2010 (4) TMI 1086 - AT - Income Tax

Summary

Issues involved: Appeal against CIT(A)'s order disallowing addition made by AO u/s 5(2), applicability of decisions in similar cases, taxation of income received in India but accrued outside India.

Summary:

Issue 1: Disallowance u/s 5(2)
The appeal was against the CIT(A)'s order disallowing the addition made by the Assessing Officer (AO) u/s 5(2) of the Income Tax Act, 1961. The assessee, a non-resident individual working on board a vessel, received salary outside India which was then credited to his NRE account in Bangalore. The AO considered the amount received in India as taxable income u/s 5(2) based on various reasons including the income being received in India and not offered for taxation in any other country. However, the CIT(A) allowed the plea of the assessee, leading to the appeal by the revenue.

Issue 2: Applicability of Previous Decisions
The CIT(A) based his decision on the applicability of decisions such as the one by the Hon'ble ITAT, Calcutta Bench in a similar case. The Tribunal in a previous case held that salary accrued outside India cannot be taxed in India merely because it is received in India. The Tribunal found the facts in the present case similar to the previous case and held that the order of the CIT(A) was correct and in accordance with the law.

Issue 3: Taxation of Income Received in India
The Tribunal emphasized that salary income is taxable on an accrual basis under section 15 of the Act, regardless of whether it has been actually received. In this case, the salary was received in India on the instructions of the assessee to credit it to his bank account in India. The Tribunal held that the salary accrued outside India and received in India did not make it taxable in India, following the precedent set by previous decisions.

In conclusion, the appeal filed by the revenue was dismissed, upholding the CIT(A)'s decision regarding the taxation of the income received in India but accrued outside India.