Foreign assignment allowance received by non-resident through Travel Cash Card abroad not taxable in India

The ITAT Hyderabad held that foreign assignment allowance received by a non-resident assessee for services rendered outside India through Travel Cash Card (TCC) abroad is not taxable in India. The tribunal rejected the Revenue's argument regarding double non-taxation, stating that whether the allowance was taxed in the host country is irrelevant for determining Indian tax liability. The decision relied on precedents from Bombay HC, Karnataka HC, and Calcutta HC, and followed a similar ruling in Bodhisattva Chattopadhyay case. The assessee's appeal was allowed.

---

---

Issues:
1. Taxability of foreign assignment allowance received by the assessee for services rendered outside India.

Analysis:
The appeal centered around whether the foreign assignment allowance received by the assessee for services outside India should be taxed in India. The assessee, an employee of an Indian company, was sent on a long-term assignment to Abu Dhabi, UAE, where he received a salary including a foreign allowance component. The dispute arose as the assessee claimed the foreign allowance received outside India to be exempt income. The Assessing Officer contended that since the employer deducted TDS in India, the situs of employment was in India, making the salary income taxable in India.

The CIT(A) upheld the Assessing Officer's view, stating that the salary income accrued in India, as evidenced by TDS deduction in India. The assessee, disagreeing with this decision, argued that as a non-resident, the foreign assignment allowance should not be taxed in India. The AR cited various cases where similar issues were decided in favor of the assessee, emphasizing that income derived by a non-resident for services outside India cannot be taxed in India.

The Revenue argued that the control and governance of the assessee's service conditions by the Indian company, along with the TDS deduction in India, indicated that the situs of employment was in India. They contended that the income was received in India when the foreign assignment allowance was transferred to the Travel Currency Card. However, the Tribunal, after examining the facts and legal precedents, concluded that the foreign assignment allowance received for services outside India was not taxable in India. They emphasized that the taxability in the host country was irrelevant to the Indian tax treatment of such income.

Given the consistent decisions of the Tribunal and higher authorities on similar issues, the Tribunal accepted the assessee's contentions and allowed the appeal, rejecting the Revenue's arguments. The judgment highlighted that the foreign assignment allowance, even if transferred through Indian accounts, was not taxable in India, as established by previous rulings.

In conclusion, the Tribunal ruled in favor of the assessee, holding that the foreign assignment allowance received for services outside India was not subject to taxation in India, following established legal precedents and rejecting the Revenue's arguments regarding the situs of employment and income receipt location.

---