TaxTMI 
TaxTMI 
2025 (7) TMI 1045
X X X X Extracts X X X X
X X X X Extracts X X X X
....;DTAA') read with Section 90 of the Act in respect 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Any consequential relief, to which the Appellant may be entitled under the law in pursuance of the aforesaid grounds of appeal, or otherwise, may be thus granted. 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-....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... * The person should be a Resident of China; and * The salary and other remuneration should be earned in respect of employment exercised in China. 7. 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 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cial precedents. d) Article 15(2)(b) of the DTAA does not apply as the employer BMW India is Resident in India and hence salary received by the assessee is taxable in India. e) It has been incorrectly stated that the assessee has not provided a copy 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssociate's work belong to BBA. (Reference drawn from 1.1 (b) on Page 9 of the Paper-book). (b). BBA is the legal and economic employer of the Associate. As such, BBA bears all remuneration of the Associate. (Reference drawn from 6.1 on Page 13 of the Paper-book) (c). Considering the economic ties of the Associate, such as his/her 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)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ber of days stayed in China during CY 2021 and CY 2022 for 365 days and 307 days respectively (Pages 73 and 81 respectively) Further, the following judicial precedents support the sufficiency of alternate evidence furnished in support of Residency in China in absence of the TRC: Pages 67 to 87 (i). Bangalore ITAT in the case of Maya C Nair Vs. Income Tax Officer [ITA No.2407/Bang/2018] 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 require....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... recent Chennai Tribunal decision dated 28.02.2020, in the case of Paul Xavier Samy which is squarely applicable in the facts of the present case holding that the salary income received in India for services rendered outside India is non-taxable in India both under the Act and the relevant DTAA. It has overruled the earlier Chennai ITAT decisions cited by the Revenue i.e. Swaminathan Ravichandran (which relied upon Dennis Rozaria) and hence as per the rule of bindingness 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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." C) The Chennai Tribunal's Bench 'A' judgment in the case of Ramesh Kumar AE v. ITO, ITA IT/TP 51/ Chny/2018) in decision dated 11 August 2023 in Para 4 enclosed as Annexure B held as follows: "In the above decision, we have held that salary income as accrued to the assessee for work performed in 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hese facts Ld. CIT(A) by following the advance ruling in the case of British Gas India (P.) Ltd. In re [2006] 287 ITR 462/157 Taxman 225 (AAR - New Delhi) has rightly held that the salary received by the assessee was not taxable in India in pursuance of DTAA between India and U.K. therefore the order passed by him is hereby upheld." The Hyderabad Tribunal has held as follows vide its recent decision dated March 5, 2020 in Bhairaiah Gouryshetty v. Income-tax Officer (ITA 1464/Hyd/2018) and Sreenivasa Reddy Cheemalamarri v. Income-tax Officer, International Taxation - 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....crue or arise to him in India during such year." 21. Based on the above, the income of an individual who qualifies as a NR in India is taxable in India only to the extent it is accrued, deemed to accrue, received or deemed to be received in India. 22. The expression "subject to" used in the opening para of the sub-section (2) indicates that the provisions of Section 5(2) of the Act are subject to other provisions of the Act and would have an overriding effect. If the charging provisions of the Act do not consider such receipts as taxable, it shall not be taxable under Section 5(2) of the Act. 23. As per Section 9(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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... India and was rendering services outside India, the salary relating to the period of services rendered outside India has not accrued in India and hence is not taxable in India. In coming to this conclusion the Hon'ble High Court also considered the case of Avtar Singh Wadhwan (supra) wherein the Hon'ble Mumbai High Court also held that the relevant test to be applied to decide whether the income accrued to a non-resident in India or outside, is to find the place where the services were rendered, in order to consider where the income accrued. Both these cases were recently considered in the case of Utanka Roy v. DIT (International Taxation), 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 extract....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the case of Mridula Jha Jena v. International Tax [2025] 171 taxmann.com 175 ( Mumbai - Trib.) that "Where assessee was sent on assignment to Cairo, Egypt by her employer company for a period of 24 months and she had stayed in India for only 108 days during relevant previous year, salary received by assessee for services rendered outside India though received in India was not taxable as per provisions of section 9(1)(ii) of the Act." 38. In view of the facts and circumstances cited above, the documentary evidence filed, statutory provisions and judicial precedents cited, the present appeal be allowed by setting aside the order of the AO. 39. Per contra the 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 empl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Rs. 1,22,09,830/- as reflected in Form 16, 26AS related to period 01.04.2019 till 31.03.2020 and claimed exemption under Article 15(1). The assessee claimed refund of Rs. 41,72,850/- arising out of excess TDS in comparison to tax. However, Ld. AO treated the gross salary received by assessee in India of Rs. 1,22,09,830/- from 'BMW-India' as taxable in India and held that the assessee is not eligible for exemption under the provisions of Article 15 of DTAA between India and China being non-resident in India. 7.2 It transpired that the assessee was employed with 'BMW-India'. He was sent to China on International assignment to 'BMW China' by the employer company 'BMWIndia'. The salary 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 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... remaining period, the work has been performed in UK though the salary has been received in India from existing employer. It is also a fact on record that this salary, for work performed in UK, has been offered to tax in UK which is evident from Tax Returns filed in UK. The assessee submit the as per Article 16(1) of DTAA, this income would be taxable in UK only. Alternatively, the assessee relies on the provisions of Sec.15 read with Sec.5(2) and Sec.9(1)(ii) which provides for taxability of salary on accrual basis and not on receipt basis. However, Ld. CIT(A) has held that the assessee would not be eligible for the benefit of DTAA since DTAA relief is to be given by resident country which is UK in the present case. 6. We find 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee has also placed on record Tax Residency Certificate (Page nos.192-193 of paper book). As per this certificate, the assessee has claimed relief for foreign earning not taxable in UK for GBP7952. The same shall be considered by Ld. AO while computing the quantum of income taxable in India as directed by us in preceding para-7. 9.The appeal stands partly allowed in terms of our above order." In the above decision, we have held that salary income as accrued to the assessee for work performed in 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 of servi....