In the earlier article after detailed discussion author had requested and suggested as follows:

A circular from the CBDT is desirable:

A circular from the CBDT in accordance with law laid down in case of Ogale Glass will be very useful in proper administration of tax for the revenue and for tax payers. The Board may direct that the law laid down in Ogale glass be applied in assessment, appeals and for decision about filing of appeals and withdrawal of appeals filed by revenue. This will go a long way in reducing un-necessary litigation and improve tax department- tax payer relationship.

Recent Circular:

And now we find a circular issued on 11.04.2017as follows (highlights added):

Circular No 13/2017 

F.No. 500/07/2017-FT & TR-V

Ministry of Finance,

Department of Revenue,

Central Board of Direct Taxes

Foreign Tax And Tax Research-II.  

FT and TR-V Division

New Delhi, dated 11.04.2017

Subject: 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.

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 has been examined in the Board Section 5(2)(a) of the income-tax Act provides that only such income of a non-resident shall be subjected to tax in India that is either received or is deemed to be received in India. It is hereby clarified that salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because that said salary has been credited in the NRE account maintained with an Indian bank by the seafarer.

(Subhash Jangala)

Under Secretary (FT & TR-V)

The above circular shall provide relief in limited manner to non-resident seafarer for services rendered outside India on a foreign ship.

Scope of Circular should be wider:

The scope should not have been restricted only to  NRI seafarer only similar clarification should also be provided for NRI’s who earn salary abroad and remit whole or a part of such salary earned, accrued and received out of India, and then remitted to bank account in India.

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Section 5(2)(a) - receipt of income is at place where services are rendered. In case of payment by cheque, DD,TT etc. receipt of income is at place where cheque is given or posted or dispatched to payee - and not where cheque is realized and bank account of payee is credited