Case Law Details
Souvik Mukherjee Vs ITO (ITAT Delhi)
Introduction: The recent judgement of the Income Tax Appellate Tribunal (ITAT), Delhi in the case of Souvik Mukherjee Vs ITO, sets a significant precedent for individuals earning income from overseas employment. This ruling, focusing on the taxation of a bonus received from foreign employment, offers fresh insights on the applicability of Foreign Tax Credit and could potentially impact a large number of Indian professionals working abroad.
Analysis: In this case, Souvik Mukherjee, the appellant, received a bonus from his previous employer in Singapore. The Assessing Officer (AO) and Commissioner of Income Tax (CIT) originally determined that only a portion of this bonus was eligible for relief under section 90 of the Income Tax Act, leading to Mukherjee’s appeal.
ITAT, upon examining the case, noted that the bonus was received in respect of employment services rendered by the appellant in Singapore during a period when he was a non-resident of India. Importantly, the bonus was declared after the appellant had returned to India and become a resident.
Despite this, ITAT interpreted the provisions of section 5(1) of the Income Tax Act and the Double Taxation Avoidance Agreement (DTAA) between India and Singapore to conclude that the bonus, while taxable in India, is eligible for a full foreign tax credit for taxes paid in Singapore. ITAT rejected the original calculation method used by the AO, which only allowed a partial tax credit.
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