Non-resident seafarer wins tax appeal on foreign income credited to Indian NRE account The Tribunal allowed the appeal of the non-resident individual, a seafarer, ruling that his salary received for services outside India and credited to his ...
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Non-resident seafarer wins tax appeal on foreign income credited to Indian NRE account
The Tribunal allowed the appeal of the non-resident individual, a seafarer, ruling that his salary received for services outside India and credited to his NRE account in India is not taxable in India. The decision aligned with CBDT Circular No. 13/2017 and Karnataka HC precedent, exempting the income of Rs. 38,26,820 from taxation under Section 5(2)(a) of the Income-tax Act, 1961.
Issues Involved:
1. Taxability of remuneration received by a non-resident individual in India. 2. Interpretation of Section 5(2)(a) of the Income-tax Act, 1961. 3. Applicability of CBDT Circular No. 13/2017 regarding non-resident seafarers.
Detailed Analysis:
Issue 1: Taxability of Remuneration Received by a Non-Resident Individual in India
The core issue in this appeal is whether the remuneration of Rs. 38,26,820/- received by the non-resident assessee, which was directly remitted from a foreign company to his NRE account in India, is taxable under the Income-tax Act, 1961.
Issue 2: Interpretation of Section 5(2)(a) of the Income-tax Act, 1961
The assessee, a non-resident individual, filed his return electronically declaring total income from salaries and other sources. He claimed that his salary income, received in foreign currency and remitted to his NRE account, should be exempt from tax. The AO, however, contended that the salary received in India should be taxed under Section 5(2)(a) of the Act, which includes income received in India in the total income of a non-resident.
The AO argued that the salary was directly credited to the assessee's bank account in India, making it taxable under Section 5(2)(a). The AO referenced the Supreme Court's interpretation in CIT Vs. L.W. Russel, which emphasized that salary due from an employer is chargeable to tax regardless of the location of payment or services rendered.
The assessee argued that his case is covered by CBDT Circular No. 13/2017, which clarifies that salary accrued to a non-resident seafarer for services rendered outside India on a foreign-going ship shall not be included in total income merely because it is credited to an NRE account in India.
The Tribunal noted the binding nature of CBDT Circulars on revenue authorities, as confirmed by the Supreme Court in Commissioner of Customs vs Indian Oil Corporation Ltd. The Circular states that salary credited to an NRE account for services rendered outside India should not be taxed in India.
Conclusion:
The Tribunal concluded that the salary received by the assessee, a non-resident seafarer, for services rendered outside India should not be included in his total income merely because it was credited to his NRE account in India. The Tribunal allowed the appeal, aligning with the CBDT Circular No. 13/2017 and the precedent set by the Karnataka High Court in Director of Income-tax (International Taxation) Vs. Prahlad Vijendra Rao.
Final Judgment:
The appeal of the assessee is allowed, and the salary income of Rs. 38,26,820/- is not taxable in India under Section 5(2)(a) of the Income-tax Act, 1961, as per the CBDT Circular No. 13/2017.
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