TaxTMI 
TaxTMI 
2017 (11) TMI 567
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....on deputation, he has earned salary income of Rs. 43,68,905/-, out of which salary amount of Rs. 40,04,830/- has been claimed as exempt on the ground that assessee's stay in Iraq was for more than 182 days. The return of income in India was filed at an income of Rs. 98,520/- after claiming exemption of aforesaid amount of salary income. Such a return of income was subjected to scrutiny and accordingly, assessment order was passed under section 143(3), vide order dated 11/2/2014, whereby the returned income filed by the assessee including the claim of deduction of salary was accepted. 4. Later on, on perusal/ examination of record, the Pr. CIT in his revisionary jurisdiction under section 263 noticed that assessee has reduced his salary income earned on deputation to abroad at Rs. 40,04,830/- which, according to him, was not permissible according to provisions of section 5(2), which provides that total income of non-resident includes all income received or accrued from whatever source derived in India is taxable in India. He observed that the Assessing Officer has not examined the issue of deduction of such huge quantum of salary and, therefore, the impugned assessment order is p....
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....s, he submitted that not only the impugned order is incorrect in law but also that salary income received by the assessee itself is not taxable. 6. On the other hand, the Ld. CIT D.R., submitted that the Ld. Pr. CIT from the examination of record prima-facie found that the assessment order is not only deficient but also erroneous and prejudicial to the interest of the Revenue. From a bare perusal of the assessment order, it can be seen that it has been passed in a very summarily manner without discussing either applicability of section 5(2) or section 6. In support of her various contentions as to what is meant by expression "erroneous and prejudicial to the interest of the Revenue" as enshrined in section 263, she has referred and relied upon catena of decisions, for which she has filed a separate synopsis. Thus, her entire focus of argument has been that the Assessing Officer has not made any adequate or proper enquiry to examine such a huge claim of deduction of salary amount and, therefore, in terms of Explanation 2 inserted in section 263 by Finance Act 2015 which clearly postulates that inadequate enquiry by the Assessing Officer will render the assessment order deemed to ....
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....dia, the period of which has exceeded more than 182 days, can be taxed under the provisions of Income-tax Act or not. The order can be held to be erroneous in the absence of any proper enquiry at the stage of assessment proceeding, though examined subsequently by the AO which is also part of assessment record, but certainly one has to see that, whether it is prejudicial to the interest of the Revenue or not. Once before the Ld. Pr. CIT assessee has clearly brought on record that assessee's stay outside India was more than threshold limit of 182 days as prescribed under the provisions of section 6, then the Ld. Pr. CIT should have atleast considered the same and given his findings accordingly. The major thrust of the Ld. CIT D.R. as well as the Ld. Pr. CIT in his impugned order is that, firstly salary has been received in India as it has been credited in the bank account of the assessee in India; and secondly, such salary income credited to the bank account of assessee in India is deemed to be income received in India and, therefore, the same is chargeable to tax under the scope of total income under section 5. Section 5 only defines the scope of total income whereby all the income ....
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.... bank account of the assessee in India and also TDS has been deducted by the employer, this fact cannot be a determinative of the taxability of resident or non-resident in terms of provisions of the Act. What is relevant is, whether the income can be said to be received or deemed to be received in India. Sub-section (2) of section 5 merely provides that total income of any previous year of a non-resident includes all income from whatever source which is received or deemed to be received in India in such year or accrues or arises or is deemed to accrue or arise to him in India during such year. This sub-section only provides that if the income of the non-resident has been received or accrued in India or deemed to be received or accrued in India, the same shall be treated as total income of that person of that previous year. The said section does not envisages that the income received by a non-resident for services rendered outside India can be reckoned as part of total income in India. Here in this case, it is not the case that the assessee has received or deemed to have received any income in India because salary which has been received by the assessee is during his employment in I....