Salary income could be deemed to accrue or arise in India only if services is rendered in India.: ITAT Chennai

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Salary income could be deemed to accrue or arise in India only if services is rendered in India.: ITAT Chennai 

Kanagaraj Shanmugam (ITA No.2936/Chny/2018)

Facts:

  1. The assessee was sent on an assignment to UK for the period from 22.04.2014 to 21.04.2016. The salary for that period has been paid by the employer, OFSSL in India though the same was reimbursable by foreign counterparts.

  1. His stay in India during financial year (FY) 2014-15 was only 63 days. Being a tax resident of UK, his salary income has been offered to tax in UK.

  1. The assessee also submitted that salary received for work performed in UK would be exempt in India as per Article 16(1) of Double Taxation Avoidance Agreement (DTAA) between India and UK.

  1. The AO formed an opinion that employer-employee relationship between the assessee and OFSSL continued. The assessee was sent to UK on assignment only and had not shifted his employer. Therefore, the salary due from an employer would be taxable u/s 15 of Income Tax Act. Further, Sec.5(2) provides that, for non-resident, salary received in India would be taxable in India.

ITAT Chennai held as below:

  1. Salary income could be deemed to accrue or arise in India only if it is earned in India in respect of services rendered in India.

  1. The salary income as accrued to the assessee for work performed in UK would not be taxable in India.

  1. It could be seen that separate tax payment has been made by OFSSL to UK revenue authorities to discharge the tax liability of the assessee in that country.

  1. The AO is directed to re-compute the income of the assessee.

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