TaxTMI 
TaxTMI 
2017 (10) TMI 308
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of Salary Income of the assessee and thereby making enhancement in the taxable income of the assessee. An alternative contention is also raised as per Ground No. 6 that even if it is held that State income tax withheld in USA of Rs. 77,042/- is part of Salary Income of the assessee and hence taxable in India, he should have allowed credit of such State income tax. 3. Relevant facts in brief are that the assessee is an employee of Fidelity Business Services India Pvt. Ltd. and the assessee derived income from Salary. He was transferred to Fidelity Investments Systems Inc, USA from 07.10.2010 to 21.06.2012. In the present year, the assessee was present in India for more than 182 days and therefore, the assessee is an ordinary resident in India in the present year as per the facts noted in written submissions filed before the tribunal by the learned AR of the assessee. In USA, the assessee was nonresident in the year 2010 but resident in 2011. The assessee filed original return of income in India on 23.07.2011 and revised the same on 12.03.2013. In the revised return, the assessee claimed credit for foreign tax amount of Rs. 275,336/- as relief u/s 90 read with provisions of Indo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lief under Section 90 read with India - US Double Taxation Avoidance Agreement ('DTAA') - Foreign Tax Credit 275,336 Less: Pre-paid taxes 647,384 Refund 275,336 1.7 The Appellant was rendering sendees in the USA, during his tenure of employment with FIS and hence, the salary income was earned outside India, the provision which apply to appellant would be section 5(1)(c) of the Act. 1.8 The Assessing Officer, in the impugned order dated March 05, 2014 passed U/s 143(3) of the Act, has considered the amount of Rs. 275,336 as a benefit and added the same to the total income of the Appellant. 1.9 As a result of the above adjustment, the learned Assessing officer has granted refund of Rs. 223,650 as against eligible refund of Rs. 275,336 claimed in the revised return of income. 2.1 Ground No 1, 2, 3 and 5 1. That on the facts and in the circumstances of the case, the Ld CIT (Appeals) erred in upholding/affirming the action of the Assessing Officer in including Federal taxes withheld in the USA amounting to Rs. 275,336 as part of salary and total income of the Appellant. 2. That the Ld CIT (Appeals) further erre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere is no inclusion under Section 198 of the Act for the sums deducted at source abroad. Accordingly, taxes deducted abroad is income which is deemed to be received outside India. There are no provision under the Act to tax income which is deemed to be received outside India. The scope of total income for a resident in India is provided in Section 5(1) of the Act. The Appellant wishes to draw the kind attention of the Learned ITAT to the relevant provisions of Section 5(1) of the Act, which read as: Quote Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrues or arises to him outside India during such year Unquote On an analysis of Section 5(1) of the Act, income which is taxable in India is: * Income which is received or accruing or arising in India; or * Income which is deemed to received or accruing or arisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....S. Hobbs116 ITR 20 [Kerala High court] * CIT v. Shaw Wallace and Co. Ltd.[1983] 143 ITR 207 [Calcutta High Court] * CIT v. Blundell Spence & Co. Ltd. 21 ITR 28 [Bombay High Court] * CIT v. Oriental Co. Ltd. 137 ITR 777 [Calcutta High Court] * CIT v. Ambalal Kilachand [1994] 210 ITR 844 [Bombay High Court] The Learned CIT (Appeals) in the order has quoted that aforementioned ruling relates to dividend income and the subject matter of Appeal is Salary and the ratio of the aforementioned ruling does not apply to the Appealing. Also, the learned CIT (Appeals) has cited the Apex ruling in the case of Goodyear Ltd. v. State of Haryana [1991] 188 ITR 402 (SC) that a precedent is an authority only for what it decides and not what may be remotely or even logically follow from it. The Learned CIT (Appeals) has not taken into consideration the facts and decision in the case of Commissioner of Income-tax v. Yawar Rashid (supra) wherein the High Court has held that foreign dividend and interest are taxable in India on net basis.Given that the both interest and salary are income and Section 5 of the Act pertains to income and a particular 'head of in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tside India during such year. Scope of income under Section 5(1)(c) does not include income which is deemed to accrue or arise outside India. * Therefore, tax deducted abroad is neither income which is accruing or arising outside India nor there is any provision similar to Section 198 to cover taxes deducted at source abroad. Accordingly, taxes deducted at source abroad is not taxable in India in the absence of any specific provision under the Act. 2.2 Ground No 4 4. That on the facts and in the circumstances of the case, the Ld CIT (Appeals) erred in holding that Medicare paid in the USA of Rs. 28,752, as taxable salary income in India and in directing the Assessing Officer to enhance the assessed income of the Appellant accordingly. The Appellant has submitted documents from the website of the US tax authorities stating that Medicare is the nature of social security and the same is covered on the case of and has relied on the following cases laws: * CIT v. Lala Shridhar, Delhi High Court (84 ITR 192), which had held thatwhere an employer took the insurance policy to meet the contingency of paying compensation for injuries or disablement, then it i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and therefore, Medicare is a social security and is covered on the case L W Russel and Yoshio Kubo (supra) and hence, is hence not liable to tax in India. The Appellant requests your honor to take the above on record and oblige. The Appellant will be glad to provide any further information/clarification in this regard.' 5. Learned DR of the revenue supported the order of CIT (A). 6. I have considered the rival submissions. I find that the provisions of section 5 (1) ( c) of I. T. Act are stated to be applicable in the present case but its contents are not reproduced in the written submissions filed by the learned AR of the assessee as reproduced above. Hence, I reproduce it hereunder for ready reference:- "Section 5(1)(c) in The Income- Tax Act, 1995 (c) accrues or arises to him outside India during such year: Provided that, in the case of a person not ordinarily resident in India within the meaning of sub- section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derivedfrom a business controlled in or a profession set up in India." 7. As per the provisions of section 5 (1) (c) as repr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave been contemplated - one, that a person who is received the income or deemed to be received the income in India; second, that income which accrues or arises or is deemed to accrue or arise to him in India and third, which accrues or arises to him outside India. In the first category the person who has already received the income that he is having the actual receipt of the income and in second category any income which accrues or arises that means income in the ordinary course under any law, accrues or to which is due to him or it could be deemed to have accrued to him or it could be deemed to have arisen to him, i.e., whatever income under any law that it has not been received by him in hand; but it accrues or arises to him on account of law from any source. Therefore, in second category, it is fictionally deemed that even if the income which has not been received in hand but it arises or accrues to him from any source, that will be treated to be the total income. But as against this, in category (c), it only talks about the income, i.e. which accrues or arises to him from outside India during that year. Therefore, a distinction has to be made between three clauses, i.e. cl. (a)....