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TMI Blog2023 (3) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 made on the payrolls of Wells India and his salary for the services rendered was credited to his Indian bank account by Wells India after deducting tax at source. 3. For the assessment year 2019-20 the assessee filed the return of income on 08/08/2019 declaring an income of Rs. 6,936/-. During the assessment year 2019-20 the assessee received a gross salary of Rs. 59,07,221/- from Wells India in respect of which the tax at source was deducted to the tune of Rs. 12,44,487/- under section 192(1) of the Act. On 18/10/2018 the employment of the assessee was terminated by Wells India and the terminal benefits were paid to him. Assessee claimed that he was part of it as a tax resident of USA and, therefore, eligible to avail the provisions of the India-US Double Taxation Avoidance Agreement (DTAA) to the extent it is beneficial to him as provided under section 90 of the Act. 4. Accordingly, at the time of filing of the Income Tax r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 section 9(1)(ii) of the Act income which falls under the head "salaries" is considered to accrue or arise in India only if it is earned in India and explanation to Section 9(1)(ii) clarifies that the income under the head salaries is considered as in India only if the services are rendered in India. Basing on this he submits that inasmuch as the services of the assessee were rendered outside India during the relevant period, it shall be deemed to have accrued or arising outside India. He further submits that under section 15(1)(a) of the Act in the salary from an employer to an employee, whether paid or not, alone is chargeable to tax in India. Since the provision of section 5 starts with the non obstante clause "subject to the provisions of the Act" to bring the salary income to tax, such a receipt must satisfy the requirement of section 9(1)(ii) of the Act and section 15(1)(a) of the Act, which provide that salary income is chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 are chargeable to tax in India. Only dispute is in respect of the salary that is paid by the Indian entity and remitted to the Indian bank account of the assessee after deducting the TDS. Assessee contends that the employment is exercised where the services are rendered and at such place only the salary accrues, and, therefore, his salary had accrued in USA for the relevant period. His case is that 5(2)(b) of the Act his salary would be chargeable to tax in India only if it is accrued in India, but since his salary had accrued in USA and since he is an NRI under section 5(2)(b) of the Act, the same cannot be brought to tax in India; whereas the Revenue contends that his salary was actually received in India and, therefore, under section 5(2)(a) of the Act, the same is chargeable in India. 11. For the sake of completeness, we deem it necessary to refer to the relevant portions of section 5 of the Act, Article 16(1) of the DTAA and the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 received in India in respect of the services rendered outside India. 13. It was contended by the Indian entity that section 4 of the Act created a charge on the total income subject to the provisions of the Act that section 5 specified the scope of total income which was also subject to the provisions of the Act; that section 90, under which the Central Government entered into agreement with the Government of a foreign country, referred to granting of relief in respect of income-tax chargeable under the Act; that since section 90 itself provided for relief in respect of tax chargeable under the Act, the provisions of sections 4 and 5 would be subject to the terms of INDO-UK DTAA. Reliance was placed on the cases of Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (SC) and CIT v. P.V.A.L. Kulandagan Chettiar [2004] 267 ITR 654 (SC) to argue that tax could be deducted at source only when income was chargeable to tax in India; that if the income was not chargeable in India, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 16. The facts of the case on hand are strikingly similar to the facts of the case in British Gas India (P) Ltd., In re (supra), and, therefore, the ratio of that decision is squarely appliable in this case also. Furthermore, the decision of the Hon'ble AAR in British Gas India (P) Ltd., In re (supra), is not disturbed as on the date. In that decision, the Hon'ble AAR clearly held that in view of the fact that the salary was received in India by the employees of the Indian entity seconded to the foreign entity are no doubt taxable in India under the provisions of section 5(2)(a) of the Act. Respectfully following the same, we hold that the salary of the assessee in this case is covered by section 5(2)(a) of the Act and otherwise, taxable in India. 17. Now turning to the Indo-US DTAA, Article 4(1) of the DTAA, under this article, the term 'resident of contracting state' includes a resident, and, Article 16(1) of the DTAA mandates that in respect of the salaries derived by a resident of USA in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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