2014 (12) TMI 519 - AT - Income Tax

Tribunal affirms NRI status, excludes Bhutan income from tax

Asstt. Commissioner of Income Tax Versus Col. Joginder Singh

The Tribunal upheld the Commissioner of Income Tax (Appeals)' decision to treat the assessee as a Non-Resident Indian, excluding salary and subsistence ... Residential Status of assessee - Salary and Subsistence Allowance received in Bhutan – Form No.16A not appreciated as TDS was deducted – Misinterpretation of section 6(1)(c) - Whether the assessee is a Non Resident Indian against Resident by wrongly applying the provision of section 6(1)(c) or not – Held that:- The AO has made the addition by holding that the assessee does not fall in the category of NRI as per the provisions of section 6(1)(c) of the Act - the assessee had left India on 8.06.2004 for taking up employment in Bhutan with Louis Berger Group Inc (LGB) and remained there continuously for almost ten months till the end of the previous year 2004-05 - the assessee stayed in India only for a period of 68 days during the previous year - the AO misinterpreted the provisions of section 6(1)(c) and Explanation (a) attached thereto – CIT(A) rightly held that the assessee has to be treated as non-resident as per Explanation (a) attached to section 6(1)(c) of the Act - in the case of the individual, a citizen of India who left India during the previous year for the purpose of employment outside India and in a peculiar circumstance, when his stay in India during the relevant period was only 68 days which is much less than the period of 182 days as per statutory provisions of the Act, then the assessee cannot be treated as resident of India and his status would be of non-resident Indian for the purpose of levying of tax as per provisions of the Act. The AO wrongly denied relief for the assessee and made additions on the basis of misinterpretation of facts – CIT(A) granted relief for the assessee by considering agreement of employment dated 31.5.2004, other relevant documents and by properly interpreting the provisions of the Act in the right direction as per letter and spirit of Explanation (a) attached to section 6(1)(c) of the Act – thus, the order of the CIT(A) is upheld – Decided against revenue. Issues Involved:1. Deletion of addition of Rs. 8,00,000/- and Rs. 7,75,612/- received by the assessee in Bhutan as Salary & Subsistence Allowance.2. Determination of the assessee's status as Non-Resident Indian (NRI) versus Resident.3. Deletion of addition without appreciating the facts and evidence in Form No. 16A issued by M/s Louis Berger Group Inc.Issue-wise Detailed Analysis:1. Deletion of Addition of Rs. 8,00,000/- and Rs. 7,75,612/- Received by the Assessee in Bhutan:The Assessing Officer (AO) added Rs. 8,00,000/- on account of consultancy income and Rs. 7,75,612/- on account of subsistence allowance to the income of the assessee, asserting that these amounts were taxable. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted these additions, concluding that the amounts were received as salary and subsistence allowance during the assessee's employment in Bhutan and should not be taxed in India if the assessee holds NRI status. The Tribunal upheld the CIT(A)'s decision, noting that the amounts received were indeed salary and subsistence allowance, and the assessee did not claim any expenditure against these receipts, which would have been the case if the income were professional.2. Determination of the Assessee's Status as Non-Resident Indian (NRI) versus Resident:The AO determined the assessee's status as Resident based on Section 6(1)(c) of the Income Tax Act, 1961, which states that an individual is a resident if they have been in India for 60 days or more in the relevant year and 365 days or more in the preceding four years. However, the CIT(A) and subsequently the Tribunal found that the assessee's stay in India was only 68 days during the relevant year, and as per Explanation (a) to Section 6(1)(c), an individual who leaves India for employment and stays in India for less than 182 days in the relevant year is considered an NRI. The Tribunal confirmed that the assessee met these criteria, thus qualifying as an NRI.3. Deletion of Addition without Appreciating the Facts and Evidence in Form No. 16A:The AO argued that the CIT(A) erred in deleting the addition without considering Form No. 16A issued by the employer, M/s Louis Berger Group Inc., where TDS of Rs. 15,779/- was deducted on professional/technical receipts. The Tribunal found that the CIT(A) correctly interpreted the agreement between the assessee and the employer, which indicated an employer-employee relationship. The Tribunal noted that the salary and subsistence allowance were covered under the definition of salary as per Section 17(1) of the Act, and the employer issued a salary certificate akin to Form No. 16, supporting the assessee's claim of salary income rather than professional income.Conclusion:The Tribunal concluded that the AO misinterpreted the provisions of Section 6(1)(c) and its Explanation (a). The CIT(A) correctly determined the assessee's status as NRI and rightly deleted the additions, considering the employment agreement and other relevant documents. The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to treat the assessee as an NRI and exclude the salary and subsistence allowance received in Bhutan from taxable income in India. The appeal of the revenue was dismissed.Order Pronounced:The Tribunal pronounced the order in the open court on 30.4.2014, dismissing the revenue's appeal.