The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that a non-resident’s salary or allowance for services rendered abroad is not taxable in India.
During Assessment year 2020-21, the Assessee,Yogesh Kotiyal an employee of Nokia Solutions and Networks India Private Limited (‘Nokia India’) was on an overseas assignment to Australia and was exercising employment by rendering services in Australia with Nokia Australia from 23 August 2017 to 10 March 2020 and also placed in Australia. While working with Nokia Australia, the Assessee was based in and was physically present in Australia during the F.Y. 2019-20.
The Assessee was in India for less than 60 days during F.Y. 2019-20 and qualified as a Non-Resident in India as per Section 6(1) of the Income Tax Act, 1961. The Assessee qualified as Tax Resident of Australia for the Tax Year (TY) 2018-19 and TY 2019-20. As the Assessee qualified as a Resident of Australia under the domestic tax law of Australia for the TY 2018- 19 and TY 2019-20, and non-resident of India.
The Assessee continued to receive salary income in India for exercising employment in Australia and services rendered to Nokia Australia. The salary income was paid to the Assessee in India for administrative convenience and the payroll remained in India while the Assessee was on assignment in Australia and exercised his employment in Australia during the F.Y. 2019-20.
As the Assessee qualified as a resident of Australia under the India-Australia DTAA for the FY 2019-20 and was rendering services/ exercised employment in Australia during the concerned period, he was eligible to claim exemption of his salary income received in India, as per Article 15(1) ‘Dependent Personal Services’ of the India Australia DTAA, read with Section 90 of the Income Tax Act.
As per the provision of Section 9 (1) (ii), the income earned under head “Salaries” was taxable in India “if it was earned” in India. The explanation issued for removal of doubts declares that ‘salaries if it is earned’ meets services rendered in India.
From the concurrent reading of Section 5 dealing with scope of total income, Section 15 dealing with computation of total income under the head salary and chargeability thereof and Section 9 dealing with income arising or accruing in India with reference to the salaries and the services rendered in India.
The two member bench of the tribunal comprising Anubhav Sharma ( Judicial member) and Dr. B. R. R. Kumar ( Accountant member) held that no taxability arises on the salary/allowances received by the assessee since the assessee is a non-resident and has rendered services outside India.
Thus, the Assessee was eligible for exemption on his salary for services rendered in Australia employment exercised in Australia during his Australia assignment period. Accordingly, the appeal of the assessee was allowed.
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