TMI Blog2016 (6) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... peal by assessee is arising out of order of CIT(A)-22, Kolkata vide Appeal No. 102/CIT(A)-22/Kol/14-15 dated 02.11.2015. Assessment was framed by DDIT- 3(1) (IT), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year 2010-11 vide his order dated 07.02.2013. 2. The only issue to be decided in this appeal of assessee is as to whether the remuneration received by the assessee in the sum of ₹ 14,79,598/- which was directly remitted from foreign to the NRE account of assessee by the foreign company could be brought to tax in the facts and circumstances of the case. 3. The basic facts are that the assessee is a non resident individual and for the AY under appeal i.e. 2010-11 return was filed on 12.08.2010 declaring total income at ₹ 3,95,099/-. The assessee is a Marine Engineer and was engaged with M/s. Great Offshore Ltd. and M/s. Bibby/Ship Management (Singapore) Pte. Ltd. in the capacity as a Marine Engineer. At the time of assessment proceedings the Ld. AO observed that the assessee worked in International Waters during the FY 2009-10 relevant to AY 2010-11 and received remuneration from two concerns i.e. (i) M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft India during the financial year relevant to the assessment year 2010-11 for the purpose of employment and I was 'Non-Resident for the year in question as per provision of section 6 of the I.T. Act. That I have claimed exemption the income which were received by me from outside India in foreign currency as per provision of section 5 of the Act. That I have transferred my allotment, received in US$ from outside India to my NRE accounts in India with Axis Bank and RBS Bank, thus it is crystal clear that the entire amount of income in US$ were received by me from outside and that income in US$ shall not be deemed to received in India and it is also to be submitted that other than foreign currency any amount could not be deposited in NRE A/c. That therefore the amounts which are credited in my NRE A/cs in India were received outside and being Non Resident' those income were not taxable U/s 5 of the Act. That I have already filed the photocopy of the Bank statement of NRE NRO A/cs with Axis Bank and the photocopy of RBS Bank (NRE) is enclosed herewith). 6. The Ld. AO examined the reply of the assessee together with the bank statements of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 5(2)(a) of the Act should be interpreted only in the context of income received in Indian currency in India. There is a distinction between receiving money and transfer of money. The distinction is that where a foreign company makes payment to the non-resident for services rendered outside India, the foreign company is transferring the money or remitting the money in foreign currency to the assessee who is a non resident, and the money is being received by the assessee not in India as because the point of payment by the foreign company is in foreign land and the point of receipt by the assessee should be taken from the point of payment. Mere remittance or transfer of the payments by the foreign company in the NRE account of the assessee in India that also in foreign exchange shall not be considered as income received in India and any larger interpretation to the section would render it otiose. The various arguments of the assessee were summarized by the Ld. CIT(A) as below: (a) The assessee is a non resident and rendering services outside India. (b) The payments are being made by a foreign company outside India and the foreign company does not have any permanen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income Tax Act is based on incorrect application of case law and the addition is arbitrary and excessive. 4. That the order of the Ld. CIT(A) upholding the order of the AO is arbitrary, excessive and unjustified and bad in law. 5. That the above grounds of appeal will be argued in details at the time of hearing and the appellant craves leave to submit additional grounds of appeal, if any, at or before the time of hearing. 9. The Ld. AR reiterated the submissions made before the lower authorities. He argued that the facts in the present case are squarely covered by the following decisions: i) DIT (International Taxation) Anr. Vs. Prahlad Vijendra Rao reported in 239 CTR 107(Kar), ii) CIT Vs. Avtar Singh Wadhwan reported in 247 ITR 260 (Bom) In response to this, the Learned DR argued that as per Section 5 of the Act, so far as non-residents are concerned, total income includes all income from whatever source derived which: i. is received in India [section 5(2(a)], or ii. is deemed to be received in India [section 5(2(a)], or iii. accrues or arises to him in India [section 5(2(b)], or iv. is deemed to accrue or arise to him in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom an employer ... whether paid or not'. This phrase was present in section 7(1) of the 1922 Act also. Hon ble Supreme Court of India had occasion to determine the meaning of this phrase in the case of CIT vs L. W. Russel (1964), 53 ITR 91(SC). Hon'ble Apex Court held that: The expression due followed by the qualifying clause whether paid or not shows that there shall be an obligation on the part of the employer to pay that amount and a right on the employee to claim the same. Thus, as explicitly and unequivocally determined by the Hon'ble Apex Court, the term due as qualified by the phrase whether paid or not is connected with the contractual right of the employee to receive his salary and nothing else. It has no relation with location or place of services rendered or to where the amount has become due . Thus, what is important for charging an amount to tax under section 15(a) is whether it is in the nature of salary and whether it has become due to the assessee (whatever may be his status - resident or non-resident) and it has no relation to the place where it has become due. The place where it has become due and the place where service has been r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enacted keeping in mind that income has to suffer tax in some tax jurisdiction . We believe that such provisions would exist in tax legislation of all countries. We hold that if the argument of the assessee is accepted, then it would make the provisions of section 5(2)(a) of the Act redundant. It is only elementary that a statutory provision is to be interpreted ut res magis valeat quam pereat, i.e. to make it workable rather than redundant. From the provisions of section 5(1) of the Act, in the case of a resident, the global income is taxable in India. In case of non-residents, the scope of total income has four modes, one of which is receipt in India, 'from whatever source derived'. If this is construed to mean that income from whatever source, should first accrue or arise in India and then it should be received in India to be included under section 5(2)(a), then section 5(2)(a) will lose its independence and will become a subset of section 5(2)(b) and there would not be any need for having section 5(2)(a) on the statute. 10.2. We find that heavy reliance has been placed by the Learned AR on the decision of the Hon ble Bombay High Court in the case of CIT vs Avtar Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia and the Accountant General Madras was merely authorized to arrange for the payment of pension to the assessee rendering the amount of pension received in India by the assessee not liable to tax. On further appeal by the revenue, the Tribunal found that there was a letter dated 23.6.1969 addressed by the Accountant General of the Federation of Malaya to the Accountant General Madras and that letter indicated an arrangement for payment in India and the circumstance that the pension of the assessee had also been assessed to tax in Malaya in the status of noncitizen and non-resident would clearly establish that the pension of the assessee had been remitted to India by arrangement with the Accountant General Madras. On further appeal, the Hon ble Madras High Court firstly held that the Malaysian Govt had assessed the assessee to income tax on the pension. The Hon ble High Court also found that the Malaysian Govt had deducted tax at source which clearly indicated that the income had accrued to assessee in Malaysia and therefore not assessable in the hands of the assessee in India. The Hon ble Court found that the accrual of pension and receipt of pension had already been taken place i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the receipt of payment which is admittedly in India. Therefore, we have our own doubts as to the applicability of the decision of High Court in the case of A. P. Kalyankrishnan (supra) to the facts of the present case. 10.5. Now what we are left with is the decision relied upon by the Learned DR on the Third Member decision of Mumbai Tribunal in the case of Captain A. L. Fernandez Vs. ITO reported in 81 ITD 203 (TM ) wherein it was held as below:- 8. In my opinion, the salary is includible in the assessment under s. 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 clear finding in the order of the learned AM, that there is no dispute that the salary was received in India. This should put an end to the controversy. I may add, that the Ld. AM has not disputed the correctness of the Ld. JM s finding that under International law, the floating island theory has undergone a change and it is no longer correct to regard the Indian ships as floating islands. Therefore, the position accepted by the learned members is that the services were rendered outside India, the ships not being considered as part of India. However ..... X X X X Extracts X X X X X X X X Extracts X X X X
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