Tax Tribunal: Salary earned in the Philippines by a Filipino resident not taxable in India

The Tribunal upheld the decision of the First Appellate Authority, ruling that the salary earned by the appellant, a tax resident of Philippines, for work done in Philippines while on an international assignment is not taxable in India. The Tribunal relied on the provisions of the India-Philippines Double Taxation Avoidance Agreement, specifically Article 16(1), to determine the taxability of the income. The appeal filed by the Revenue against the order of the First Appellate Authority was dismissed.

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Issues involved:
The appeal filed by the Revenue against the order of Ld.CIT(A)-XXX, New Delhi for Assessment Year 2008-09 regarding the taxability of salary earned by an employee working on an international assignment.

Facts of the case:
The assessee, an employee of M/s KJS India Pvt.Ltd., was on a long term international assignment to Kraft Foods, Philippines, and was present in India for less than 60 days during the relevant year. The assessee was regarded as a tax resident of Philippines and paid taxes there on the salary received in India for services rendered in Philippines.

Arguments before the First Appellate Authority:
The First Appellate Authority relied on the India-Philippines Double Taxation Avoidance Agreement, specifically Article 16(1), to conclude that the salary in question is not taxable in India.

Grounds of appeal by the Revenue:
The Revenue appealed on the grounds that the salary was accrued, received, and paid in India, and should be taxed accordingly under the Income Tax Act, 1961. They also questioned whether the tax paid in Philippines included the salary earned in India and claimed that the penalty proceedings initiated by the Assessing Officer were premature.

Decision of the Tribunal:
After considering the facts and the Indo-Philippines DTAA, the Tribunal held that the salary income derived by the appellant, a tax resident of Philippines, from employment exercised in Philippines shall be taxable only in Philippines. Therefore, the salary received through KJS India for work done in Philippines is not taxable in India. The Tribunal upheld the decision of the First Appellate Authority and dismissed the appeal of the Revenue.

Conclusion:
The Tribunal's decision was based on the specific provisions of the Double Taxation Avoidance Agreement between India and Philippines, which governed the taxability of the salary earned by the assessee while working on an international assignment.

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