TMI Blog2023 (3) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... Panda, Accountant Member And Shri K.Narasimha Chary, Judicial Member For the Assessee : Shri Hiten Chande, AR For the Revenue : Shri Jeevan Lal Lavidiya, CIT-DR ORDER PER K. NARASIMHA CHARY, JM: Aggrieved by the order dated 17/06/2022, passed by the learned Income Tax Officer (Int Taxn)-2, Hyderabad ( Ld. AO ) in the case of Prasanth Nandanuru ( the assessee ) for the assessment year 2019-20, under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (for short the Act ), consequent to the directions of Hon'ble Dispute Resolution Panel, Bengaluru ( DRP ), assessee filed this appeal. 2. Assessee is an individual. He was an employee of Wells Fargo (EGS) India Pvt. Ltd ( Wells India ) and was sent on short-term assignment to Wells Fargo Bank N.A., USA (Wells USA) from 20/10/2017 and such short-term assignment continued in the 18/10/2018 and thereafter the assessee was directly employed by the Wells USA. During the assessment year 2019-20 he was absorbed in Wells USA w.e.f. 18/10/2018 the assessee was working in USA, physically present there and qualify to be a non-resident of India. During his short-term assignment to Wells USA, the assessee mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 5(2)(a) and section 5(2)(b) of the Act are applicable as the salary income has accrued in India and the same has been received in the Indian bank account of the assessee. Ld. DRP, however, directed the learned Assessing Officer to give credit for the taxes paid in USA. Learned Assessing Officer accordingly passed the final assessment order taxing the salary income of the assessee, but without giving credit for the taxes paid in the USA. 7. Assessee is therefore, before us in this appeal contending that the authorities below should have allowed the exemption claimed by the assessee under Article 16 (1) of the DTAA read with section 90 of the Act and should have held that the employment was exercised in USA where the services are rendered and also because during that period the assessee was qualify to be a non-resident of India. The counsel argued that the salary income pertaining to assignment/secondment was received for rendering the services outside India and, therefore, the salary income received by the assessee does not accrue or arise in India in view of the provisions under section 9(1)(ii) and section 15 of the Act. He further argued that as per the provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered by section 5(2)(a) of the Act but not by 5(2)(b) of the Act. In respect of Article 16(1) of DTAA, learned DR submitted that such an article is not applicable to the case of the assessee, because, the assessee was exercising the employment pursuant to the contract with the Indian entity, it shall be construed that the employment is exercised only in India where the seat of Indian entity exists. According to the learned DR, assessee is governed by the expression unless the employment is exercised in the other contracting state in which case the remuneration derived by the assessee therefrom has to be taxed in the other country, namely, India. 10. We have gone through the record in the light of the submissions made on either side. During the relevant year, assessee is a non-resident of India and was working at USA serving a foreign entity, on a short-term assignment. During the financial year 2018-19 till 10/08/2018, the salary of the assessee was paid by the Indian entity and was remitted to the assessee s Indian bank account. Assessee also received some allowances in USA and there is no dispute about such allowances and the Revenue never contend that such allowances ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration and Pensions in respect of Government Service), 20 (Private Pensions, Annuities, Alimony and Child Support), 21 (Payments received by Students and Apprentices) and 22 (Payments received by Professors, Teachers and Research Scholars), salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State. xxx xxx xxx 12. In the case of British Gas India (P) Ltd., In re (supra), the company sent two of its employees to its group company in UK on deputation, during the period of deputation, such employees continued to be on the payrolls of the Indian entity, and regularly received salary in India. The Indian entity sought advance ruling on the question as to whether the salary received in India by the two employees is taxable in India or not. Apart from this, ruling in respect of the TDS was also sought, but it is irrelevant for our purpose. We shall cull out the ratio in respect of the chargeability of salary r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n deputation basis, with salaries being paid by the Indian company in India, but, since both the employees continued to be on the payroll of the Indian company in India even when they were posted in the U.K, it could not be said that employment was exercised on behalf of the U.K. company. 15. As regards article 16 of INDO-UK DTAA, Revenue argued that the words 'employment' and 'exercised' were important. Both the employees were in the regular employment with Indian company although on deputation to a Contracting State. Salaries were being paid in India. The terms of employment were governed by laws of India. The employees had simply been leased to the U.K. associate company. They were not on regular payroll of the overseas company. On this premise, Revenue argued before the Hon ble AAR that in this set of circumstances, it could not be said that employment was on behalf of the foreign company. These employees rather performed special duties at the behest of their Indian employers although at a distant destination. Therefore, the provisions of article 16 of INDO-UK DTAA do not help the Indian entity insofar as taxability of salary paid in India was concerned. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainment 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 DTAA, 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 U.K. 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. 13. In the light of the above discussion, we determine as follows : (i) The salary paid by the applicant to Mr. Manish Gupta shall not be taxable in India, if the same has been offered for tax in the U.K. in pursuance of the DTAA. 18. Respectfully following the decision of the Hon ble AAR in British Gas India (P) Ltd., In re (supra), we hold that though the provision under section 5(2)(a) of the Act fastens tax liability on the assessee, but, because of the overriding effect of section 90 of the Act, article 16 of the DTAA would prevail over the 5(2)(a) of the Act and consequently, the salary received by the assessee in I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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