TMI Blog2017 (6) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplated above. Hence we deem it fit to give the benefit of doubt to the assessee by holding that the Circular covers both the situations referred to above. The result of such interpretation of the Circular would be that the provisions of Sec.5(2)(a) of the Act is rendered redundant. Be that as it may, it is well settled that the Circulars issued by CBDT are binding on the revenue authorities. This position has been confirmed by the Hon'ble Apex Court in the case of Commissioner of Customs v. Indian Oil Corporation Ltd (2004 (2) TMI 66 - SUPREME COURT OF INDIA) wherein their Lordships examined the earlier decisions of the Apex Court with regard to binding nature of the Circulars and laid down that when a Circular issued by the Board remains in operation then the revenue is bound by it and cannot be allowed to plead that it is not valid or that it is contrary to the terms of the statute. Accordingly, the grounds raised by the assessee are allowed. - I.T.A. No.67/Kol/2016 - - - Dated:- 2-6-2017 - SHRI A. T VARKEY, JUDICIAL MEMBER And SHRI M. BALAGANESH, ACCOUNTANT MEMBER For the Appellant : Shri Manoj Kataruka, Advocate For the Respondent : Shri N. B. Som, ACIT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India in foreign currency and, therefore, claimed as exempt. The assessee stated that he used to get his contract to do service with Indian/foreign shipping company through Indian agent and that contract were executed in India duly signed by the agent in India and himself before joining the ship. But he has to float on foreign water to render services during the course of voyage and accordingly when he will stay more than 182 days outside India or on foreign water, his residential status will be treated as 'Non-resident' as per provision of law and his salary income which are received outside India in foreign currency also will not be taxable u/s 5 of the Act. The Ld. AO accepted the residential status of the assessee as non resident after verification of copy of passport and other details submitted. The assessee claimed that as per provision of law, salary income, which is received outside India in foreign currency will not be taxable u/s. 5 of the Act. The Ld. AO issued show cause notice to the assessee as to why the remuneration received in India should not be brought to tax in terms of section 5(2)(a) of the Act. 5. The assessee replied to the show cause notice stati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced reliance on the Third Member decision of Mumbai Tribunal in the case of Capt.A.L.Fernandes v. ITO reported in 81 ITD 203 (Mumbai) (TM ) wherein it was held that the salary received by the assessee in India was taxable u/s 5(2)(a) of the Act. 7. On first appeal, the assessee argued that he was a non-resident and no income was taxable in India as entire service was rendered outside India. It was argued that assessee was under employment of a foreign company i.e. M/s Wallem Ship Management Ltd, Hongkong and services were rendered outside India and shipping company does not have any permanent establishment in India. For the services rendered by the assessee outside India the entire payment of salary was made by the foreign company in US$ and remittance was made to the NRE account of the assessee in India. The assessee claimed that the meaning of the word 'received in India' within the meaning of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the arguments of the assessee upheld the addition made by the Ld. AO. Aggrieved, assessee is in appeal before us on the following grounds: 1. That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to uphold the addition made by the AO of ₹ 3347112/- as income u/s 5(2)(a) of the Income Tax Act is erroneous and contrary to the material facts on record. 2. That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to uphold the action of the AO to bring into tax an amount of ₹ 3347112/- by treating it be received in India is based on incorrect assumption of facts and wrong application of law. 3. That on the facts and in the circumstances of the case the application of decision of Captain A.L. Fernandez vs. ITO 81 ITD 203 (Mum) (TM) by the Ld. CIT(A) to treat as income of ₹ 3347112/- u/s 5(2)(a) of the 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 det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason that the main charging section, i.e. section 4, does not make any reference to the words 'in India' as it has to provide a basis of charge for both - income which is accruing or arising to a person in India as well as income which is accruing and arising to a person outside India. The charging section does not have a territorial bias. This is also the reason that neither does section 4 qualify a person as being resident or non-resident, nor does the definition of 'person' given in section 2(31) of the Act qualifies it as such. Thus, the charging section does not have a bias based on residency also. It will be shown below that the separate charging sections for each head of income provided in the Act also follow the same scheme as does the main charging section (section 4). It was further argued by the Learned DR that the main point of contention here, is whether the language of the statute as contained in section 15(a) reflects any locational preference. There is no such preference in section 15(a). Salary can become due to an 'assessee' anywhere in the world. The moot question here is the meaning of the phrase 'due from an employer ... whether pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal in the case of Tapas Kumar Bandhopadhyay v. DDIT reported in [2016] 159 ITD 309 (Kol Trib) dated 1.6.2016 on the very same set of facts. He also argued that the Circular relied upon by the ld AR would make the provisions of section 5(2)(a) of the Act itself unworkable and redundant. 11. We have heard the rival submissions and perused the materials available on record. We find that the decision relied upon by the ld DR, which was authored by the undersigned, was rendered by placing reliance on the Third Member decision of Mumbai Tribunal in the case of Capt. A.L.Fernandes vs ITO reported in (2002) 81 ITD 203 (Mum ) (TM ). This decision clearly lays down that the receipt in India of salary for services rendered on board a ship outside the territorial waters of any country would be sufficient to give the country where it is received the right to tax the said income on receipt basis. Such a provision is found in section 5(2)(a) of the Act which was applied in the aforesaid decision. It is trite that decision of a Third Member would be equivalent to a decision of a Special Bench and thereby would become a binding precedent on the division bench. However, we find that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Indian bank by the seafarer. Remittances of salary into NRE Account maintained with an Indian Bank by a seafarer could be of two types : (i) Employer directly crediting salary to the NRE Account maintained with an Indian Bank by the seafarer ; (ii) Employer directly crediting salary to the account maintained outside India by the seafarer and the seafarer transferring such money to NRE account maintained by him in India. The latter remittance would be outside the purview of provisions of section 5(2)(a) of the Act, as what is remitted is not salary income but a mere transfer of assessee's fund from one bank account to another which does not give rise to Income . It is not clear as to whether the expression merely because used in the Circular refers to the former type of remittance or the latter. To this extent the Circular is vague. 11.2 In the instant case, the employer has directly credited the salary, for services rendered outside India, into the NRE bank account of the seafarer in India. In our considered opinion, the aforesaid Circular is vague in as much as it does not specify as to whether the Circular covers either of the situations or both the situations cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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