Citizenship & Taxability of NRI cannot be determined by TDS Deduction by Overseas Companies in India: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad “D” bench has held that the Citizenship & Taxability of an NRI cannot be determined by Tax Deducted at Source (TDS) by an Overseas Company in India.

The appeal was filed by the assessee, Pralay Pradyotkanti Gosh, through his counsel Shri S.N. Soparkar & Shri Parin Shah against the order of the Commissioner of Income Tax, CIT (IT & TP), Ahmedabad, in proceeding under Section 263 for the assessment year 2016-17.

The assessment order was passed under Section 143(3) of the Income Tax Act, 1961 accepting the income declared by the assessee in his return.

The CIT initiated 263 proceedings and was selected for scrutiny to examine the “claim of large exempt income”.

During the course of the assessment, the assessee had given categorisation of this exempt income and submitted that the salary is received from his overseas employer “Oceaneering International GmbH”. This was claimed as “exempt” income because of his non-residential status and the salary earned is for working in international waters.

The CIT observed that TDS was deducted under Section 192 of the Income Tax Act, 1961 by the Mumbai Project Office of the company on a Tax Deduction and Collection Account Number (TAN) registered at Mumbai and it cannot be accepted that payment was made by an overseas company. It was held that the order passed is erroneous and prejudicial to the interests of the revenue. The same was set aside for de novo consideration. Aggrieved by the said order, assessee preferred the present appeal.

The two-member bench consisting of Shri Waseem Ahmed (Accountant Member) and Shri Siddhartha Nautiyal (Judicial Member) held that the fact that TDS was deducted by the project office of the overseas company in India, using TAN registered at Mumbai, India is not a determinant factor in ascertaining whether the assessee was a non-resident or not and whether his income was exempt “from Taxation in India”. The order passed by the assessing officer is not erroneous and prejudicial to the interests of the Revenue, the bench observed.

The appeal was allowed setting aside the order passed by the CIT passed under Section 263 of the Income Tax Act, 1961.

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