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2016 (3) TMI 15 - ITAT JAIPUR

2016 (3) TMI 15 - ITAT JAIPUR - TMI - Residential status - resident or nonresident of India - application of article 16(1) of Indo-USA DTAA denied - taxability of income - nationality - Held that:- As the facts emerge from record t the assessee’s residential status as nonresident has been accepted by the ld Assessing Officer, therefore, there is no justification on the part of the ld CIT(A) to hold that the assessee was a resident. It has not been disputed that the services in question was rende .....

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e Hon'ble Supreme Court in the case of Kedar Nath Jute Mnf. Co Ltd. Vs. CIT (Central) Kolkata [1971 (8) TMI 10 - SUPREME Court] has held that actual and legal nature of the transaction will decided the taxability and not mere book entries or assumptions. In view thereof, judgments in the case of CIT Vs. Nippon Limited (1998 (4) TMI 121 - CALCUTTA High Court), CIT Vs. Khambaty (1985 (10) TMI 91 - BOMBAY High Court) and Ranjit Kumar Bose Vs. ITO 18 ITD 230 (1986 (2) TMI 96 - ITAT CALCUTTA-C ), hol .....

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has erred in law and on facts in: - (i) Treating the assessee as resident in India. (ii) Taxing the salary amounting to ₹ 8,25,792/- received in India (from the sister concern of US employer) for the services which are undisputedly rendered in United States (U.S.) and is exempt from Indian Taxation under Article 16(1) of the India-U.S. Double Taxation Avoidance Agreement (DTAA). (iii) Charging interest U/s 244A and 234D thereon. Ld. Counsel contends that impugned assessment has been frame .....

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nce, for the period from 1/4/2007 to 30.05.2007 he was an employee of FBSI and with effect from 31.05.2007, he started working for FIS. Provisions of section 5(2) starts with the expression "subject to the other provisions of the Act... .as a result of section 5(2), it follows that salary is to be taxed in India subject to other provisions of the Act. Other provisions of the Act is the context of salary income refers to the following provisions: i) Section 15 Chargeability of Salary ii) Sec .....

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is humbly submitted that Section 5(2)(a) requires receipt of salary as the first receipt and not the receipt which follows accrual of income. ....Income is taxable on accrual or receipt whichever occurs first. Hence, in terms of applicability of scope of total income, it is the accrual or arisal or deemed accrual or arisal which is more important criteria rather than receipt of income. Therefore, if an income is accrued or deemed to accrue outside India then it has to be taxed on accrual or deem .....

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ovisions of DTAA from the India Taxation perspective, it is necessary to consider the Indian financial year as the year . f) Salary is considered to be accrued in the State where the employee exercises the employment and therefore, his salary accrued in USA. g) By applying the provisions of Article 16(1) of the treaty also, the salary is not taxable in India. h) Hence, by applying Indian Income-tax Act, as well as Treaty, salary income shall not be taxable in India. As such the assessee is entit .....

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Officer however held that exemption u/a 16(1) of DTAA was not applicable as Fidelity Business Services India Pvt. Ltd. had issued form No. 16 which indicated that the impugned part of salary was taxable in India. Since the salary is received in India by the employee through a credit to his salary account and TDS is deducted thereon in India, the same will be taxable in India irrespective of the residential status, in accordance with Section 5 of the Income Tax Act, 1961. The claim of exemption o .....

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vious year of a person who is a resident includes all income from whatever source derived which is received or deemed to be received in India in such year by or on behalf of such person on accrues or arises to him in India during such year. Since, the salary is received in India by the employee through a credit to his salary account due from his India employer in India, the same will be taxable in India irrespective of the residential status, in accordance with Section 5 of the Income Tax Act, 1 .....

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the right of taxation in respect of salary income of the employee will remain with the India whether or not the right of taxation in respect of this sum vest with USA. 4. The ld counsel for the assessee referred to the paper book and contends that it has not been disputed that the services for impugned period were rendered in USA, which is certified by Fidelity USA as well as Indian counterpart. Besides the due taxes on the impugned income having been levied by US tax authorities. It has also no .....

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TDS was deducted thereon. Looking at the small amount, the India entity did not apply for exemption U/s 192/193 of the Act. Besides in law the salary was not taxable in India consequently assessee also did not raise any objection for such TDS. Besides the Indian entity was to be reimbursed by the US entity. In view of these undisputed facts and circumstances the salary in question is not taxable in India being clearly exempt u/a 16(1) of DTAA. Further reliance in placed on the following judicial .....

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