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2016 (6) TMI 215
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....or the AY under appeal i.e. 2010-11 return was filed on 12.08.2010 declaring total income at Rs. 3,95,099/-. The assessee is a Marine Engineer and was engaged with M/s. Great Offshore Ltd. and M/s. Bibby/Ship Management (Singapore) Pte. Ltd. in the capacity as a Marine Engineer. At the time of assessment proceedings the Ld. AO observed that the assessee worked in International Waters during the FY 2009-10 relevant to AY 2010-11 and received remuneration from two concerns i.e. (i) M/s. Great Offshore Ltd. Rs. 26,73,772/- and (ii) M/s. Bibby Ship Management (Singapore) Pte. Ltd. Rs. 6,60,100/-. Out of the above receipts the assessee claimed following income as exempt: (i) M/s. Great Offshore Ltd. Rs. 20,28,671/- (ii) M/s. Bibby Ship Management (Singapore) Pte. Ltd. Rs. 6,60,100/- 4. The assessee stated that the above income was received from outside India in foreign currency and, therefore, claimed as exempt. The assessee stated that he used to get his contract to do service with Indian / foreign shipping company through Indian agent and that contract were executed in India duly signed by the agent in India and himself before joining the ship. But he has to float....
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....d that other than foreign currency any amount could not be deposited in NRE A/c. That therefore the amounts which are credited in my NRE A/cs in India were received outside and being "Non Resident' those income were not taxable U/s 5 of the Act. That I have already filed the photocopy of the Bank statement of NRE & NRO A/cs with Axis Bank and the photocopy of RBS Bank (NRE) is enclosed herewith)." 6. The Ld. AO examined the reply of the assessee together with the bank statements of the assessee and observed that sums of Rs. 7,11,872/- and Rs. 7,67,726/- were directly credited to Royal Bank of Scotland NRE Account and Axis Bank NRE Account respectively totaling to Rs. 14,79,598/-. The Ld. AO further observed that regarding the assessee's contention that these amounts received in foreign currency is not taxable in India, it is stated that as per section 5(2)(a) of the Act, which deals with the scope of income arising to a Non-resident, any income of a Non-Resident received in India is taxable in India. The section does not mention anything about Indian currency or foreign currency. The section specifically stated that any income received or deemed to be recei....
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....by the foreign company in the NRE account of the assessee in India that also in foreign exchange shall not be considered as income received in India and any larger interpretation to the section would render it otiose. The various arguments of the assessee were summarized by the Ld. CIT(A) as below: "(a) The assessee is a non resident and rendering services outside India. (b) The payments are being made by a foreign company outside India and the foreign company does not have any permanent establishment in India. (c) The point of payment is to be taken into consideration for determining the provisions of clause 5(2)(a) of the Income Tax Act and the point of payment shall be considered as the point of receipt. (d) It is immaterial that the payment is being transferred by the foreign company or remitted by the foreign company to the NRE account in foreign exchange in India as because payment have been made by the foreign company outside India and the point of payment is to be taken as the point of receipt. (e) Without prejudice to the above the amount which is received by the assessee from the foreign company is in foreign exchange and there....
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....Vijendra Rao reported in 239 CTR 107(Kar), ii) CIT Vs. Avtar Singh Wadhwan reported in 247 ITR 260 (Bom) In response to this, the Learned DR argued that as per Section 5 of the Act, so far as non-residents are concerned, total income includes all income from whatever source derived which: i. is received in India [section 5(2(a)], or ii. is deemed to be received in India [section 5(2(a)], or iii. accrues or arises to him in India [section 5(2(b)], or iv. is deemed to accrue or arise to him in India [section 5(2(b)]. Thus, total income of a non-resident can consist of income from any source which is derived by way of any of these four modes. This means, first of all, there has to be a source of income (the term 'in India' is not mentioned in the context of such source of income) and then, income from such a source will only get included in the total income of the non-resident person through any of the four modes as described in section 5(2) of the Act. It is evident that all the four modes stand on their own legs, otherwise the enactment will be rendered redundant. Section 5(2)(b) mentions the term 'accrues or arises to h....
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....onnected with the contractual right of the employee to receive his salary and nothing else. It has no relation with location or place of services rendered or to where the amount has become "due". Thus, what is important for charging an amount to tax under section 15(a) is whether it is in the nature of salary and whether it has become due to the assessee (whatever may be his status - resident or non-resident) and it has no relation to the place where it has become due. The place where it has become due and the place where service has been rendered do not form a basis of charge under section 15 of the Act. Had the Parliament thought it relevant, the statute would have taken a form which reflected such thought. 10. We have heard the rival submissions and perused the materials available on record. The scheme of the Act is such that charge of tax is made independent of territoriality and residency and currency. The Ld. DR argued that the assessee though rendered services outside India had received salary in India by way of fund transfer from foreign company in abroad directly to NRE account of the assessee in India. The character of receipt of salary does not change according to Ld.....
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....n India, 'from whatever source derived'. If this is construed to mean that income from whatever source, should first accrue or arise in India and then it should be received in India to be included under section 5(2)(a), then section 5(2)(a) will lose its independence and will become a subset of section 5(2)(b) and there would not be any need for having section 5(2)(a) on the statute. 10.2. We find that heavy reliance has been placed by the Learned AR on the decision of the Hon'ble Bombay High Court in the case of CIT vs Avtar Singh Wadhwan reported in 247 ITR 260 (Bom) which was in turn followed by Hon'ble Karnataka High Court in the case of DIT (Intl Taxn) vs Prahlad Vijendra Rao reported in 239 CTR 107 (Kar). We find that the question before the Hon'ble Bombay High Court was to decide the place of accrual of income. The Court held that the income accrues in the place where the services were rendered which was admittedly outside India. We find that the Court did not have an occasion to deliberate upon the fact that the receipt of the income has been in India as the issue decided by them was only the place of accrual of income in the context of section 5(2)(b) of the Act....
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.... remitted to India by arrangement with the Accountant General Madras. On further appeal, the Hon'ble Madras High Court firstly held that the Malaysian Govt had assessed the assessee to income tax on the pension. The Hon'ble High Court also found that the Malaysian Govt had deducted tax at source which clearly indicated that the income had accrued to assessee in Malaysia and therefore not assessable in the hands of the assessee in India. The Hon'ble Court found that the accrual of pension and receipt of pension had already been taken place in Malaya. The Hon'ble Court held that the letter dated 23.6.1969 addressed by the Accountant General Federation of Malaya Kuala Lumpur to the Accountant General Madras was only intended as an arrangement for the payment of pension to the assessee and the said letter was couched in the form of a request , requesting payment to the assessee to be made at the nearest treasury and the rate of exchange was also indicated therein. Further the letter also stated that the payment requested to be made was in respect of the pension payable to the assessee and at the rate of exchange indicated therein and the amount so paid, should , according to the letter....