TMI Blog2006 (11) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... the case and in law, salary income received in India by Mr. Manish Gupta from British Gas India Private Limited for rendering services outside India is taxable in India? Whether in the facts and circumstances of the case and in law, British Gas India Private Limited is required to withhold taxes on salary paid in India to Mr. Nipun Pradhan and Mr. Manish Gupta for rendering services outside India. 2. The applicant is a part of a BG Group, leading international energy company that has expertise across spectrum of the natural gas chain. The applicant has assigned certain individuals including Mr. Manish Gupta to BG Group entities outside India. It is stated that Mr. Manish Gupta commenced employment with the Indian company in February/March, 2002 and that with effect from July 1, 2005 he was deputed to BG U.K. vide assignment letter dated 25.5.2005 for two years and has since been working in U.K. It is asserted that he would be spending less than 182 days in India in financial year 2005-06, therefore, he is a non-resident under explanation (a) to section 6 (1) of the Act. 3. The Commissioner in his remarks stated that in view of the stay of 88 days in India in the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore; or (ii) if the individual, having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year. Now explanation (a) says, inter alia, in the case of an individual being a citizen of India, who leaves India in any previous year for the purpose of employment outside India, then in relation to that year he will be resident in India if he is in India for a period or periods amounting in all to 182 days or more. 7. The contention of the Commissioner that he has been in India for more than 60 days is supported by clause (c) of Section 6(1) of the Act but this ignores explanation (a) thereof. For the words "sixty days", occurring in sub-clause (c), the word "one hundred and eighty-two days" had been substituted by the explanation. If clause (c ) is read in the light of the Explanation (a), it is apparent that the stay of Mr. Gupta is less than 182 days (his stay is 88 days in India), therefore, he becomes a non-resident and thus the requirement of the tax liability of non-resident for the purpose of defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Avoidance Agreement between India and the U. K., Mr. Nipun Pradhan and Mr. Manish Gupta were tax residents of the U. K. Article 16(1) of the Double Taxation Avoidance Agreement provided that salary derived by a resident in the U. K. in respect of employment would be taxed in the U. K., unless the employment was exercised in India. This gave the U. K. the right to tax Mr. Nipun Pradhan's and Mr. Gupta's salary received in India. Mr. Kartar Singh, Additional Commissioner, on the other hand, argued that the mandate of the provisions of law as contained in sub-section (2) of section 5 was very clear that any income received in India was subject of taxation laws of this country. Therefore, even if Mr. Nipun Pradhan and Mr. Manish Gupta were non-resident in the financial year 2005-06, the salary income received by them in India would be governed by the Act. It was also argued that both the employees were posted by the applicant to its group company in the U. K. on deputation basis, with salaries being paid by the Indian company in India, but certain allowances being paid by the group company in the U. K. There was no doubt, as regards the Indian salary, that the source of such sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So, once it is decided that the Indian salary is taxable in India, then it will have to be determined whether the Double Taxation Avoidance Agreement between India and the U. K. contains any provisions for granting relief in respect of such taxes or for avoidance of double taxation. The question whether any taxes are to be deducted from the Indian salary or not will follow from what view we take on the foregoing issues and tile provisions of section 192 of the Act. In this connection, it will be useful to refer to section 5 of the Act, which lays down the scope of total income. The relevant provision of this section reads as under: "5.(1) ... (2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which (a) is received or is deemed to be received in India in such year by or on behalf of such person;..." The above provision very clearly states that the total income of a non-resident includes all income from whatever source derived, which is received in India by or on behalf of such person. This leaves no manner of doubt that the Indian salary of the concerned employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act to the extent of inconsistency between the two. Since sections 4 and 5 are subject to other provisions of the Act, including section 90, the provisions of such an agreement would prevail over the provisions relating to chargeability to income tax and ascertainment of total income. In view of these decisions, there is no doubt that it is open to the applicant to take recourse to article 16 of the Double Taxation Avoidance Agreement, which would prevail over the provision of section 5(2)(a) of the Act. It is, in fact, seen from the pleadings of the applicant, that in his tax return filed in the UK. for the financial year 2003-04, Mr. Nipun Pradhan has also included the salary received by him during this period in India. Thus, he has offered the Indian salary also for tax purpose in the U K. Chapter XVII of the Act deals with collection and recovery of tax. The purpose of the provisions of this Chapter, as contained in section 190, is that prior to the regular assessment being made, the tax on income shall be payable by deduction or collection at source or by advance payment, etc. A question arises whether tax at source can be deducted under this Chapter only if the income is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ... (2) Where, during the financial year, an assessee is employed simultaneously under more than one employer, or where he has held successively employment under more than one employer, he may furnish to the person responsible for making the payment referred to in sub-section (1) (being one of the said employers as the assessee may, having regard to the circumstances of his case, choose), such details of the income under the head 'Salaries' due or received by him from the other employer or employers, the tax deducted at source therefrom and such other particulars, in such form and verified in such manner as may be prescribed, and thereupon the person responsible for making the payment referred to above shall take into account the details so furnished for the purposes of making the deduction under sub-section (1)..." The above provision is quite clear and unambiguous. A plain reading of this provision makes the intention of the Legislature clear. At the time of paying salary to its employee, the employer shall deduct applicable income tax therefrom. But if the employee is serving more than one employer simultaneously, he has a choice of furnishing details of salary received from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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