TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1045
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....ct of the salary income received in India for services rendered in China to BMW Brilliance Automotive Limited, China (BMW China) in ignorance of the facts, statutory provisions, documentary evidence and judicial precedents cited. 2. The learned AO has in pursuance of the Directions of the Hon'ble DRP erred in the facts and circumstances of the case and in law in disallowing the exemption claimed under Article 15(1) of the India-China DTAA read with Section 90 of the Act on the following incorrect premises: (i) There was an employer-employee relationship between the Appellant and BMW India Private Limited (BMW India) even when he was working in China (Para 14(a), 14(b) and 14(c) of impugned order) (ii) Salary is chargeable as per Section 15 of the Act [Para 14(d) of impugned order] (iii) Salary received in India from BMW India is taxable in India under Section 5(2)(a) of the Act (Para 14(e) of impugned order] (iv) As the Appellant is Resident in China and Non-Resident in India, he is not eligible to claim benefit of Article 15 of the India-China DTAA on combined reading of Article 15 and 23 of DTAA and DTAA provisions have been incorrectly applied [Para 14(f) of impugn....
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....ed. The Appellant may kindly be given an opportunity of being heard as per the principles of natural justice. All of the above grounds of appeal are without prejudice and notwithstanding each other. The Appellant craves leave to add, alter, omit or substitute any or all of the above grounds of appeal, at any time before or at the time of hearing of the appeal, to enable the Hon'ble ITAT to decide the appeal according to law. 3. The brief facts of the case are that the assessee, an employee of BMW India Private Limited ('BMW India') was on an assignment/secondment to BMW Brilliance Automotive Limited ('BMW China') during the FY 2021-22 relevant to the AY 2022- 23 and was rendering services/exercising employment with BMW China in China during this period. While on an International assignment with BMW China, the assessee was based in China and was physically present in China and was rendering services in China during the FY 2021-22. The assessee was in India for less than 60 days during the FY 2021-22 and qualified as a Non-Resident in India as per Explanation (b) to Section 6(1) of the Act. The Appellant was present in India for "Nil" days during the FY 2021-22. The assessee....
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.... as a Non-Resident of India and as a Tax Resident of China for the Calendar Year 2021 and 2022 (i.e., period covering 01 April 2021 till 31 March 2022) and was eligible to claim the benefit of Article 15(1) of the India-China DTAA as he exercised employment/rendered services with BMW China in China. 8. Further, the assessee has also been duly taxed in China in respect of salary and benefits paid to him in India for the period 01.04.2021 to 31.03.2022 of Rs. 1,53,65,359/- and related to employment exercised/services rendered in China to BMW China. 9. Since the assessee qualified as a Non-resident of India during FY 2021-22 and a Resident of China for the Calendar year 2021 and exercised his employment/rendered services in China with BMW China, the assessee claimed exemption of Rs. 1,53,65,359/- with respect to salary received in India for services rendered in China, under Article 15(1) of the India- China DTAA r.w.s. 90 of the Act and accordingly filed his return of income for the A.Y. 2022-23 on 18.07.2022 and claimed a refund of Rs. 52,22,590/-. 10. However, pursuant to scrutiny proceedings, the AO has in his Final assessment order and the Dispute Resolution Panel ('DRP') in th....
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....py of the Secondment Agreement between BMW China and BMW India and has also not provided a copy of the Employment Contract of the assessee with BMW China. f) The AO has incorrectly held that cases relied upon are distinguishable in ignorance of the pari-materia facts of the case. g) The ld. DRP has incorrectly relied upon the decision of the Chennai Tribunal in the case of Dennis Rozaria to hold that as the Appellant was Non-Resident in India he was not eligible to claim the benefit of Article 15(1) of India-China DTAA, while ignoring the decision of the Chennai Tribunal in the case of Paul Xavier Samy (ITA No.2233/CHNY/2018) and several recent judicial precedents issued by the Jurisdictional Tribunal on identical issue. h) The Learned DRP has incorrectly held that as the Salary was received in India from BMW India, the employer is BMW India. i) The Learned DRP has incorrectly held that Assessee has not demonstrated that any tax has been paid voluntarily or otherwise to the Chinese Government. This is contrary to evidence filed i.e. China Tax Returns for CY 2021 and 2022 evidencing payment of taxes in China. j) The Learned DRP and AO have incorrectly relied upon the Chenn....
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....r bank accounts, some household spending and social security contributions, remains in the country where Affiliate (BMW India) is located ('Home Country'), the Associate prefers that part of his remunerations paid in the currency of the Home Country directly to his/her bank accounts in his/her Home Country. Affiliate will act as 'technical' paying office to the Associate or related third parties in the Home Country. (Reference drawn from 6.3 on Page 14 of the Paper book) Pages 8 to 24 Inter-company cross charge Agreement between BMW India and BMW China (a). Each Transferred Expat enters into a labour contract with Party B (BMW China) according to PRC Labor Law and Party B provides a job card for him/her. The Transferred Expats are released from working for Party A (BMW India) during the employment period with Party B. (Reference drawn from (2) on Page 25 of the Paper book) (b). Party B is the legal and economic employer of the Transferred Expats. As such, Party B bears all personnel costs and expenses ("Costs"). (Reference drawn from (3) Page 26 of the Paper book) (c). Party A acts as a "technical" paying office to the Transferred Expats or related third parties in the Home Co....
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....8] pronounced on 31 October 2018 has held as follows: "...Further, in the decision cited by the learned Departmental Representative (supra), the Tribunal had held that absence of TRC cannot be a ground for denying the benefit of DTAA. It has only held that the assessee should furnish evidence for the claim of exemption. In the case on hand, the assessee has furnished evidence of her stay abroad in the year under consideration before the Assessing Officer and as the salary for services rendered did not accrue in India for that period of stay outside India, that salary income is not taxable in India." (ii). ITAT Hyderabad in the case of Sreenivasa Cheemalamarri [I.T.A.No.1463/Hyd/2018] held that if the assessee provides sufficient circumstantial evidence in such cases, the requirement of Section 90(4) ought to be relaxed and where there is a conflict between the Treaty and the Act, the Treaty shall overrule the Act. (iii). Ahmedabad Bench of the Tribunal in the case of Skaps Industries India (P.) Ltd vs. ITO, International Taxation, Ahmedabad ( ITA Nos. 478 and 479/Ahd/2018) has held that "The failure to submit a 'Tax Residency Certificate' (TRC) as required by s.90(4) is ....
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....gness of judicial precedents, should be duly followed by the Income-tax Authorities. (vii). Further, Para 6 of the ruling in Paul Xavier Samy clearly states that the Tribunal had only disallowed the treaty relief on ground that the Assessee was claiming foreign tax credit relief for taxes paid on doubly taxed income, which is applicable in the case of Resident of India, Article 23 allows exemption only to Resident Indian. Accordingly, the exemption under Dependent Personal Services Clause of India-Australia DTAA was allowed for the Assessee qualifying as Non-Resident of India and Resident of Australia in light of provisions of Article 1, 4 and Article 15(1) of the said DTAA. 16. Further, the ld.AR relied on the Judicial precedents issued by Jurisdictional Chennai ITAT covering the issue in favour of the assessee: A) Hon'ble Chennai Tribunal Bench D decision in own case of the Appellant for AY 2020-21 in the case of Nanthakumar Murugesan and Sivakarthick Raman [2024] 165 taxmann.com 304 (Chennai - Trib.) in decision dated 10 June 2024 in Para 8 enclosed as Annexure A held as follows: "After deliberating upon the paper book which includes China tax return, Copy of passport sho....
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.... a foreign jurisdiction would not be taxable in India whereas the salary received for work performed in India would be taxable in India. The benefit of DTAA would be available to the assessee as per the decision of coordinate bench of Chennai Tribunal in Shri Paul Xavier Antonysamy V/s ITO (ITA No.2233/Chny/2018 dated 28.02.2020) wherein it was held by the bench that the provisions of Sec.5(2) are subjected to other provisions of the Act. The regular salary accrued to any assessee is chargeable to tax in terms of Sec.15(a). Even as per the provisions of Sec.9(1)(ii), salary income could be deemed to accrue or arise in India only if it is earned in India in respect 7 of services rendered in India. The bench, reading down Article-1 and Article- 15 of India-Australia DTAA, held that Treaty benefit shall be applicable to persons who are residents of both India as well as Australia. Therefore, the contention of the revenue that the assessee being a non-resident and hence treaty benefit cannot be extended to assessee, is incorrect. Accordingly, it was held by the bench that the salary so earned for work performed in Australia would be taxable in Australia. The case law of Swaminathan Rav....
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....axation - 1, Hyderabad (ITA 1463/ Hyd/2018) that "From the facts of the case it is apparent that during the previous years relevant to AY 2014-15, the assessee qualifies as a non-resident in India and as a tax resident in Austria. The salary and allowances are earned by the assessee in respect of employment rendered in Austria due to his foreign assignment. Hence, the first two conditions enumerated under Article 15(1) of the India-Austria DTAA stands satisfied. Therefore, the assessee's claim of exemption in regard to his salary income as per the provisions of Article 15(1) of the India-Austria DTAA in the return of income filed by him is appropriate." The Jaipur Tribunal's decision in case of Neeraj Badaya (ITA No.308/ Jaipur/ 2014) on the applicability of Article 16(1) of India-USA DTAA held as follows: "It has not been disputed that the services in question were rendered by the assessee in US and taxed in the USA, which is evident from the relevant record filed on the paper book. The applicability of Article 16(1) of Indo-USA DTAA depends on the country where services are rendered which in this case is undisputedly USA. The application of Article 16(1) of Indo-USA DTAA can....
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....(1)(ii) of the Act, income under the head "Salaries" shall be deemed to accrue or arise in India if it is earned in India. Further, as per Explanation to Section 9(1)(ii) of the Act, services rendered in India are regarded as income earned in India. 24. As indicated above, u/s. 5(2) of the Act, the total income of a NR includes income which is received or deemed to be received in India. It also includes income which accrues or arises or is deemed to accrue or arise in India during such previous year. Given that Section 5(2) begins with "Subject to the provisions of this Act", the total income needs to be arrived at after considering all the relevant provisions of the Act. 25. Section 15 of the Act provides for the chargeability of income under the head "Salaries". Accordingly, in arriving at the total income of a Non-Resident, the provisions of Section 15 of the Act need to be considered as well. 26. Section 15(a) of the Act provides for chargeability of salary on due or accrual basis, Section 15(b) of the Act provides for chargeability of salary paid in advance, Section 15(c) of the Act provides for taxability of arrears of salary. Further, the explanation provides for clarity ....
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....decided by the Hon'ble Calcutta High Court (2016), 390 ITR 109, and it was held that the services rendered outside India have to be considered as income earned outside India" 31. The Hon'ble ITAT Bangalore in the case of Bholanath Pal vs ITO (2012 52 SOT 369) has held that, salary is taxable on accrual basis and it accrues where employment services are rendered. 32. Important observations of the Hon'ble Supreme Court in Union Of India And Anr vs Azadi Bachao Andolan And Anr on 7 October, 2003, SLP(C) Nos. 22521- 22522 of 2002) are extracted as follows: "A survey of the aforesaid cases makes it clear that the judicial consensus in India has been that section 90 is specifically intended to enable and empower the Central Government to issue a notification for implementation of the terms of a double taxation avoidance agreement. When that happens, the provisions of such an agreement, with respect to cases to which where they apply, would operate even if inconsistent with the provisions of the Income-tax Act. We approve of the reasoning in the decisions which we have noticed. If it was not the intention of the legislature to make a departure from the general principle of chargeabili....
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....ld.DR relied on the order of the authorities. 40. We have heard both the parties, perused materials available on record and gone through orders of the authorities below along with the judicial precedents relied on. Admittedly during the FY 2021-22, the assessee duly qualified as a Non- Resident of India and as a Tax Resident of China for the Calendar Year 2021 and 2022 (i.e., period covering 01.04.2021 till 31.03.2022) and was eligible to claim the benefit of Article 15(1) of the India-China DTAA as he exercised employment/rendered services with BMW China in China. Further, the assessee has been duly taxed in China in respect of salary and benefits paid to him in India for the period 01.04.2021 to 31.03.2022 of Rs. 1,53,65,359/- and related to employment exercised/services rendered in China to BMW China. Since the assessee qualified as a Non-resident of India during FY 2021-22 and a Resident of China for the Calendar year 2021 and exercised his employment/rendered services in China with BMW China, the assessee claimed exemption of Rs. 1,53,65,359/- with respect to salary received in India for services rendered in China, under Article 15(1) of the India- China DTAA r.w.s. 90 of the....
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....y continued to be paid in India by the employer 'BMW-India'. The assessee submitted before AO that assessee being tax resident of China, the salary income was taxable in China only and the same has been offered to tax in China. It was further contended before AO that assessee being non-resident, the salary received in India for work performed in China would be exempt in India as per Article 15(1) of DTAA between India and China. The assessee submitted before ld. Assessing Officer that salary is taxable in India only if it accrues in India and salary is considered to be accrued where the employment is exercised. 7.3 However, Ld. AO held that the assessee did not shift his employer and the assessee continued to be on the payroll of its employer. There existed employer employee relationship. Therefore, the income so received would be chargeable to tax in India under section 15 of the Act which provides that any salary due from an employer would be chargeable to tax under the head salaries. Further, in terms of the provisions of Section 5(2) of the Act, salary received by non-resident in India would be taxable in India. Therefore, the assessee's submissions were rejected. It was, how....
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....nd that an identical issue has been addressed by coordinate bench of Chennai Tribunal in Shri Paul Xavier Antonysamy V/s ITO (ITA No.2233/Chny/2018 dated 28.02.2020). In this decision, the bench has held that the provisions of Sec.5(2) are subjected to other provisions of the Act. The regular salary accrued to any assessee is chargeable to tax in terms of Sec.15(a). Even as per the provisions of Sec.9(1)(ii), salary income could be deemed to accrue or arise in India only if it is earned in India in respect of services rendered in India. The bench, reading down Article-1 and Article-15 of India-Australia DTAA, held that Treaty benefit shall be applicable to persons who are residents of both India as well as Australia. Therefore, the contention of the revenue that the assessee being a non-resident and hence treaty benefit cannot be extended to assessee, is incorrect. Accordingly, it was held by the bench that the salary so earned for work performed in Australia would be taxable in Australia. The case law of Swaminathan Ravichandran V/s ITO (ITA No.2911/Mds/2016 dated 05.08.2016) was held to be factually distinguished on the ground that in that case the assessee was claiming foreign t....
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....n Shri Paul Xavier Antonysamy V/s ITO (ITA No.2233/Chny/2018 dated 28.02.2020) wherein it was held by the bench that the provisions of Sec.5(2) are subjected to other provisions of the Act. The regular salary accrued to any assessee is chargeable to tax in terms of Sec.15(a). Even as per the provisions of Sec.9(1)(ii), salary income could be deemed to accrue or arise in India only if it is earned in India in respect of services rendered in India. The bench, reading down Article-1 and Article-15 of India-Australia DTAA, held that Treaty benefit shall be applicable to persons who are residents of both India as well as Australia. Therefore, the contention of the revenue that the assessee being a non-resident and hence treaty benefit cannot be extended to assessee, is incorrect. Accordingly, it was held by the bench that the salary so earned for work performed in Australia would be taxable in Australia. The case law of Swaminathan Ravichandran V/s ITO (ITA No.2911/Mds/2016 dated 05.08.2016) was held to be factually distinguishable. 5.We find that similar fact exists before us in the present appeal. The proportionate salary for services rendered in India has already been offered to ta....