The Income Tax Appellate Tribunal ( ITAT ) A Bench, Chennai directed to exclude the Foreign Assignment Salary for Income Recomputation, as the Foreign Tax Credit has already been paid.
The above appeal by Shri Sanjay Ajit, assessee for Assessment Year (AY) 2020-21 arises out of order passed by Commissioner of Income Tax (Appeals), Chennai-16 [ CIT(A) ] on 20-10-2023 in the matter of an assessment framed by the Ld.AO u/s.143(3) r.w.s.144C(3) of the Act on 31-05-2022.
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The Shri. G.C Srivasatava, Authorized Representative (AR) advanced arguments assailing the stand of lower authorities and relied on various decisions of the Tribunal, the copies of which have been placed on record. The Sr. DR supported the orders of lower authorities.
The assessee being a non-resident individual filed a return of Rs.10.28 Lacs. The assessee earned a salary of Rs.39.47 Lacs from his employer M/s Oracle Financial Services Software Ltd. (OFSSL) and claimed salary to be exempt to the extent of Rs.39.41 Lacs under Article 16(1) of India- UK DTAA.
It transpired that the assessee was working under administrative control of OFSSL and he was sent on an international assignment to the UK. The salary amount was received in the Indian Bank Account of the assessee and OFSSL issued Form 16 to the assessee.
The assessee stated that the salary earned from international assignment was offered to tax in UK Tax Return. However, Ld. AO observed that the assessee did not furnish any evidence of foreign tax payment. The tax was paid by the employer. The AO held an opinion that India being the source state and considering the fact that no tax has been paid by the assessee to UK Tax Authorities, the salary income would be taxable in India.
Finally, considering Article 16 of India-UK Tax Treaty as well as the provisions of Sec.5(2), AO rejected the claim of the assessee and brought to tax the entire salary of Rs.39.47 Lacs while computing the income of the assessee.
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The Commissioner of Income Tax (Appeals) also upheld that the expenditure was claimed by OFSSL and as per Tax Residency Certificate (TRC), no remittance tax was paid by the assessee in UK. Aggrieved by this the assessee approached the court.
It is quite clear that the assessee is non-resident during the impugned assessment year. The substantial salary has been received by the assessee for international assignment to UK. The prime observation of lower authorities is that the assessee has not paid any tax in UK, the court observed.
The details regarding the payment of taxes by the assessee has been placed on Page No.46 to 64 of the paper-book. According to this it can be seen that the assessee’s net earning is 27,042 pounds. The assessee has paid tax of 3635 pounds. Also the certificate of residence has been placed on Page No.67 of the paper book.
So based on the above details, it is quite clear that the assessee is a resident of the UK during the period of 06-04-2019 to 05-04-2020. Therefore the lower authorities have errered in noting that the assessee has not paid any taxes in UK, the court observed.
Though the tax may have been paid / reimbursed by the employer, nevertheless, the assessee has offered income on gross basis and subjected to tax in UK. Therefore, the claim of the assessee was to be allowed.
Similar issues had been decided by co-ordinate bench of this tribunal, in assesses favor in ITA No.2936/Chny/2018 dated 07 09-2022 in the case of Shri Kangaraj Shanmugam.
The ITAT Chennai Bench comprising ABY T. Varkey (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) observed that since the facts are being pari-materia the same, the court directed AO to exclude the foreign assignment salary earned by the assessee while re-computing the income of the assessee.
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The appeal of the appellant was also been allowed.
The respondent, International Taxation Ward, Coimbatore was represented by Dr. Samuel Pitta.
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