Gautam Arora Vs DCIT (ITAT Kolkata)
ITAT Kolkata held that non-resident Indian who has provided services as an employee outside India (i.e. in Morocco) is entitled to claim benefit of Article 15(1) of the India Morocco DTAA.
Facts- The assessee is a Non-Residential Indian and had worked at a assignment at Morocco and salary for doing this service was though received in India, but the same was subjected to tax as per the Income-tax laws of Morocco and tax was paid thereof and that the credit for the said tax ought to have been provided by the Assessing Officer.
The assessee states that it is entitled to benefits under the India- Morocco DTAA and thus, the salary received by it in India pertaining to services rendered in Morocco is not taxable in India in terms of Section 5(2) of the Income-tax Act, 1961 r.w. Article 15 of the India-Morocco DTAA.
Conclusion- Held that since the assessee is a NRI and stayed more than 182 days outside India, and has provided services as an employee outside India and since the salary for the period working outside India at Morocco has been claim to be subjected to tax as per the income tax laws of Morocco we hold that assessee is eligible for DTAA benefit as per Article 15(1) of the India Morocco DTAA.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal is directed at the instance of the assessee against the order of the Learned Commissioner of Income Tax (Appeals) – 22, Kolkata (hereinafter the “ld. CIT(A)”) dt. 17/03/2021, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2012-13.
2. The Registry has pointed out that there is a delay of 128 (one hundred twenty eight) days in filing the present appeal before the Tribunal. Petition for condonation of delay is placed on record by assessee explaining the reasons for delay, owing to Pandemic of Covid-19 during that time. It is noted that the period of delay falls during the time of Pandemic of Covid-19 which has been excluded by the Hon’ble Supreme Court in the case of suo moto Writ Petition (C) No. 3 of 2020 dated 10.01.2022 by which the period from 15.03.2020 to 28.02.2022 has been directed to be excluded for the purpose of limitation. Vide this order a further period of 90 days has been granted for providing the limitation from 01.03.2022. Accordingly, we condone the delay and proceed to admit the appeal for hearing.
The assessee has raised the following grounds of appeal:-
“1:0 General:
1: 1 The Assessing Officer (“AO”) has erred in assessing the total income of the Appellant at Rs. 52,44,210/- as against the income of Rs. 10,83,317/- as per the revised return of income. The Commissioner of Income-tax (Appeals), Kolkata (“CIT(A)”) has further erred in confirming the additions made in the impugned Order passed by the AO.
1:2 The Appellant craves leave to add, alter, amend, substitute and / or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal.
2:0 Denial of the beneficial provisions under Article 15 of India-Morocco tax treaty:
2:1 The CIT(A) has erred in confirming the Order passed by the Assessing Officer in denying the benefits available to the Appellant under Article 4 r.w Article 15 of the Morocco Double Taxation Avoidance Agreement between India and Morocco [‘India DTAA], thereby making an addition of Rs. 40,40,448/- to the returned income.
2:2 The CIT(A) while denying the benefits under the India-Morocco DTAA has erred in ignoring the fact that the Appellant was a resident of Morocco for the years 2011 and 2012 and was therefore eligible to claim benefits under the said DTAA.
2:3 The Appellant submits that considering the facts and circumstances of the case and the law prevailing on the subject, the Appellant is entitled to benefits under the India- Morocco DTAA and thus, the salary received by the Appellant in India pertaining to services rendered in Morocco is not taxable in India in terms of Section 5(2) of the Income-tax Act, 1961 r.w. Article 15 of the India-Morocco DTAA and the stand taken by the CIT(A) is misconceived, erroneous, illegal and bad in law.
2:4 The Appellant submits that the Assessing Officer be directed to allow the benefits under the India-Morocco DTAA to the Appellant, delete the addition so made and to re-compute his total income and tax liability accordingly. ”
3. At the outset, the ld. Counsel for the assessee stated that the assessee is a Non-Residential Indian and had worked at a assignment at Morocco and salary for doing this service was though received in India, but the same was subjected to tax as per the Income-tax laws of Morocco and tax was paid thereof and that the credit for the said tax ought to have been provided by the Assessing Officer. In support, reliance was placed on the decision of this Tribunal in the case of Mr. Debabrata Datta vs. ACIT in ITA No. 453/Kol/2 021; Assessment Year 2014- 15; order dt. 1 0/01/2023.
On the other hand, the ld. D/R, vehemently argued supporting the orders of both the lower authorities further stating that the assessee has not been able to place tax residency certificate of being a resident of Morocco and consequently the assessee has not been able to prove that the assessee was a resident in Morocco.
Further, the ld. Counsel for the assessee has contended that Morocco does not have the provision of issuing tax residency certificate and, therefore, the assessee will be unable to obtain the same and file before the revenue authorities.
4. We have heard rival contentions and perused the material placed before us. We observe that the assessee is an individual and is an employee working with M/s. Dell International Private Limited. Income of Rs.51,01,460/-, declared in the return of income filed on 20/07/2012 claiming Nil refund but later on return was revised on 27/02/2013 declaring income of Rs.10,83,320/- and claiming refund of Rs.12,41,606/-. The return selected for scrutiny through CASS followed by issuance of notice u/s 143(2) & 142(1) of the Act. During the course of scrutiny proceedings, the ld. Assessing Officer noticed that the assessee has claimed benefit under DTAA of Rs.40,40,448/- and also claimed to be a non-resident Indian. The said benefit under DTAA has been claimed on the ground that the salary income received by the assessee was taxed as per the taxation laws of Morocco and, therefore, the assessee is eligible for benefit under Article 15(1) of the India Morocco Double Taxation Avoidance Agreement. However, the ld. Assessing Officer has observed that the assessee has not been able to prove that he is a resident of Morocco and, therefore, Article 15(1) of the India Morocco Double Taxation Avoidance Agreement, is not applicable and accordingly disallowed the benefit of DTAA under Article 15.
5. When the matter came up before the ld. CIT(A), he confirmed the action of the ld. Assessing Officer observing that as per Section 5(2) of the Act, any income received or is deemed to be received in India by an assessee or on behalf of such a person, would be taxable in India unless of course the income was covered by the DTAA and was taxable in Morocco and the assessee failed to demonstrate the same. Before us, the ld. Counsel for the assessee has placed a copy of the statement which though are not in English, but were referred to as the quarterly return statement filed at Morocco and tax having been paid thereon. We notice that during the course of assessment proceedings though the ld. Assessing Officer accepted that the assessee is a NRI but did not accept that he is a resident of Morocco given reference to the calendar year and period of stay in Morocco. We, however, fail to find any merit in the observation, since residential status of the person has to be examined as per the Indian Income Tax Act and since during the FY 2011-12, undisputedly the assessee only stayed for 117 day in India in other words, he was staying in Morocco for 248 days during the financial year 2011-12 and thus fulfilled the condition of being a non-resident.
Now, since the assessee is a non-resident and he performed the services outside India the income accrued outside India but the same was received in India. Now in case the assessee has been subjected to income tax in another country then whether the assessee will be eligible to claim DTAA benefit if any, available? We notice that there is a treaty between India and Morocco under the Article 15(1) of the India Morocco DTAA which provides that:-
“1. Subject to the provisions of Articles 16, 17, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State, if:
