Commissioner Of Income Taxsalary V, Chennai v. Rajasekaran Balasubramaniam

CORAM THE HONOURABLE MR. JUSTICE R.SUDHAKARANDTHE HONOURABLE MRS. JUSTICE S.VIMALA Commissioner of Income TaxSalary V, Chennai... Appellant/Appellant- Vs - Rajasekaran Balasubramaniam.. Respondent/Respondent Appeal filed under Section 260A of the Income Tax Act againstthe order dated 17.01.2014 passed by the Income Tax AppellateTribunal, 'D' Bench, Chennai, made in ITA No.1324/Mds/2013. Against the order of the Joint Commissioner of Income Tax SalaryRange V (i/c) Aayakar Bhavan, New Block, 5th Floor, 121 MahatmaGandhi Road, Nungambakkam, Chennai-34 dt.28.12.2011 and made inPAN/GIR. No.AJAPB 4310 R. Against the order of the Commissioner of Income Tax (Appeals)VI, 121 Mahatma Gandhi Road, Chennai-34 dt.28.12.2012 and made inITA.No.240/11-12. Aggrieved by the order of the Tribunal in dismissing the appealfiled by it, the Revenue is before this Court by filing this appealraising the following questions of law :-“1) Whether on the facts and circumstances of thecase, the Income Tax Appellate Tribunal was right innot adjudicating the taxability of the gross totalincome, when the assessee has not paid any federal taxin USA as evidenced by the W-2 furnished by theassessee for the FY 2008-09?2) Whether on the facts and circumstances of thecase the Income Tax Appellate Tribunal was justifiedin not adopting the grossing up concept in respect ofthe assessee's Indian taxes borne by the employer inreference to Section 17 (2) (iv) r/w Section 192 (1B)of the Income Tax Act, 1961?” https://hcservices.ecourts.gov.in/hcservices/ 2. The facts, in a nutshell, are as hereunder :- The respondent/assessee is an individual residing and working inIndia, but receiving salary in US Dollars in USA. The assessee hadoffered the net salary of Rs.1,22,94,450/= received, after deductingthe federal taxes, medical insurance, life insurance, etc., in hisreturn for the assessing year 2009-2010 filed on 27.7.09. Thecompany/employer had, however, withdrawn the amount of Rs.40,13,145/=from the salary of the assessee as “hypothetical tax” to be paid inUSA. It is accepted by the Department that in lieu of the amountwithdrawn as hypothetical tax, the employer/company paid the taxliability of the assessee in India in a sum of Rs.31,57,915/=.Consequent upon the payment of tax as above in India, there remainscertain amount withdrawn by the company of the assessee from thesalary, which has not been paid as tax in India, i.e., an amount ofRs.8,55,320/=. The assessing officer held that the assessee has notpaid any federal tax in USA as evidenced by the W-2 furnished by theassessee for the financial year 2008-2009 and, therefore, madeappropriate additions in the assessment order towards the said amount. 3. Aggrieved by the said order of the assessing officer, theassessee filed appeal before the CIT (Appeals). The CIT (Appeals)held that the hypothetical tax has been brought in to bring in taxequalization between domestic employment and overseas employment and,hence, the hypothetical tax cannot be a subject of addition andallowed the appeal. Aggrieved by the order of the CIT (Appeals), theRevenue preferred appeal before the Tribunal. 3. The Tribunal considered the issue of computation of actualsalary, and the same has been set out in detail in para-7 of theTribunal's order in the following manner :-“7. The assessee has received in US $ amountequivalent to INR Rs.1,10,75,021/= as salary on whichan amount of Indian Rs.40,12,145/= is withdrawn being“hypothetical tax” payable in US. In lieu for theamount withdrawn as hypothetical tax, the employercompany had paid the tax liability of the assessee inIndia for Rs.31,57,915/=. Thus, the net amountwithdrawn by the assessee company from the salary ofthe assessee is Rs.8,55,230/= (Rs.40,13,145 (-)Rs.31,57,915), thereby the assessee has factually hadreceived salary of Rs.1,02,19,791/= (Rs.1,10,75,021 –Rs.8,55,230). (Emphasis supplied).” 3. The Tribunal considered the issue of computation of actualsalary, and the same has been set out in detail in para-7 of theTribunal's order in the following manner :-“7. The assessee has received in US $ amountequivalent to INR Rs.1,10,75,021/= as salary on whichan amount of Indian Rs.40,12,145/= is withdrawn being“hypothetical tax” payable in US. In lieu for theamount withdrawn as hypothetical tax, the employercompany had paid the tax liability of the assessee inIndia for Rs.31,57,915/=. Thus, the net amountwithdrawn by the assessee company from the salary ofthe assessee is Rs.8,55,230/= (Rs.40,13,145 (-)Rs.31,57,915), thereby the assessee has factually hadreceived salary of Rs.1,02,19,791/= (Rs.1,10,75,021 –Rs.8,55,230). (Emphasis supplied).” 4. The Tribunal also took into consideration the statement ofanalysis of hypothetical tax as submitted by the representative ofthe assessee and held in para-8 of its order that there is adifference in tax to the tune of Rs.8,55,320/=. A note has beenappended by the authorised representative in the analysis ofhypothetical tax stating that under the tax equalization policy, thisdifference of Indian Rs.8,55,320/= is not eligible to be paid back tothe assessee. In this view of the matter, the Tribunal, aftercoming to the conclusion, the formula as to how salary received forthe purpose of tax to be determined, remanded the matter back to thehttps://hcservices.ecourts.gov.in/hcservices/ assessing officer to verify whether on principles the contention putforth by the representative for the assessee is correct. Aggrievedagainst the said order of the Tribunal, the Revenue is before thisCourt by filing the present appeal. 5. Mr.Swaminathan, learned standing counsel appearing for theappellant submits that the Double Taxation Agreement between Indiaand the USA enunciates the concept that if income tax has been paidin the country of residence, then rebate will be allowed in the othercontracting State. It is further submitted by the learned counselthat the Tribunal failed to note that the assessee has not paid anyfederal tax in USA as could be seen from the W-2 furnished by theassessee and, therefore, the entire gross salary received by theassessee has to be taxed. It is further submitted that the grossingup concept has not been adopted by the Tribunal. In view of theabove infirmities in the order passed by the Tribunal, the order ofthe Tribunal is liable to be set aside. 6. Heard Mr.Swaminathan, learned standing counsel appearing forthe appellant/Revenue and perused the materials available on record. 7. Even at the outset, without any contradiction, it could bestated that the plea of the appellant/Revenue that there is nospecific indication as to what is the gross total income of theassessee and, therefore, there is no clarity in the order of theTribunal, deserves to be rejected. A cursory look at the order ofthe Tribunal reveals that there is no such confusion in the order ofthe Tribunal, as portrayed by the learned standing counsel for theappellant/Revenue. The Tribunal, in para-7 of its order, which hasbeen extracted above, has clearly stated that consequent to thewithdrawal of hypothetical tax payable in US, certain amount has beenpaid towards tax liability of the assessee in India. Taking intoconsideration the amount paid towards salary and deducting thehypothetical tax payable in the US,the Tribunal has determined thesalary received after deduction made by the employer towards thehypothetical tax. A cursory look at the above calculation made bythe Tribunal would reveal that the computation is just and proper andno clarification is required to be given by the Tribunal, as it isfor the assessee to explain as to how this amount should be treatedfor the purpose of determining the tax. 8. In view of the well considered findings given by the Tribunal,as noted above, this Court finds no error warranting interferencewith the order passed by the Tribunal and, accordingly, we uphold theorder passed by the Tribunal. No question of law, much lesssubstantial question of law arise for consideration in this appeal. 9. In view of the reasons as above, finding no merits, thisappeal is accordingly dismissed. Sd/-Assistant Registrar True CopySub Assistant Registrar To1. Commissioner of Income Tax Salary V, Ayakar Bhavan, New Block 5th floor, Nungambakkam, Chennai.2. The Assistant Registrar, Income Tax Appellate Tribunal 'D' Bench, III Floor, Rajaji Bhavan, Chennai.3.The Commissioner of Income Tax (Appeals) 121 Mahatma Gandhi Road,Chennai.+1 cc to Mr.M.Swaminathan, Advocate,SR.11721.ug(co)krd 31/3 T.C.A. NO. 105 OF 2015