TaxTMI 
TaxTMI 
2016 (6) TMI 1174
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....f assessment proceedings, it was noticed by the AO from the bank account of the assessee maintained with HSBC, Dalhousie Square branch, Kolkata that various amounts aggregating to Rs. 21,56,683/- paid by M/s. BW Fleet Management Pvt. Ltd. were credited therein. According to the AO, the said amount was taxable in India in the hands of the assessee as per the provisions of section 5(2)(a) of the Income Tax Act, 1961 and the assessee was therefore called upon by him to explain why the same should not be brought to tax in his hand. In reply, a certificate issued by M/s.BW Fleet Management Pvt. Ltd., Singapore was filed by the assessee which read as under: "We are hereby confirming that Mr. Tapan Krishna Pattanaik holder of Passport no. F 2020607 dt. 06.04.2005 served with our company as a second Engineer from 18.05.2010 to 11.11.2010, again from 20.11.2010 to 20.12.2010 as per contract dated 16.05.2010. We paid total remuneration to him for the above period aggregating to US $ 58146.00 duly discharging payment vouchers executed on board during voyage before the master of the ship from outside India. We also confirm that we have allotted out of his above mentioned total remuneration ....
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....d credited to the account of the non-resident in India would render such payments to be as income taxable in India. Such interpretation of law is meaningless and the benefits given to the non-resident becomes meaningless and absurd. The clause (a) which reads as income is received or deemed to be received in India has to be understood in the context of whether the payments are made in India whereby the recipient is receiving the payments in India from the payer. Any other interpretation to the provisions of Section 5(2)(a) would render the section otiose. Reference may be drawn to the taxability in respect of deduction of tax at source for payments made outside India and services rendered outside India. The Hyderabad Tribunal in the case of ACIT v. Avon Organics Ltd. reported in 55 SOT 260 (2013) on the interpretation of the provision of Section 5, 9, 195 wherein the question arose in respect of commission payments received by foreign agents in India through telegraphic transfer and held that "Only because the remittances towards commission were telegraphically transferred to the foreign agents from the banks in Hyderabad will not lead to the inference that the income to the foreig....
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....) Without prejudice to the above the amount which is received by the assessee from the foreign company is in foreign exchange and therefore income cannot be said to have been received in India where payments have been received in foreign currency. (f) The provisions of Section 5(2)(a) has to be interpreted in the manner that it does not render the section meaningless. If interpretation as made out by the department is adopted, then definitely the section would be otiose and meaningless as because no benefit would be given to the non residents even if all the conditions have been satisfied. (g) The true interpretation to the provisions of section 5(2)(a) is that the meaning which is to be adopted for income received or deemed to be received in India, that the payments have been made in India in Indian currency and the recipient of the payments has received the payments in Indian currency." 4.1 The ld. CIT(A) did not find merit in the submissions made by the assessee and after discussing the scheme of taxation of income as laid down in the relevant provisions of the Income Tax Act, 1961 in detail, he finally dealt with the applicability ....
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....nr vs. Prahlad Vijendra Roa reported in 198 Taxman 0551; CIT vs. Avtar Singh Wadhwan reported in 247 ITR 260{Bom) and the order of the Ld.CIT{A) inthe case of Mr. Gautam Bhattacharya relying on the above decisions do not deliberate upon fact that the receipt of the income has been in India nor they ponder over the fact that the charge of tax is made independent of territoriality and residency. The reliance in the case of Hyundai Heavy Industries Ltd. decided by Hon'ble Supreme Court is misplaced as the Hon'ble Court was dealing with the meaning of 11 Income accruing and arising In India" as per section 5(2)(b) and not income' received or deemed to be received in India" as per section 5(2)(a). On the contrary, the case of Capt. A.L. Fernandes vs Income Tax Officer(2002) 81 ITD 203 Mum, which is a Third Member decision, has held that the receipt of salary in India by seaman are taxable in India. The appellant's attempt to distinguish the case by stating that the assessee in that case is under employment of government of India undertaking is misplaced as this fact does not alter nature of transaction an its nature of interpretation under the IT Act. The fact of the cas....
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....add, that the learned AM has not disputed the correctness of the learned JM's finding that under International law, the floating island theory has undergone a change and it is no longer correct to regard the Indian ships as floating islands. Therefore, the position accepted by the learned members is that the services were rendered outside India, the ships not being considered as part of India. However, since the salary was received in India, it was rightly held taxable in India under Section 5{2){a). I agree with the learned AM in this respect." (emphasis supplied) on the facts of the case, Ld. TM also held that the income had accrued or arisen to the assessee in India under Section 5(2)(b). Ld. TM also found that section 9(l)(ii) read with Explanation thereto was not relevant for the controversy. 7.5 It needs to be pointed out here that as decided in the case of DCIT vs. Padam Prakash (HUF) (2007) 288 ITR (AT) l(Del.) (SB), Ld. Special Bench of Delhi ITAT decided that the majority decision in a Third Member case is entitled to as much weight and respect as a decision of a Special Bench and it should be followed and applied by the regular Benches. The reli....
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....see to establish that the amount in question towards salary was received by him outside India. In this regard, he invited our attention to the relevant observations recorded by the ld. CIT(A) in his impugned order to point out that the assessee never had any control over the salary amount before it got credited to his NRE account maintained in India. He contended that it is thus a clear case of receipt of salary by the assessee in India which is chargeable to tax in India as per the provisions of section 5(2)(a) of the Act which are clearly applicable. He, therefore strongly supported the impugned order of the CIT(A) on the issue under consideration and urged that the same may be upheld. 7. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the Coordinate Bench of this Tribunal in the case of Shri Tapas Kr. Bandopadhyay-vs- DDIT(IT) in ITA No.70/Kol/2016 had an occasion to consider the similar issue involving identical facts and circumstances and after discussing all the relevant aspects of the matter and dealing with all the submissions made on behalf of both the parties, which are similar to the su....
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....ection 5(2)(a) of the Act are probably enacted keeping in mind that income has to suffer tax in some tax jurisdiction . We believe that such provisions would exist in tax legislation of all countries. We hold that if the argument of the assessee is accepted, then it would make the provisions of section 5(2)(a) of the Act redundant. It is only elementary that a statutory provision is to be interpreted ut res magis valeat quam pereat, i.e. to make it workable rather than redundant. From the provisions of section 5(1) of the Act, in the case of a resident, the global income is taxable in India. In case of non-residents, the scope of total income has four modes, one of which is receipt in 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....
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....t was further held that pension had accrued to assessee only in Malaysia and the Accountant General Madras was merely authorized to arrange for the payment of pension to the assessee rendering the amount of pension received in India by the assessee not liable to tax. On further appeal by the revenue, the Tribunal found that there was a letter dated 23.6.1969 addressed by the Accountant General of the Federation of Malaya to the Accountant General Madras and that letter indicated an arrangement for payment in India and the circumstance that the pension of the assessee had also been assessed to tax in Malaya in the status of noncitizen and non-resident would clearly establish that the pension of the assessee had been 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 ac....
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....eive salary is not the relevant criterion but the relevant criterion is the receipt of payment which is admittedly in India. Therefore, we have our own doubts as to the applicability of the decision of High Court in the case of A. P. Kalyankrishnan (supra) to the facts of the present case. 10.5. Now what we are left with is the decision relied upon by the Learned DR on the Third Member decision of Mumbai Tribunal in the case of Captain A. L. Fernandez Vs. ITO reported in 81 ITD 203 (TM ) wherein it was held as below:- 8. In my opinion, the salary is includible in the assessment under s. 5(2)(a) of the Act, which says that any income received by a non-resident in India is taxable in India. There is a clear finding in the order of the learned AM, that there is no dispute that the salary was received in India. This should put an end to the controversy. I may add, that the Ld. AM has not disputed the correctness of the Ld. JM's finding that under International law, the floating island theory has undergone a change and it is no longer correct to regard the Indian ships as floating islands. Therefore, the position accepted by the learned members is that the services were r....