TMI Blog2019 (4) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... No.1655/Bang/2017 - - - Dated:- 15-3-2019 - SHRI N.V. VASUDEVAN, VICE-PRESIDENT AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri Vikas Suryavamshi, Addl. CIT For The Respondent : Shri Nageshwara Rao, Advocate ORDER Per N.V. Vasudevan, Vice-President This appeal by the revenue is against the order dated 31.03.2017 of the CIT(Appeals)-V, Bengaluru relating to assessment year 2013-14. 2. The grounds of appeal raised by the revenue reads as follows:- 1. The order of the Commissioner of Income Tax (Appeals) - 5, Bangalore, is opposed to the law and not on the facts and circumstances of the case. 2. The Ld. Commissioner of Income Tax (Appeals) erred in accepting fresh evidence in the form of Tax Residency Certificate which the assessee failed to produce/furnish during the assessment proceedings without calling for any Remand Report from the Assessing Officer on this purported fresh evidence nor allowing verification of the same by the Assessing Officer during Appellate proceedings as mandated under Rule 46A of the Income Tax Rules,1962. 3. The Ld. Commissioner of Income Tax (Appeals) erred in holding the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the relevant DTAA. Once an individual is regarded as Resident in India, his worldwide income becomes taxable in India. However, it is quite likely that the individual leaving India may also be a resident of the country from which he came to India under the local laws of such country in this case USA. Hence, for the relevant year(s), the individual would become a resident of both India and the other country. Thus, the individual may become a dual resident , i.e. resident of two countries for tax purposes. On becoming a dual resident, the question arises as to which country has the right to tax his income. India has entered into a DTAA with USA. In such a situation, the revenue authorities of both countries would have claim over the individual s worldwide income for the purpose of levying tax. This would clearly lead to a case of double taxation. The Article-4 of the DTAA between India and USA provides for a tieITA No.1655/Bang/2017 Page 4 of 13 breaker provision under which such determination can be made is as follows:- ARTICLE 4 - Residence - 1. For the purposes of this Convention, the term resident of a Contracting State means any person who, under the laws of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode ; (c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national ; (d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement. 8. The tiebreaker rule specified under Article 4 of the Double Taxation Avoidance Agreement (treaty) between India and USA was applied in sequence for determining the Assessee s residency. Residential status of the assessee for the period from April 01, 2012 to August 10, 2012 the tie-breaker rule of the treaty between India and US 9. The assessee had a house property in India as well as in the US during the previous year 2012-13 (i.e. from April 01, 2012 to March 31, 2013). The assessee s house property in the USA was let out during the period of his Indian assignment (i.e. from April 01 2012 to August 10, 2012) and therefore for the purpose of the tie-breaker, deemed to be unavailable for use to the assessee during this perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the US in 1986. Since then the appellant has been working in US based companies like Accenture US (earlier) and currently in Deloitte US and paying taxes in the US. The assessee started contributing towards US social security since 1988. He became permanent US resident in 1992, got married in 1992 and since then his spouse is also continuously residing in the US. The assessee s 2 children were born in the US. His spouse and children are all citizens of the US as well. The assessee spent his summer vacations as well in the US during the period of assignment to India. The assessee has spent an aggregate of 30 years in the US. 2. Settlement - Post completion of his India assignment, the assessee has been living in the US with his spouse and children, where he plans to settle down for the rest of his lifespan. Residential status of the appellant for the period from August 11, 2012 to March 31, 2013 11. The assessee completed his assignment to India and moved back to the US on August 11 2012, where he resided at his US home and he also had a rented home available in India. Therefore, during this period of the previous year 2012-13 (i.e. from August 11 2012 to March 31 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee received in USA for the period from 11.08.2012 to March, 2013 as follows:- (a) What is the tax residential status of the assessee? (b) What is the legal position on the concept of split residency? (c) Can the exemption claimed under Article 16(1) be allowed in this case? 15. On point (a), the AO came to the conclusion that since the assessee stayed in India during the relevant previous year by his physical presence for the period exceeding 182 days, he had to be regarded as a resident of India for AY 2013-14. With regard to the tie-breaker test laid down in Article 4(2) of the Indo-US DTAA, the AO held as follows:- 4.7 The AR of the assessee is attempting to say that during the period of 11 august 2012 to 31 march 2013, the personal and economic relations are closer (centre of vital interests) to US. By the corollary the AR admits that till such period the personal and economic relations are closer (centre of vital interests) to India. It has to be noted that personal and economic relations refers to a long and continuous relation that an individual nurtures with a place (in this case a state). It cannot be broken so casually into bit and pieces by c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untry or specified territory ii. Form 1OF under the Income-tax Act, 1961 (Act) has to be furnished iii. Any other documents and information, as may be prescribed (section 90 (5) However the assessee does not satisfy the conditions for claiming any tax exemption under DTAA as he has not produced Tax Residency Certificate (TRC) or Form 10F under the Income-tax Act, 1961. 7. The AR of the assessee further argues that the income in the nature of interest and dividend that he earned in US is not offered in India for the period 11 August 2012 to March 2013. The ARs explains that the interest and dividend income earned by the assessee cannot be treated under Article 10 and 11 of the Indo-US DTAA but has to be treated under Article 23. This argument is based on assessee assumption that for the period 11 August 2012 to March 2013 the assessee is a non-Resident in India. But as discussed earlier split residency as claimed by the assessee is not accepted and the assessee is treated as Resident and Ordinarily Resident in India for tax purposes. Thus in this case Article 10, 11 or 23 of the DTAA is not applicable as the assessee is treated as Resident and Ordinarily Res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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