TMI Blog2015 (9) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... issued for non-resident assessee. Therefore, there is no need to pass order under section 127 of the IT Act as Additional DIT (International Taxation) Jaipur had passed the order in pursuance of direction of CBDT. The case laws referred by the assessee are not squarely applicable to the facts of this case. The ld. A/R had not controverted the findings given by ld. CIT (A). Therefore, we confirm the order of the ld. CIT (A). - Decided against assessee. Treatment to the over all income of the assessee as belonging to his wife, received in UK which was only remitted to India and clubbing these receipts in the hands of the assessee under section 64 - Held that:- As per Explanation-1, income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Therefore, it is clear from section that in case of assessee non-resident and income accrues or arises outside India shall not be included in the income of the assessee. The shares were held by the assessee. The employer company issued these shares on the basis of Scheme and performance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the whole asstt. proceedings (based on invalid notice) are invalid, bad-in-law, without jurisdiction and thus deserves to be quashed. 2. That the ld. Asstt. Director of I. Tax (Intl. Taxation), Jaipur erred in law and facts while treating the foreign income of assessee amounting to ₹ 41,98,615/- (being sale proceeds of shares of Vedanta Resources Plc. At U. K.) as belonging to his wife and further erred in taxing the same in India treating it as received in India whereas in fact the income was earned and received in U. K. which was only remitted to India. Further the ld. CIT (A)-II, Jaipur also erred in law and facts while upholding the above addition. 3. That the ld. Asstt. Director of I. Tax (Intl. Taxation), Jaipur erred in law and facts while taxing the foreign income in case of non-resident assessee after invoking the provisions of section 64 (by applying clubbing provisions u/s 64 treating it as foreign income of wife) whereas in fact, any foreign income even of spouse could not be taxed in the hands of non-resident.(as it neither accrued or arise in India nor it was received or deemed to be received in India as per the provisions of section 5 of the I. Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 dated 01.09.2008 in exercise of powers conferred by the Central Board of Direct Taxes u/s (1) (2) of section 120 of the Income Tax Act, 1961, the jurisdiction of the case (i.e. non resident) lies with the Assistant Director of Income Tax (Intl. Taxation), Jaipur, with effect from 01.09.2008. However, in the present case, the appellant had filed his return of income with ACIT, Circle-2, Udaipur. The processing was done by the clerical staff. The ACIT issued notice u/s 143(2) dated 22.09.2009 for selecting the case under scrutiny. On realizing that the case of the appellant was that of a non resident, the ACIT transferred the case of the appellant to ADIT (Intl. Tax), Jaipur. Since the jurisdiction over the non resident cases lay with the ADIT (Intl. Tax.), Jaipur, there was no need to pass order u/s 127 of the I T Act. On the contrary, it is obvious that the appellant had filed his return of income with ACIT, Circle-2, Udaipur deliberately to escape the scrutiny. The ACIT after becoming aware of the status of the appellant immediately transferred the case to ADIT (Intl. Tax.), Jaipur. Thus no fault could be found with the approach of the AO. When the appellant has himself filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at before the ld. CIT (A) the appellant had raised two fold contentions :- 3.1. If ld. ADIT (Intl. Taxation) was having jurisdiction over the case of assessee then issue of notice u/s 143(2) by ACIT, Circle-2, Udaipur was invalid as it was without jurisdiction. Hence no valid notice within the period prescribed u/s 143(2) has been issued and, therefore, assessment was invalid and bad-in-law. 3.2. The alternate contention was that if transfer of case to ADIT (Intl. Taxation) is valid then such transfer of jurisdiction could have been only u/s 127 of Income Tax Act. Such transfer of jurisdiction is bad-in-law as no opportunity was provided as required u/s 127(2) of Income-tax Act, 1961. 3.3. As per the definition of Assessing Officer, the assessing officer is the officer who is vested with jurisdiction as per order under sub section (1) or (2) of section 120 of the Income Tax Act. Hence the Assessing Officer, in the case of the assessee, was ADIT (International Taxation) Jaipur. Section 139(1) of Income-tax Act does not require the assessee to file the return with assessing officer since the assessee was an existing assessee and therefore return of income was filed with ACIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so relied upon by the ld. A/R, has cautioned on how to apply the ruling of the Supreme Court and judgment have to be considered in the light of the questions which were before the court. The ld. A/R requested to quash the order passed by the ADIT (International Taxation), Jaipur. 4. At the out set, the ld. D/R vehemently supported the order of ld. CIT (A) and argued that ld. CIT (A) has considered all the objections raised by the assessee. Therefore, same may be confirmed. 5. We have heard rival contentions and perused the material on record. The assessee filed return for A.Y. 2008-09 on 09.01.2009 with ACIT Circle-2, Udaipur. The case was processed under section 143(1) on 25.06.2009. The case was selected for scrutiny by issuing notice under section 143(2) on 22.09.2009. As per notification issued vide F. No. Addl. DIT (Intl. Tax/JPR/Juris/2008-09/93 dated 1st September, 2008, the jurisdiction over the case of non-resident assessee vests with the Asstt. Director of Income Tax (International Taxation), Jaipur, under section 120 of the IT Act as per powers conferred by the CBDT. It is fact that assessee s PAN was with ACIT Circle-2, Udaipur as he was able to process the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-2, Udaipur on 25.06.2009. The jurisdiction of nonresident was decided by the Addl. Director of Income-tax (International Taxation), Jaipur as per direction of the CBDT issued for non-resident assessee. Therefore, there is no need to pass order under section 127 of the IT Act as Additional DIT (International Taxation) Jaipur had passed the order in pursuance of direction of CBDT. The case laws referred by the assessee are not squarely applicable to the facts of this case. The ld. A/R had not controverted the findings given by ld. CIT (A). Therefore, we confirm the order of the ld. CIT (A). The ground no. 1 of the assessee is dismissed. 6. Ground Nos. 2, 3 4 of the assessee are against treating the over all income of the assessee amounting to ₹ 41,98,615/- as belonging to his wife, received in UK which was only remitted to India and clubbing these receipts in the hands of the assessee under section 64 of the IT Act. The AO observed that the assessee had claimed exemption in respect of capital gain income arising out of sale proceeds of ₹ 41,98,615/- on account of sale of shares of Vedanta Resources Plc in lieu of his nonresident status. The AO further observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minee since he did not knew that the would be encashing the shares so early. By appointing wife as nominee of shares or as alleged by transfer Mrs. Sunita Pathak does not become suo moto owned of the shares and tax liability cannot be transferred. If Mrs. Sunita Pathak would have been owner of the shares the assessee had no evidence to show that how the shares got transferred from his name to her name, no gift deed was signed. At all the times the assessee was the legal owner of the share options. Sir, Your attention is invited to section 64 of the I. Tax Act, 1961 which reads as under :- Income of Individual to include income of spouse minor child etc. 64 In computing the total income of any individual there shall be included all such income as arises directly or indirectly (iv) subject to the provisions of clause (i) of section 27 to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to lice apart. The AO gave another show cause notice on this issue under section 142(1) of the Act. The assessee again filed reply before the AO by le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een disclosed by the assessee. The cost of shares to the wife is also not disclosed. Under these circumstances, the AO had choose to compute the entire proceeds in the hands of the wife as short term capital gain which by virtue of section 64 of the Act is being clubbed in the taxable income of the assessee. Thus he made addition of ₹ 41,98,615/- in the income of the assessee as clubbed under section 64 of the It Act. 7. Being aggrieved by the order of the AO, assessee carried the matter before ld. CIT (A), who had confirmed the addition by observing as under :- 4.1. I have duly considered the submissions of the appellant. The facts of the case are that the AO noticed that 3500 shares of Vedanta Resources standing in the name of Smt. Sunita Pathak, wife of the appellant were sold in the year under reference and entire sale proceeds were remitted in ICICI bank account of Smt. Sunita Pathak held jointly with her husband on 20.6.2007. On the other hand, it was the contention of the appellant that he was allotted these shares (technically on option ) of Vedanta Resources Plc on 16.04.2004. It was a London based company and was listed in the London Stock Exchange and it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shares were transferred in the name of his wife i.e. Smt. Sunita Pathak. There is no evidence brought on record by the appellant that payment for purchase of shares was made by him from his salary. The action of the AO to club the capital gain in the hands of the appellant is proper since as per the provisions of section 5 of I T Act, the total income of a non resident shall include all the income from whatsoever source derived which is received or deemed to be received in India in such year. It was held by Hon ble Supreme Court in the case of CIT vs. Calcutta Agency Ltd. (19 ITR 191) that the burden of proving the necessary facts in order to entitle the assessee to claim an exemption is upon the assessee as the relevant facts are within the special knowledge of the assessee and it is for the assessee to establish this fact by adducing proof thereof. In the present case, the assessee has failed to discharge this burden. There is not an iota of evidence submitted by the appellant to suggest that these 3500 shares were ever registered in the name of the appellant. Since these shares got registered in the name of wife of the appellant i.e. Smt. Sunita Pathak on 27.03.2007 and were s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of assessment proceedings as well as appellate proceedings, these facts were made available to both the lower authorities. However, these evidences could not be made available to the lower authorities as the assessee during major part of the proceedings was staying out of India. All the above evidences are very vital and crucial to the issue under appeal. Therefore, he requested to admit the additional evidences. He further relied on the case of Abhay Kumar Shroff vs. ITO of ITAT, Patna Third Member Bench in ITA Nos. 95 193/Pat/1993 A.Y. 1989-90 (63 ITD (Pat) 144. 9. At the out set, the ld. D/R opposed the admission of additional evidences filed by the assessee stating that sufficient opportunity has been given by the lower authorities during the course of assessment and appellate proceedings. As per Rule 29, the ITAT has not directed to file suo moto additional evidences for disposal of the appeals. Therefore, same should not be entertained. 10. We have heard rival contentions and perused the material on record. It is found that these documents were not submitted before the lower authorities at the time of assessment and appellate proceedings. It is fact that assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough his wife Smt. Sunita Pathak executed the Sale Instruction Form of HSBC Securities, London (being broker appointed by Vedanta for selling shares for its employees) for selling the shares allotted under the LTIP on the London Stock Exchange. Although the Authorization Request Form for dealing in Vedanta Resources Plc. Shares were signed by the wife of the assessee, Smt. Sunita Pathak, yet at sl. No. 3 of the said request form the position was specified as AGM (Commercial), also at sl. No. 5 the date of commencement of employment was mentioned. The said particulars were of the assessee himself. 11.2. The ld. A/R further submitted that the shares were subsequently sold by HSBC Securities based on the instructions received. The sale proceeds were received by HSBC Securities in London acting as agent of the assessee. The amount so received was subsequently transferred by HSBC Securities to the Indian Bank account of the assessee on 20.06.2007 which was held in the joint name with his wife. 11.3. The ld. A/R also submitted that once it is established that the consideration was paid by the assessee then the assessee is the real owner. Allotment of shares was to the assessee empl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 986) 159 ITR 203 (Bombay) The ld. A/R concluded that in view of the above the shares were beneficially and in substance owned by the assessee himself, the assessee is undisputedly non-resident, the transfer has taken place outside India and the capital gain had arisen and accrued out of India, the sale consideration was also received by the assessee through his agent out of India, the shares, since owned by the assessee himself, the income cannot arise in the hands of resident wife of the assessee and, therefore, provisions of section 64 and Section 5 would have no application. 12. We have heard rival contentions and perused the material on record. M/s. Vedanta Resources Plc vide letter dated 05.03.2004 had informed to the assessee that the Remuneration Committee of Vedanta Resources Plc has granted to the assessee an Award under the Indian Sub Plan to the Plan in respect of 3,500 ordinary shares in the Company. The award to assessee was subject to satisfaction of performance of condition summarized in the attached Appendix-I to this letter, to acquire shares on payment of US 10 Cent per share. Number of shares capable of acquisition will depend on the extent to which the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HSBC Securities, London on the instructions of the wife of the assessee. The sale proceeds were received outside India. Later on it was transferred by it in Indian Bank account maintained with ICICI Bank on 20.06.2007. The capital gain arise or deemed to be arise outside India as assessee is a non-resident. As per section 5(2) of the Act, to the total income of any previous year of a person who is a non-resident include all income from whatever sources derived which is received or deemed to be received in India in such year by or on behalf of such person or accrues or arises or is deemed to have accrued or arisen to him in India during such year. As per Explanation-1, income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Thetrefore, it is clear from section that in case of assessee non-resident and income accrues or arises outside India shall not be included in the income of the assessee. The shares were held by the assessee. The employer company issued these shares on the basis of Scheme and performance of the assessee. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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