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2017 (11) TMI 2030 - AT - Income TaxIncome accrue or arise in India - Taxability of Foreign[salary] income in India - income received by the assessee towards salary for an employment outside India - assessee was seconded to Switzerland to work - Number of stay in India - 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) - exemption of salary under Article 15(1) of the Double Taxation Avoidance Agreement (tax treaty) between India and Switzerland seeked - HELD THAT:- As the salary is includible in the assessment under section 5(2)(a) of the Act, which says that any income received by a Non-Resident in India is taxable in India. There is a fair finding in the order of the lower authorities that there is no dispute that the salary was received in India. This should put end to the controversy, therefore, it was rightly taxed in India u/s.5(2)(a). In the present case, the salary income was received 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 since all 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. 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. As 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 not to the nonresident. In the present case, there is no dispute that as the assessee is a non-resident, the said Article is not applicable. This view is fortified by the order of Tribunal in the case Shri Swaminathan Ravichandran [2016 (8) TMI 1498 - ITAT CHENNAI] The decision in the case of Captain A L Fernandez [2001 (12) TMI 873 - ITAT MUMBAI] clearly lays down that salary for services rendered aboard a ship outside the territorial waters of any country would be taxable in India, if it was received in India as per Section 5(2)(a) of the Act. Following the decision of Captain A L Fernandez [supra] the salary income received by the non-resident taxpayer in the present case were held as taxable in India by virtue of receipt in India as per Section 5(2)(a) of the Act. Decided against assessee.
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