Case Law Details
Madras High Court has recently held in the case of CIT Vs R. Rajgopal [TS-222-HC-2011 (MAD)] that, as the salary was paid directly by the Indian subsidiary company, conditions of Article 16(2)(b) of the Indo-UK Treaty was not fulfilled. Accordingly, the taxpayer was not entitled to claim short stay exemption under Article 16(2) of the India-UK Treaty.
Facts of the case –
1. Taxpayer was an employee of the UK entity and was working in their London office. Taxpayer had worked in India for 20 days with Indian Subsidiary of the UK entity. A portion of the salary was payable in India and the said arrangement was made for the purpose of pensionary benefits. The Indian subsidiary paying the salary in India had deducted taxes and accordingly had issued a salary certificate in Form No. 16 for the same as well. It appears that the salary paid by the Indian subsidiary was not claimed as a deduction in their books of accounts but recovered from the UK parent company. The taxpayer while filing his return of income for the assessment year 200 1-02 claimed exemption on salary income under Article 16(2) of the India-UK Treaty. The Assistant Director of Income Tax (International Taxation), Chennai (‘ADIT’ or ‘Assessing Officer’) issued a notice under Section 148 of the Income Tax Act, 1961 (‘the Act’) to the taxpayers Power of Attorney holder. Upon hearing the taxpayer, the Assessing Officer, passed the assessment order disallowing exemption claimed by the taxpayer.
2. The taxpayer filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) confirmed the order of the Assessing Officer holding that the contention of the taxpayer is not tenable as the taxpayer has not paid any tax in UK on the portion of income claimed exempt in his India tax return.
3. On preferring an appeal before the Income Tax Appellate Tribunal (ITAT), the ITAT deleted the additions and set aside the order of CIT (A) holding that the Indian subsidiary was only acting as a postman and such money was being recovered from the parent company and it was further held that the salary amount was never claimed as expenditure by the Indian subsidiary.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
