Non-resident marine engineer's foreign ship salary in NRE account not taxable under CBDT Circular 13/2017

The ITAT Kolkata ruled in favor of a non-resident marine engineer who received salary in India through an NRE account for services rendered outside India on a foreign ship. The assessee worked on M/T Torm Agnes of Singapore for 187 days, qualifying as non-resident. The tribunal held that per CBDT Circular No. 13/2017, salary accrued to non-resident seafarers for foreign ship services outside India cannot be included in total income merely because it was credited to an Indian NRE account. The appeal was allowed.

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Issues:
1. Taxability of salary income received by a non-resident Marine Engineer in India.
2. Interpretation of Section 5(2)(a) of the Income-tax Act regarding income received in India.
3. Applicability and interpretation of CBDT Circular No. 13/2017 in determining tax liability.

Issue 1: Taxability of Salary Income:
The appeal pertains to the taxability of salary income of a non-resident Marine Engineer for the assessment year 2012-13. The Assessing Officer (AO) added Rs. 36,96,150 to the assessee's income based on the salary received in India from a foreign employer. The AO considered the income as taxable in India under Section 5(2)(a) of the Income-tax Act. The assessee contended that the entire salary was earned outside India and remitted to his NRE account in India, thus not subject to tax in India.

Issue 2: Interpretation of Section 5(2)(a):
The main contention revolved around the interpretation of Section 5(2)(a) regarding income received in India. The assessee argued that the salary received in his NRE account should not be considered as income received in India, as the services were rendered outside India and the payment was made in foreign currency. The AO and the Commissioner of Income-tax (Appeals) upheld the tax liability, citing various judgments against the assessee.

Issue 3: CBDT Circular No. 13/2017:
The assessee relied on CBDT Circular No. 13/2017, which clarified that salary accrued to a non-resident seafarer for services outside India on a foreign ship shall not be included in total income if credited to the NRE account in India. The Circular emphasized that mere crediting of salary in the NRE account does not make it taxable in India. The Appellate Tribunal, considering the binding nature of CBDT Circulars, ruled in favor of the assessee, citing the Circular and Supreme Court precedents.

In conclusion, the Appellate Tribunal allowed the appeal, emphasizing the non-taxability of salary income received by a non-resident seafarer for services rendered outside India, as clarified by CBDT Circular No. 13/2017. The decision highlighted the significance of Circulars issued by the CBDT and their binding nature on Revenue authorities, ultimately determining the tax liability in favor of the assessee.

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