TMI Blog2008 (2) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... cer. (3) On the facts and in the circumstances of the case, learned CIT(A) has erred in holding the separate tax treatment should be given to on periods and off periods salaries. The assessee s case covers under Explanation to section 9(1)(ii) introduced by the Finance Act 1983 and Uttaranchal High Court decision in the case of CIT v. Halliburton Offshore Services Inc. [2004] 140 Taxman 405 (Uttaranchal). 3. The facts of the case stated in brief are that the assessee an employee of The Economist was receiving salary in London which remained untaxed in U.K. The assessee was South East Asia region Bureau Chief having his permanent base in India. He was controlling the operations from India. He was staying in India along with his family. During the previous year relevant to assessment year 2001-02, the salary relatable to period of 59 days was claimed as exempt on the ground that the status of the assessee was resident but not ordinarily resident (NOR). The assessee was working as a correspondent in South Asia region stationed at Delhi. His job was to collect the news from South East Asian region and send the same to The Economist. The assessee visited Pakistan and Sri Lanka for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sident (NOR) in assessment year 2001-02. As regards assessee s stay of 38 days at a stretch in UK, learned CIT(A) is of the view that entire period of stay could not be taken for briefing the London editors about the developments of South East Asia, in the absence of evidence to substantiate this contention. He, therefore, came to the conclusion that a period of 18 days could be considered for briefing and accordingly the remuneration for this period was not taxable in India. 5. Before us learned Departmental Representative submitted that assessee an employee of The Economist was posted in India and was staying with his family in New Delhi. The head office of The Economist is in UK. The assessee had no office in Pakistan and Sri Lanka. He went on tour for collecting the news from these two countries. Accordingly, the salary earned by the assessee is taxable in India under section 9(1)(ii) of the Act. He placed reliance on the decision of Tribunal Delhi F Bench, New Delhi in the case of Hiromi Hirose [IT Appeal No. 4506 (Delhi) of 2003, dated 31-8-2006], for assessment year 2003-04. As regards the stay in UK no proof for services rendered in headquarters was filed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the taxability of income in India is to be determined on the basis of residential status of the assessee together with the nature of income itself. Section 9(1)(ii) of the Act provides a deemed definition for incomes chargeable to tax, which has been interpreted through various Departmental circulars and judicial rulings. He placed reliance on the decision of Tribunal F Bench in the case of Stephen Brandon wherein salary earned by assessee outside India was held to be non-taxable in India since his residential status was NOR. He also relied on the decision of Hon ble Supreme Court in the case of CIT v. Morgenstem Werner [2003] 259 ITR 486 (SC), wherein it was held that income of a person not ordinarily resident in India within the meaning of section 6(6) of the Act, when accruing outside India, shall not be taxed and would not come within the scope of income within the charging section 4 of the Act. Relying on decision of Hon ble Supreme Court in the case of E.D. Sassoon Co. Ltd. v. CIT [1954] 26 ITR 27, learned Authorised Representative of the assessee also submitted that words earned in India appearing in section 9(1)(ii) must mean arising or accruing in India. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clear that the assessee was made responsible to collect news and views from entire South East Asia region which chiefly included India, Pakistan, Sri Lanka, Nepal, Bhutan and Maldives. Therefore the visits made by assessee out of India were in connection with his employment in India. 10. We have heard both the parties and perused the material available on record. There is no dispute about the status of the assessee that for the year under consideration he was not ordinarily resident. The perusal of letter dated 8-1-2004 gives details of remuneration relatable to other regions. The appointment/deputation order is issued before joining the new assignment. Therefore this letter cannot be treated as an appointment or a deputation order directing assessee to render services in India. Therefore it is incorrect on the part of learned CIT(A) to treat the same as appointment letter. On a specific query from the Bench, learned Authorised Representative of the assessee admitted to have filed no such document. Thus it is clear that the assessee had not filed the copy of appointment letter neither before the authorities below nor before us. 11. It is well-settled that in order to asc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertaining whether the income accrues or arises in India, because section 5(2) provides that all income from whatever source derived is to be included in the total income of the non-resident of assessee if the income accrued or arises in India during the relevant year. Whether a certain income accrued or arose in India within the meaning of section 5(2) is a question of fact which should be looked at and decided in the light of commonsense and plain thinking. Looking at functions performed by the assessee in India and outside India were for the purpose of gathering news in South Asia and the impact of the events happening abroad on socio-political scenario in South Asia. The assignment terms obviously contained provision for gathering news from neighbouring countries, which include Pakistan, Sri Lanka, Nepal, Bhutan and Maldives. Therefore the short visits to Pakistan and Sri Lanka can only be treated in connection with the collection of news with his assignment in India. A visit to headquarters in London to brief the editors for the same reasons is also in connection with his employment in India. Therefore the visits by the assessee outside India have to be treated in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) failed to appreciate the overall context of the visits outside India and, thus, came to erroneous conclusion that he was required to gather news outside India periodically de hors his functions as Chief, News Bureau Office, New Delhi. If we look at the whole situation from commonsense and plain thinking, it becomes clear that the salary for the whole year accrued to him because of his assignment as Chief of Bureau Office, New Delhi. It would be obvious to anyone that NHK-Japan would have offices at least in Bangkok, US and UK and as such there would have been no need for him to travel to these places to gather news independently. The purpose obviously was to gather stories, which were relevant to and had impact on the South Asia region. There is nothing on record that his salary structure was changed when he visited UK and US so as to amount to relocation. The assessee continued to accompany the rent-free accommodation through the year. Therefore, we are of the considered view that the whole of the salary, income and bonus accrued to the assessee in India. In view thereof it is necessary for us to go into the issue on deemed accrual under section 9, as pointed out by the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of revenue by the decision of Hon ble Uttaranchal High Court in the case of Halliburton Offshore Services Inc. wherein it has been held that if the services under the contract for employment are rendered in India, the place of receipt or actual accrual of salary is immaterial. In other words section 9(1)(ii) creates a legal fiction that income chargeable under the head Salaries is deemed to accrue in India if it is earned in India. 17. The Explanation to clause (ii) of section 9(1) substituted by the Finance Act, 1999, with effect from 1-4-2000 reads thus : Explanation . For the removal of doubts, it is hereby declared that the income of the nature referred in this clause payable for : (a) service rendered in India; and (b) the rest period or leave period which is preceded and succeeded by the services rendered in India and forms part of the service contract of employment, shall be regarded as income earned in India. Thus the amended provisions of Explanation make it clear that the salary for the rest period or leave period which is preceded and succeeded by the services rendered in India and forms part of the service contract of employment, shall be regarded as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussion. Likewise the other decision of the Tribunal learned relied by CIT(A) in the case of Stephen Brandon, a distinction was made between salaries earned in India and salaries earned outside India. Such distinction was made in terms of contract between parties. In the case of Aage Frohde the salaries paid for visits outside India were not related to Indian activity. The Norwegian company used the services of the assessee outside India for the purpose not related to Indian activities without paying him anything extra what was paid to him as CEO of Indian office. The proportionate salary for the period spent outside India was held to have not accrued in India. Thus these decisions relied by the assessee are not applicable to facts of the case before us in view of discussion made as above. 20. In view of above discussion and since the facts of the case are identical to the facts of case of Hiromi Hirose, respectfully following the precedent we hold that learned CIT(A) was not justified in treating the salary relatable to Pakistan, Sri Lanka and UK was for performance of duties outside India. We accordingly set aside the order of learned CIT(A) and restore the order of Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
