Case Law Details
Arnab Bose Vs DCIT (ITAT Kolkata)
In the instant case, the employer has directly credited the salary, for services rendered outside India, into the NRE bank account of the seafarer in India. In our considered opinion, the aforesaid Circular is vague in as much as it does not specify as to whether the Circular covers either of the situations or both the situations contemplated above. Hence we deem it fit to give the benefit of doubt to the assessee by holding that the Circular covers both the situations referred to above. The result of such interpretation of the Circular would be that the provisions of Sec.5(2)(a) of the Act is rendered redundant. Be that as it may, it is well settled that the Circulars issued by CBDT are binding on the revenue authorities. This position has been confirmed by the Hon’ble Apex Court in the case of Commissioner of Customs vs Indian Oil Corporation Ltd reported in 267 ITR 272 (SC) wherein their Lordships examined the earlier decisions of the Apex Court with regard to binding nature of the Circulars and laid down that when a Circular issued by the Board remains in operation then the revenue is bound by it and cannot be allowed to plead that it is not valid or that it is contrary to the terms of the statute. Moreover, we note that the similar issue came up for consideration before the Hon’ble Calcutta High Court wherein Their Lordships in GA 3745 of 2016 with ITAT 374 of 2016 dated 13.07.2017 in Smt. Sumana Bandyopadhyay & Anr. Vs. The Deputy Director of Income Tax (International Taxation 3(1) admitted the appeal on 11.07.2017 on the following question:
“Whether on the facts and in the circumstances of the case and in law, income by way of salary which became due and has accrued to the assessee, a non-resident, for services rendered outside India and which is not chargeable to tax in India on the “due” or “accrual” basis, can be said to be chargeable to tax on the “receipt” basis merely because the foreign employers, on the instructions of the assessee, have remitted a part of amount of salary to the assessee’s NRE bank account in India?”
While adjudicating the issue, Their Lordships taking note of the Circular No. 13/2017, supra and the Karnataka High Court’s judgement in Director of Income-tax (International Taxation) Vs. Prahlad Vijendra Rao (IT Appeal No. 833 of 2009) held as under:
“6. We concur with the ratio of the decision of the Karnataka High Court and in our opinion the interpretation be given to sub section (b) of Section 5(2) of the Act would also apply to Section 5(2)(a) of the Act. The Circular is clarificatory in nature and is applicable for construing the aforesaid provision for the relevant assessment year. In our opinion the authorities under the Income Tax Act did not properly apply the provisions of law to the case of the assessee. We are of the view that the Assessing Officer was wrong in adding the aforesaid sum to the income chargeable to tax of the assessee for the relevant assessment year. We accordingly allow the appeal and answer the question framed by us in favour of the assessee.”
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