Case Law Details
Kapil Gupta Vs ITO (ITAT Delhi)
Material Facts
The appeal arose from an order of the JCIT(A) dated 23.01.2026 against an assessment order passed under Section 154 of the Income-tax Act, 1961 for Assessment Year 2020-21.
The sole issue before the Tribunal was whether salary received by the assessee in Australia for services rendered in Australia was taxable in India.
The assessee filed the return of income on 29.09.2020 declaring salary of ₹14,16,115 received from an Australian employer, M/s. Modis Consulting Private Limited.
During the relevant year, the assessee migrated from India to Australia for employment. The services were rendered in Australia to the Australian employer. The salary was subjected to tax in Australia and tax of ₹3,40,428 was deducted at source there.
The assessee relied upon Article 15 of the India-Australia Double Taxation Avoidance Agreement (DTAA) and sought exclusion of the Australian salary from taxation in India. However, the salary had inadvertently been offered to tax in India. The assessee also filed Form 67 on 19.02.2022 claiming foreign tax credit (FTC) for taxes paid in Australia.
The assessee thereafter sought rectification for exclusion of the salary from taxable income in India. The Centralised Processing Centre (CPC) rejected the rectification application.
Procedural History
- Return of income filed declaring Australian salary.
- Form 67 filed claiming foreign tax credit for taxes paid in Australia.
- Rectification application seeking exclusion of Australian salary from Indian taxation was rejected by CPC.
- The assessee appealed before the CIT(A).
- The CIT(A) considered only the issue of grant of foreign tax credit and held that delay in filing Form 67 could be condoned, treating Rule 128(9) as directory and not mandatory.
- The assessee appealed before the ITAT.
Legal Issue
Whether salary received in Australia from an Australian employer for services rendered in Australia was taxable in India.
Relevant Statutory Provisions
- Section 154 of the Income-tax Act, 1961.
- Article 15 of the India-Australia Double Taxation Avoidance Agreement (DTAA).
- Rule 128(9).
- Form 67.
Parties’ Submissions
The assessee submitted that:
- The salary was received from an Australian employer for services rendered entirely in Australia.
- The salary had already been taxed in Australia.
- Under Article 15 of the India-Australia DTAA, such salary was taxable only in the country where the services were rendered.
- The salary had been inadvertently offered to tax in India.
- Rectification was sought for exclusion of the salary from Indian taxable income.
Tribunal’s Findings and Reasoning
The Tribunal observed that there was no dispute regarding the facts that:
- the assessee had migrated to Australia for employment;
- services were rendered in Australia;
- remuneration was received from an Australian employer; and
- the salary had been subjected to tax in Australia.
The Tribunal noted that the CIT(A) had examined only the issue of grant of foreign tax credit and had not addressed the core issue.
According to the Tribunal, the principal issue was whether the Australian salary itself was taxable in India.
The Tribunal held that Article 15 of the India-Australia DTAA provides that salary is taxable only in the State where the services are rendered. Since the services were rendered in Australia, the salary received in Australia was not liable to taxation in India.
Accordingly, the Tribunal directed the Assessing Officer to exclude the Australian salary from the total income of the assessee.
The Tribunal further held that once the salary itself was excluded from taxation in India, the foreign tax credit of ₹3,40,428 would also not be admissible.
Final Ruling
The ITAT:
- directed the Assessing Officer to exclude the salary received in Australia from the assessee’s total income in India under Article 15 of the India-Australia DTAA;
- held that the foreign tax credit of ₹3,40,428 would consequently not be available; and
- allowed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The appeal in ITA No.1543/Del/2026 for AY 2020-21, arises out of the order of the Id. Commissioner of Income Tax (Appeals)/ ADDL/JCIT(A)-2, Surat [hereinafter referred to as ‘Id. JCIT(A)’, in short] dated 23.01.2026 against the order of assessment passed u/s 154 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 30.04.2023 by the Assessing Officer, CPC, Bangalore (hereinafter referred to as ‘Id. AO’).
2. The only issue to be decided in this appeal is as to whether the salary received by the assessee in Australia for services rendered in Australia would become taxable in India or not.
3. We have heard the rival submissions and perused the material available on record. The return of income for AY 2020-21 was filed by the assessee on 29.09.2020 wherein, the sum of Rs. 14,16,115/- was declared as salary received from an Australian Employer M/s Modis Consulting Pvt. Ltd. The return of income for the AY 2020-21 was filed by the assessee on 29.09.2020 wherein a sum of Rs. 14,16,115/- was declared as having been received from Australian employer, M/s. Modis Consulting Private Limited. The assessee during the year had gone abroad for employment purposes from India to Australia to take his employment there. There is absolutely no dispute that services were rendered by the assessee in Australia for which remuneration was received. The assessee was a resident in India. But after migration, he was residing in Australia and services to Australian employer were rendered by the assessee in Australia. The salary received in Australia was subjected to taxation in Australia as per their tax laws and a sum of Rs. 3,40,428 was deducted as tax at source in Australia. Placing reliance on Article 15 of Double Taxation Avoidance Agreement (DTAA) between India and Australia, the assessee sought for exclusion of salary income from taxation in India as the said Article stipulates that salary would be taxable only in the state where services were rendered. Since undisputedly the services were rendered by the assessee in Australia to Australian employer, the salary received in Australia would not be liable for taxation in India as per Article 15 of India-Australia DTAA. But inadvertently the assessee offered the same for taxation in India and had also filed Form 67 on 19.02.2022 seeking foreign tax credit for taxes paid in Australia. Accordingly, the assessee filed a rectification for exclusion of salary income from taxation in India which stood rejected by Id CPC and assessee preferred an appeal before the Id CIT(A). The Id CIT(A) adjudicated the issue on a totally different perspective of granting foreign tax credit alone of Rs. 3,40,428 by stating that delayed filing of form No. 67 is to be condoned as the relevant Rule 128(9) mandating furnishing of Form No 67 within time is to be construed as directory and not mandatory in nature.
4. We find that the Id CIT(A) had adjudicated the issue only from the angle of grant of foreign tax credit of Rs. 3,40,428. But the core point to be seen is that the salary income per se received in Australia for services rendered in Australia is not taxable at all in India in the hands of the assessee in view of Article 15 of India-Australia DTAA. Hence, we direct the Id AO to exclude the salary income of Australia from the total income of the assessee. Correspondingly, the foreign tax credit of Rs. 3,40,428/-shall also not be eligible to be given to the assessee. The grounds raised by the assessee are allowed.
5. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 30/06/2026.
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