The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the bonus received in respect of employment shall be taxable only in the contracting state and not in any other state.
The assessee had filed his return of income declaring a total income of Rs. 1,42,58,599/-. The assessee had declared income under the head income from salary, income from house property, and income from other sources.
During the course of scrutiny assessment proceedings, the Assessing Officer found the assessee had claimed relief under Section 90 of the Income Tax Act, 1961 in respect of the bonus received from his previous employer in Singapore amounting to Rs. 12,18,677/-.
The Assessing Officer granted relief only to the extent of Rs. 5.92% under Section 90 of the Income Tax Act and which was worked out to Rs. 2,33,481/-.
Accordingly, the Assessing Officer proceeded to disallow the relief under Section 90 of the Income Tax Act in the sum of Rs. 9,85,196/-.
It is not in dispute that this bonus is received by the assessee form the Singapore Company in respect of employment services rendered by the assessee in Singapore.
It is also not in dispute that the assessee when he had rendered employment services in Singapore was a non-resident.
The bonus received from Singapore Company was treated as part of salary by the assessee and by the Singapore Company. It is not in dispute that the bonus has been declared by the Singapore Company is not a dispute.
This excruciating fact of the bonus clearly proves the contention of the assessee that the said bonus was in respect of employment services rendered by the assessee in Singapore when he was a non-resident.
The Article 15 of the Double Taxation Avoidance Agreement (DTAA) entered into between India and Singapore, salary, wages, and other similar remuneration derived by a resident of the contracting state in respect of employment shall be taxable only in that state unless the employment is exercised in another contracting state.
The Two-member bench comprising of Kul Bharat (Judicial member) and M. Balaganesh (Accountant member) held that during the period for which the bonus is received, the assessee was serving only in Singapore and not in India.
Hence, the bonus received by the assessee, being a resident would be taxable for the year under consideration in India. However, in terms of Section 90 of the Income Tax Act, the entire taxes paid by the assessee in Singapore for the very same salary and bonus component would be eligible for the tax credit for the assessee.
The said determination of foreign tax credit by the Assessing Officer was rejected. The Assessing Officer was directed to allow the foreign tax credit in full in respect of tax paid in Singapore for the very same salary and bonus income.
The ground raised by the assessee was allowed and the Assessing Officer was directed to give tax credit to the assessee accordingly.
Thus, the appeal was allowed for statistical purposes.
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