TaxTMI 
TaxTMI 
2015 (4) TMI 133
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.... Rs. 99,245 and claiming refund of Rs. 1,90,997. The assessee claimed his status as that of a non-resident on the ground that he was in USA on job assignment for 306 days and hence his salary income to the tune of Rs. 6,73,431 was exempt from tax under Article 16(1) of the Double Taxation Avoidance Agreement (DTAA) between India and the USA. In the footnote to the computation of income statement, assessee stated that he was tax resident of USA and exercised his employment in USA during the financial year 2001-02, except for 59 days and that Article 16(1) of the DTAA provides that remuneration derived by a resident of a contracting state in respect of an employment shall be taxable only in that State, unless the employment is exercised in th....
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....o tax the income said to have been voluntarily offered by the assessee to tax in USA during the financial year 2001-02 of Rs. 20,29,019 (Rs.1455733 + Rs. 573286). In the computation of tax liability, the Assessing Officer allowed double taxation relief in respect of tax paid in USA of Rs. 4,46,814 as per provisions of Article 25 of DTAA, and accordingly completed the assessment vide order dated 21.3.2005 passed under S.143(3)(i) of the Act. 4. On appeal CIT(A) confirmed the assessment made as above, rejecting the contentions of the assessee, with regard to his residential status; for relief under Article 16(1) of the DTAA; and relief in tax in terms of Article 25 of the DTAA, and accordingly dismissed the appeal of the assessee. 5. Aggrie....
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.... 7. ........'' 7. The learned counsel for the assessee, reiterating the contentions urged before the Revenue authorities, submitted that during the assessment year 2002-03, the assessee was a non-resident, as the total stay during the previous year 2001-02 was only 59 days, whereas the total stay in US during that period was 306 days. While in employment in US during the calendar year 2001, the assessee has filed the US Income-tax return as he was a US tax resident. In the said return, a sum of US $ 6406 (equivalent to Indian Rupees) received in India was offered to tax. Assessee has claimed exemption in terms of Article 16(1), being a tax resident of USA was taxable in USA in respect of income earned in US. Since out of salary incom....
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....retation of Article 16(1) would lead to the conclusion that taxation rights for the salary earned for work done in the USA vests only with USA and that amount cannot be considered for Indian tax purposes - in other words this is the 'exemption' regime (as opposed to 'credit' regime) under the DTAA. For this, the assessee placed reliance on the decision of the Supreme Court in CIT v. P.V.A.L. Kulandagan Chettiar (2004 267 ITR 654 SC). 11. Article 16(1) of the Indo-US Double Taxation Avoidance Agreement reads as follows: "Article 16 - Dependent personal services - 1. Subject to the provisions of Articles 17 (Directors' Fees), 18 (Income Earned by Entertainers and Athletes), 19 (Remuneration and P....
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....all, unless the context otherwise requires, and is not inconsistent with the provisions of this Act or the agreement, have the same meaning as assigned to it in the notification issued by the Central Government in the Official Gazette in this behalf." 14. Subsequently there was a Notification No.91/2008 dated 28th August 2008 which has clarified that when the phrase 'may be taxed' is used in a DTAA, then India can include such income taxed in the other country in the total taxable income in India. Relevant portion of the said Notification reads as follows: ''In exercise of the powers conferred by sub-section (3) of section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notif....
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....an Chettiar (supra), the interpretation of the phrase 'may be' in Article 16(1) is applied in the impugned assessment year so as to exempt from the Indian taxable income of the assessee, his salary income which has been offered to tax in USA. We therefore allow this ground of the assessee on this aspect. 17. With respect to Ground No.3, it is the case of the assessee that the per diem being received outside India means that these are payments to a non-resident received outside India. 18. We heard both sides on this issue. Relevant portion of Section 5(2) of the Act reads as follows: "(2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes....