2013 (8) TMI 872 - AT - Income Tax

Tribunal rules in favor of assessee's residential status, dismisses taxation of global income and perquisites

Shri Mihir J. Doshi Versus ACIT-26 (2) Mumbai

The Tribunal ruled in favor of the assessee, determining their residential status as 'not ordinarily resident' for the assessment year 2003-04. The ... Revision u/s 263 - Assessing Officer did not examine the status of the assessee in the course of assessment proceedings - taxation of Indian salary along with U.S.A. salary - global income rectification of the order to exclude double addition as the global income of ₹ 7,18,15,365 taken as income from the U.S.A. in fact includes the Indian salary already brought to tax at ₹ 3,24,45,350 - Held that:- If the proceedings under section 263 are on assessment order dated December 29, 2008, obviously there cannot be any prejudice caused to the Revenue, as the Assessing Officer not only brought to tax the Indian component but also the entire global component of the salary. Therefore, the proceedings under section 263 can only be considered to be against the order dated February 24, 2009 under section 154 in which the Assessing Officer by mistake excluded ₹ 7,18,15,365 instead of ₹ 3,24,45,350 included in the above amount.Since the proceedings are initiated against the order under section 154 dated February 24, 2009, question of considering amount of ₹ 53,19,253 does not arise at all, as issue of perquisite was originally concluded by the order dated January 24, 2006 and subsequent proceedings under section 263 did not make it as an issue. Therefore, CIT(A) raising an issue of taxability of perquisite out of the entire tax deducted at source does not arise at all, as this is not an issue considered in the order under section 154. Therefore to that extent the direction of the Commissioner of Income-tax to bring the amount to tax is beyond jurisdiction. Even on the merits, the assessee, from the beginning has submitted before the Assessing Officer that the tax refund if any does not belong to him and belongs to employer. Based on the above submissions, the issue of perquisite would not have been raised by the Assessing Officer. Be that as it may, the assessee placed evidence on record that already refund to the extent of ₹ 40,41,172 was returned to the employer and balance refund, if any arising to the assessee, would also be returned to the employer. Therefore, in our opinion, there is no error in the order and certainly no prejudice to the Revenue. Whether there is any prejudice caused to the Revenue in the order under section 154 - Held that:- The amendment to section 6(6)(a) has come with effect from April 1, 2004, therefore, the same is not applicable to the assessment year under consideration. In view of the interpretation given in the case of Pradip J. Mehta v. CIT [2008 (4) TMI 6 - Supreme Court]to the then existing law, in a way the Assessing Officer excluded the income earned outside India and ultimately the assessee was taxed in the income earned in India. Therefore, to that extent there is no prejudice caused to the Revenue on the basis of interpretation of law relevant for the assessment year 2003-04. Therefore, in our opinion the order under section 263 by the Commissioner of Income-tax is bad in law even though there was a mistake committed in the order under section 154 as stated earlier. - Decided in favour of assesse. Issues Involved:1. Determination of the residential status of the assessee.2. Inclusion of global income in the taxable income.3. Taxation of perquisites.4. Validity of the order under section 263 by the Commissioner of Income-tax.Issue-Wise Detailed Analysis:1. Determination of the Residential Status of the Assessee:The assessee, an employee of M/s. Morgan Stanley International Inc. of the U.S.A., claimed the status of 'resident but not ordinarily resident' for the assessment year 2003-04. The Commissioner of Income-tax, however, held the assessee as a resident based on the interpretation of section 6(6) of the Income-tax Act at that point in time, directing the Assessing Officer to consider the global income. The Tribunal noted that the assessee's status as 'not ordinarily resident' was supported by the Supreme Court judgment in Pradip J. Mehta v. CIT [2008] 300 ITR 231 (SC), which clarified that the assessee was not resident in India for 9 out of 10 preceding years. Thus, the assessee's status should be 'not ordinarily resident,' and there was no prejudice to the Revenue.2. Inclusion of Global Income in the Taxable Income:The Commissioner of Income-tax directed the Assessing Officer to include the entire global salary of Rs. 7,18,15,365 in the taxable income, leading to a total income of Rs. 10,51,06,290. The assessee contended that the global income already included the Indian salary of Rs. 3,24,45,350, and excluding it would result in double addition. The Tribunal found that the Assessing Officer had mistakenly excluded the entire global income instead of only the Indian component. However, the Tribunal concluded that the inclusion of global income was not warranted as the assessee was 'not ordinarily resident.'3. Taxation of Perquisites:The Commissioner of Income-tax considered the difference in tax on perquisites paid by the employer and shown by the assessee in the return of income. The amount of Rs. 53,19,253 was considered as perquisites. The assessee argued that this amount represented tax paid by the employer and was not his income. The Tribunal agreed, noting that the employer had confirmed the amount belonged to them, and the assessee had already refunded a part of it to the employer. Therefore, the direction to tax the perquisites was beyond the jurisdiction of the Commissioner of Income-tax.4. Validity of the Order under Section 263 by the Commissioner of Income-tax:The Tribunal examined whether the order under section 263 was valid. The Commissioner of Income-tax invoked section 263 against the order under section 154, which had excluded the global income erroneously. The Tribunal found that the proceedings under section 263 were not justified as the original assessment order already included the global income, and the mistake in the order under section 154 could have been rectified without invoking section 263. The Tribunal concluded that the order under section 263 was bad in law as it was not erroneous or prejudicial to the interests of the Revenue.Conclusion:The Tribunal set aside the order under section 263 dated March 30, 2010, and allowed the appeal, concluding that the assessee was 'not ordinarily resident,' and there was no prejudice to the Revenue. The order pronounced on August 30, 2013.