Exemption can’t be disallowed under India-Austria DTAA only for want of Tax Residency Certificate: ITAT [Read Order]

Tax Residency Certificate - Exemption - India-Austria DTAA - TRC - ITAT - Taxscan

The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench held that the exemption can not be disallowed under India-Austria Double Taxation Avoidance Agreement (DTAA) only for want of Tax Residency Certificate (TRC).

The assessee, Ranjit Kumar Vuppu is a Non- resident individual, filed his return of income for the A.Y 2014-15 on 31.07.2014 admitting total income of Rs.10,04,580/-. During the assessment proceedings under section 143(2) of the Act pursuant to selection of his return of income for scrutiny under CASS, the assessee was required to furnish certain information and the said information was furnished by the assessee.

On verification of Form-16 issued by the assessee’s employer i.e., IBM India (P) Ltd for the Assessment Year 2014-15, the Assessing Officer found that during the relevant Assessment Year, the gross salary of the assessee was Rs.31,11,185/-. The Assessing Officer observed that the employer had deducted the tax at source of Rs.7,76,564/-.

Further, on verification of the total income filed by the assessee along with the return of income for the A.Y 2014-15, the Assessing Officer found that the assessee has claimed double taxation relief under section 90 of the I.T. Act and admitted NIL total income but claimed TDS of Rs.7,66,567/- in his return.

Therefore, the assessee was required to furnish the Tax Residency Certificate to claim the relief under section 90 for the salary received outside India with respect to the services rendered outside India and the copy of the Assignment letter between the Employer and employee.

In response, the assessee said that as he has spent less than 60 days in India during the Financial Year 2013-14, he qualifies as a Non-resident under section 6(1) of the Act. Therefore, the foreign allowance of Rs.20,72,238/- was not offered to tax in India in the return of income as the same was received by him outside India for the services rendered outside India and shall not form part of total income under section 5(2) of the Income tax Act, 1961.

The Assessing Officer, however, held that the claim of the assessee could not be allowed

The learned Counsel for the assessee while reiterating the submissions made before the authorities below have submitted that the same issue had arisen in the case of similar employees of IBM Ltd before the Tribunal and the Tribunal has granted relief to the assessee in support there several orders of the decisions of the Coordinate Bench of the Tribunal are placed before the Tribunal.

The coram of a Judicial Member, P.Madhavi Devi while directing the AO to allow exemption under DTAA relied on the Sreenivasa Reddy Cheemalamarri vs. ITO wherein it was held that Normally it is a herculean task to obtain certificates from alien countries for compliance of domestic statutory obligations. In such circumstances the taxpayer cannot be obligated to do impossible task and penalized for the same. If the assessee provides sufficient circumstantial evidence in such cases, the requirement of section 90(4) ought to be relaxed.

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