Income Tax Not Payable On Services Rendered Abroad By Non-Resident Deputed By Indian Employer: ITAT

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the income tax is not payable on services rendered abroad by non-residents deputed by Indian employers.

The bench of Saktijit Dey (Vice President) and B. R. R. Kumar (Accountant Member) has observed that from the concurrent reading of Section 5 of the Income-tax Act, 1961, dealing with scope of total income, Section 15 dealing with computation of total income under the head salary and chargeability thereof, and Section 9 dealing with income arising or accruing in India with reference to the salaries and the services rendered in India, no taxability arises on the salary or allowances received by the assessee since the assessee is a non-resident and has rendered services outside India.

The appellant or assessee had filed his return of income under Section 139 of the Income-tax Act, 1961, declaring an income of Rs. 9,76,960. The Assessing Officer found that the assessee did not disclose various allowances received from M/s Datamatics Global Services Ltd., which amounted to Rs. 21,80,932 in his return of income. The proceedings under Sections 147 and 148 of the Income Tax Act were initiated by issuing a notice under Section 148 after obtaining the necessary approval of the Competent Authority under Section 151 of the Income Tax Act.

The assessing officer made additions on account of salary and allowances as the assessee did not furnish a tax residency certificate (TRC). The assessee was an employee of M/s Datamatics Global Services Ltd., an Indian company, deputed to work on a project awarded by the IAEA in Vienna, Austria, and stationed in Vienna. He was also a non-resident. The salary and the compensatory allowances were paid to the assessee in Vienna by the company in India. The allowances were permitted to be used through a credit card, which is valid only in Austria.

The assessee contended that the assessee neither had any rest period nor leave period, which were preceded and succeeded by services rendered outside India. Since the assessee has rendered services outside India, the salary cannot be taxable in India.

The tribunal, while allowing the appeal of the assessee, held that salary and allowances received by the assessee are not taxable in India as the services rendered were outside India.

Counsel For Appellant: Pallavi Talavlikar

Counsel For Respondent: P. Praveen Siddharth

Case Title: Devi Dayal Versus The DCIT/ACIT

Case No.: ITA Nos. 835 & 836/Del/2023

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