Income Tax Appellate Tribunal - Delhi
Deputy Commissioner Of Income Tax vs Vivek Paul [Alongwith Ita No. ... on 16 January, 2004
Equivalent citations: (2004)82TTJ(DELHI)699
ORDER
Y.K. Kapur, J.M.
1. These two appeals arising out of the order, dt. 2nd April, 1997, passed by the CIT(A), since, involve the common question of law and facts, are being taken up together and disposed of by this common order.
2. The challenge to the order of the CIT(A) by the Revenue is on the following grounds :
ITA No. 4236/Del/1997"On the facts and in the circumstances of the case, the learned CIT(A) has erred in directing the AO to exclude the salary for the period, the assessee stayed outside India, viz., 365 days."ITA No. 4235/Del/97
"On the facts and in the circumstances of the case, the learned CIT(A) has erred in directing the AO to exclude the salary for the period, the assessee stayed outside India viz. 60 days."
3. The facts available on the record as far as these two appeals are concerned are that the AO during the course of assessment proceedings while framing and finalising the assessment had assessed the income of the appellants for the entire period of their assignment in India including the period the appellants were not in India on the ground that the appellants are having their headquarters in India and, therefore, they continued to render their services in India. While travelling to Asia and Far-East, the AO felt that their headquarters remained in India and, therefore, they were rendering their services from headquarters.
4. The case of the assessees before the AO was that the assessees are foreign nationals and their residential status during the year was that of resident, but not ordinarily resident. The assessees before the AO contended that in terms of their employment with the employer, the appellants had to undertake journeys to places outside India for their employees' business. According to the assessee, as the salary, subject matter of these assessment proceedings related to the periods spent outside India, according to him, his income accrued outside India, and, therefore, was not taxable in India.
5. The contentions of the assessee did not find favour before the AO and he felt that while the appellants were outside India their headquarters remained in India and the salaries drawn by them during their stay outside India were, in these circumstances, taxable in India.
6. Being not satisfied with the order "of the AO both the assessees have filed independent appeals before the CIT(A). Before the CIT(A) it was contended by the assessees, though independently that in accordance with the proviso to Section 5(1) of the IT Act which applies to persons not ordinarily resident of India, the income which accrues to him/them outside India is not to be included in the total income unless it is derived from a business controlled in or a profession set up in India. The reference before the CIT(A) was also made to the provisions of Section 9(1)(ii) which deal with the income under the head 'salaries' and as per which income from salaries as accrued is deemed to accrue or arise in India if it is earned in India. Placing reliance on the Explanation to Section 9(1)(ii) it was contended by the assessee that income from salary payable for services rendered in India is to be regarded as income earned in India.
7. The contention raised by the assessees before the CIT(A) found favour with him and he held that unless services are rendered in India, the income from salary cannot be said to be deemed to accrue or arise in India and, therefore, such income cannot be included in the total income of a person who is resident, but not an ordinarily resident. For arriving at the said conclusion, the CIT(A) placed reliance on the judgment of the Delhi High Court reported in IT Ref. No. 4 of 1979 in the case of CIT v. A. Keilman. The Revenue has a grievance to the said order of the CIT(A) and is in appeal before us.
8. At the time of hearing of the said appeal, learned Departmental Representative, apart from relying upon the order of the AO, relied upon the order of the Uttaranchal High Court in CIT v. Sedco Forex International Drilling Co. Ltd. (2003) 264 ITR 320 (Uttaranchal) wherein the Uttaranchal High Court while dealing with the issue of salaries for the off period pertaining to the persons who was non-resident and working on rigs has held that the salary which is paid to an employee for off period is for and in lieu of services rendered in India and, therefore, the same is taxable in India. According to the learned Departmental Representative, this judgment squarely applies to the present case and, therefore, the appeal of the Revenue needs to be allowed.
9. On the arguments raised by the learned Departmental Representative, learned authorised representative drew our attention to p. 20 of the paper book which is the appointment letter and the terms of the assignment are:
"Your work responsibilities will include working in India as well as outside India. It is anticipated that you would be required to spend about 20 per cent of the total time outside India on our international matters excluding India."
10. After having drawn our attention to the said appointment letter, the learned authorised representative referred to Section 9(1)(ii) and Section 5(1)(c) and submitted that since these are the cases of a person resident in India, the salaries earned by them for the work done abroad would not fall within the ambit of Indian IT authorities. After having submitted so, the learned authorised representative also contended that the issue involved in the present appeal is no longer res integra and stands settled by this Tribunal in assessee's own case wherein this Tribunal relying upon an earlier order of this Tribunal, Delhi High Court has held that the salaries earned by the assessees are for work having done abroad and are not taxable in India. The copy of the said order in ITA No. 5711/Del/1997 for the asst. yr. 1994-95 was placed on the record and supplied to the learned Departmental Representative as well. The other order on the same issue by which our attention was drawn was pertaining to ITA No. 2101/Del/1998 wherein this Tribunal has again held that the salaries earned outside India are not taxable. Our attention was also drawn to another order of this Tribunal passed in ITA No. 5713/Del/1997 to the same effect.
11. After having drawn our attention to these orders, the learned authorised representative drew our attention to the order of the Delhi High Court passed in IT Ref. No. 4 of 1979 and relied upon the following observations:
"In the case before us the question is of a much simpler nature. We are told that part of the salary earned by the assessee was for rendering services outside India. It seems to us that if this is assumed, then the definition of Section 9(1)(ii) has to be applied. This states that income is deemed to accrue or arise in India under the head 'salaries' if it is earned in India. There has to be a distinction between income by way of 'salaries' earned in India and income by way of 'salaries' earned outside India. In this case the finding is that for long periods the assessee was working in India. The proportionate salary has been taxed in India. This seems to be the proper way of applying this section. We would, therefore, answer the question referred to us in the affirmative in favour of the assessee and against the Department leaving the parties to bear their own costs."
12. We have heard the parties and taken ourselves through the record and find that the judgment of the Uttaranchal High Court was passed under different facts and circumstances of the case and in that case, the issue was squarely different and pertained to the salaries paid for off period while in this case, the issue is absolutely different and pertains to the salary paid to an employee while working in the other countries and for the work done in other countries. These salaries paid cannot be equated to the salaries paid to the employee with which the Uttaranchal High Court was concerned. In this view of the matter, respectfully following the earlier orders of this Tribunal, we find that the appeals filed by the Revenue have no force and, therefore, need to be dismissed.
13. In the result, the appeals filed by the Revenue are dismissed.