2024 (4) TMI 16 - AT - Income Tax

AO properly used Section 154 to add undeclared USA salary income for Indian resident liable for global taxation

Mahesh Ram Vittal, C/o Mr. P. Santanam, Chennai Versus The Asst. Commissioner of Income Tax, Circle – 5 (3) (1), Bengaluru.

Mahesh Ram Vittal, C/o Mr. P. Santanam, Chennai Versus The Asst. Commissioner of Income Tax, Circle – 5 (3) (1), Bengaluru. - TMI Issues involved: The judgment involves various issues including the validity of order under section 154, determination of tax residency status, grant of foreign tax credit, application of tax treaty provisions, violation of statutory provisions, and imposition of interest under sections 234A, 234B, and 234C of the Act.Validity of Order under Section 154:The appeal was filed against the order passed by NFAC, New Delhi, challenging the issuance of order under section 154 despite no apparent mistake in the assessment order under section 143(3) of the Act. The Appellate Tribunal held that the global income received by the assessee should be taxed in India as per the provisions of the Act and the India-USA treaty. The Tribunal found that the AO correctly rectified the order under section 154, as the income from USA was not doubly taxed and foreign tax credit was allowed. The Tribunal concluded that the AO's invocation of section 154 was valid, as there was a mistake apparent from the record.Tax Residency Status and Taxation of Salary Income:The issue of tax residency status arose concerning the appellant's income earned in India and the USA. The AO determined that the appellant, being a resident of India, should offer global income for taxation in India, including the salary received from the USA. The Tribunal upheld the AO's decision, stating that the appellant's global income was taxable in India, subject to relief under the India-USA treaty. The Tribunal also noted the appellant's failure to offer the salary income from the USA, leading to the invocation of section 154 for rectification.Grant of Foreign Tax Credit and Application of Tax Treaty Provisions:The appellant claimed foreign tax credit under Article 25 of the India-USA treaty for taxes paid in the USA on interest and dividend income. The Tribunal found that the AO correctly allowed foreign tax credit and applied the treaty provisions to avoid double taxation. The Tribunal directed the AO to consider the eligibility of the assessee for relief under the treaty provisions and to pass an Order Giving Effect accordingly.Violation of Statutory Provisions and Imposition of Interest:The Tribunal addressed the issue of violation of statutory provisions by the CIT(A) and AO in not granting foreign tax credit and beneficial tax rates as per the India-USA treaty. The Tribunal noted the imposition of interest under sections 234A, 234B, and 234C of the Act. The appellant's appeal was partly allowed for statistical purposes, emphasizing the importance of complying with statutory provisions and treaty obligations.Conclusion:The Appellate Tribunal upheld the AO's decision to tax the appellant's global income in India, granted foreign tax credit as per the treaty provisions, and directed compliance with statutory requirements. The judgment highlighted the significance of accurately declaring and offering income for taxation, especially concerning international income and tax treaty provisions.