Kenneth Malcolm Holland v. Deputy Commissioner Of Income Tax, International Taxation, Gurgaon

CWP-13703-2021 (O&M) IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH oho a CWP-13703-2021 (O&M)Date of Decision: 14.12.2021 Kenneth Malcolm Holland — Petitioner Versus Deputy Commissioner of Income Tax, International Taxation, Gurgaon .....Respondents CORAM:HON’BLE MR. JUSTICE AJAY TEWARTHON’BLE MR. JUSTICK PANKAJ JAIN Present :Mr. Pankaj Garg, Senior Advocate, withMr. Milind Garg, Advocate,Mr. Milind Garg, Advocate, for the petitioner. Mr. Kunal Sharma, Senior Standing Counsel,for the respondent. PANKAJ JAINJ. 1]The present writ petition has been filed seeking a writ ofcertiorari for quashing order dated 29.12.2020 (Annexure P-1), wherebyclaim of the petitioner for grant of certificate of residence has been rejected by the authorities. The petitioner herein prays for further direction to theauthorities to award him benefit under the provisions of Article 22 of theIndia-US Double Taxation Avoidance Treaty (herein after referred to as 'theTreaty’). ? The case of the petitioner is that he is a USA national, who hasbeen appointed in India as a Dean-cum-Professor in O.P. Jindal GlobalUniversity w.e.f. 01.01.2020. He joined his services in India on 01.02.2020 and owing to the Covid-19 pandemic, he departed from India on 21.03.2020. VIRENDRA SINGH ADHIKARIAt. tae time of payment of his salary, he was issued Form-16 by his2021.12.14 15:37I attest to the accuracy andintegrity of this document CWP-13703-2021 (O&M) employer under the provisions of Section 203 of the Income Tax Act, 1961(hereinafter referred to as ‘1961 Act’), showing tax deducted at source onSalary. onAggrieved by deduction of tax at source, the petitionerrepresented to the authorities invoking Article 22 of the Treaty and claimed exemption. 4Vide the impugned order, the authorities have rejected the claimof the petitioner with the following observations; :ODP XXX XxXXX your reply has beenconsidered but not found tenable as it is againreiterated that the provisions of Tax ResidencyCertificate (IRC) is required for those foreignnationals who have come to India for a specifiedperiod and are claiming a relief under the DIAAon their Indian income. However, as per thedetails provided in your application it is noted thatyou have arrived in India on 01.02.2020 anddeparted from India on 21.03.2020 and till dateyou are outside India. As your stay in India is 49days during the F.Y. 2019-20 as per the documentssubmitted by you, which is less than 182 daystherefore, you are a Non-Resident for the FY.2019-20 and F.Y. 2020-21 under the provisions ofSection 6 ofthe Income Tax Act, 1961.XXXXXXXXX3.2)In light of the Rule 21AB(3) of the IncomeTax Rules, 1962, a resident ofIndia may apply forTRC and you being a Non-Resident cannot applyfor TRC. Further, it is difficult to envisage asituation at this stage for determining theresidential statusfor the upcoming years.4 In view of the above, this office considersyou as a Non-Resident, therefore, your applicationfor TRC may be treated as disposed-off,a2 5Hence, this writ petition, 6.The petitioner claims that Article 22(1) of the Treaty clearly provides that the assessee who visits a contracting State for a period not exceeding two years for the purpose of teaching and who has immediately CWP-13703-2021 (O&M) before that visit been a resident of the other contracting State shall beexempted from tax by the first mentioned contracting State for a period notexceeding two years from the date he first visits that State for such purpose.Thus, for giving the aforesaid exemption, the petitioner applied and theclaim has been wrongly rejected. The petitioner for the purpose of satisfyingthe authorities on his eligibility has submitted his passport depicting hisnationality of USA, letter of appointment letter and Form-16, which fulfillsthe conditions as required under law. 6.The petitioner claims that Article 22(1) of the Treaty clearly provides that the assessee who visits a contracting State for a period not exceeding two years for the purpose of teaching and who has immediately CWP-13703-2021 (O&M) before that visit been a resident of the other contracting State shall beexempted from tax by the first mentioned contracting State for a period notexceeding two years from the date he first visits that State for such purpose.Thus, for giving the aforesaid exemption, the petitioner applied and theclaim has been wrongly rejected. The petitioner for the purpose of satisfyingthe authorities on his eligibility has submitted his passport depicting hisnationality of USA, letter of appointment letter and Form-16, which fulfillsthe conditions as required under law. vaLearned counsel for the petitioner further submitted that thepetitioner is not an assessee under Section 2(7) of the 1961 Act as no tax ispayable by him for a period of two years by virtue of the provisions ofArticle 22 of the Treaty. § Response has been filed on behalf of the respondent-DeputyCommissioner of Income Tax, International Taxation, Gurgaon. QOIn the written statement, the authorities has defended their orderof dismissing the claim of the petitioner with respect to the grant of TRC.The respondents assert that the certificate for claiming benefits underDouble Tax Avoidance Agreement is issued to individuals who have stayedin India during the relevant Financial Year for a period of 182 days or moreor for 60 days or more in relevant year and 365 days or more in preceding 4years immediately to the relevant financial year. The petitioner having alstay of merely 49 days does not fulfil any of the conditions and thus, he isnot entitled to benefit of the Treaty. It has further been submitted thatSection 90 of the 1961 Act read with Rule 21AB of the Income Tax Rules,1962, provides a comprehensive procedure qua residents as well as non- CWP-13703-2021 (O&M) residents for claiming relief under the Treaty and the claim of the petitionerSans merit when tested on the touchstone of the aforesaid provisions. 10.We have heard the learned counsel for the parties and havecarefully gone through the pleadings. 11.There 1s no denial to the fact that the two countries i.e. Indiaand USA have a treaty by the name of India-U.S. Double Tax AvoidanceAgreement executed between them under Section 90 of the 1961 Act,Section 90 of the 1961 Act reads as under:- :90(1) The Central Government may enter into anagreement with the Government of any country outsideIndia or specified territory outside India,—(a) for the granting ofreliefin respect of— (i) income on which have been paid both income-taxunder this Act and income-tax in that country orspecified territory, as the case may be, or (ii) income-tax chargeable under this Act and under thecorresponding law in force in that country or specifiedterritory, as the case may be, to promote mutualeconomic relations, trade and investment, or (b) for the avoidance of double taxation of income underthis Act and under the corresponding law in force in thatcountry or specified territory, as the case may be, or (c) for exchange of information for the prevention ofevasion or avoidance of income-tax chargeable underthis Act or under the corresponding law in force in thatcountry or specified territory, as the case may be, orinvestigation ofcases ofsuch evasion or avoidance, or (d) for recovery of income-tax under this Act and underthe corresponding law in force in that country orspecified territory, as the case may be, and may, by notification in the Official Gazette, makesuch provisions as may be necessary for implementingthe agreement. (b) for the avoidance of double taxation of income underthis Act and under the corresponding law in force in thatcountry or specified territory, as the case may be, or (c) for exchange of information for the prevention ofevasion or avoidance of income-tax chargeable underthis Act or under the corresponding law in force in thatcountry or specified territory, as the case may be, orinvestigation ofcases ofsuch evasion or avoidance, or (d) for recovery of income-tax under this Act and underthe corresponding law in force in that country orspecified territory, as the case may be, and may, by notification in the Official Gazette, makesuch provisions as may be necessary for implementingthe agreement. (2) Where the Central Government has entered into anagreement with the Government of any country outsideIndia or specified territory outside India, as the case maybe, under sub-section (1) for granting relief of tax, or asthe case may be, avoidance of double taxation, then, inrelation to the assessee to whom such agreement applies,the provisions of this Act shall apply to the extent theyare more beneficial to that assessee. (2A) Notwithstanding anything contained in sub-section(2), the provisions of Chapter X-A of the Act shall applyto the assessee even if such provisions are not beneficialto him. (3) Any term used but not defined in this Act or in theagreement referred to in sub-section (1) shall, unless thecontext otherwise requires, and 1s not inconsistent withthe provisions of this Act or the agreement, have thesame meaning as assigned to it in the notification issuedby the Central Government in the Official Gazette in thisbehalf, (4) An assessee, not being a resident, to whom anagreement referred to in sub-section (1) applies, shallnot be entitled to claim any relief under such agreementunless a certificate of his being a resident in any countryoutside India or specified territory outside India, as thecase may be, is obtained by himfrom the Government ofthat country or specified territory. (5) The assessee referred to in sub-section (4) shall alsoprovide such other documents and information, as maybe prescribed. Explanation I1.—or the removal of doubts, it is herebydeclared that the charge of tax in respect of a foreigncompany at a rate higher than the rate at which adomestic company is chargeable, shall not be regardedas lessfavourable charge or levy oftax in respect ofsuchforeign company. Explanation 2.—For the purposes of this section,"specified territory” means any area outside India whichmay be notified as such by the Central Government. Explanation 3.—For the removal of doubts, it is herebydeclared that where any term is used in any agreemententered into under sub-section (1) and not defined underthe said agreement or the Act, but is assigned a meaningto it in the notification issued under sub-section (3) andthe notification issued thereunder being in force, then,the meaning assigned to such term shall be deemed tohave effect from the date on which the said agreementcame intoforce. Following Explanation 4 shall be _ inserted afteExplanation 3 to Section 90 by the Finance Act, 2017,w.é.f. 1-4.2018 : Explanation 4.—For the removal of doubts, it is herebydeclared that where any term used in an agreemententered into under sub-section (1) 1s defined under thesaid agreement, the said term shall have the samemeaning as assigned to it in the agreement; and wherethe term is not defined in the said agreement, but defined in the Act, it shall have the same meaning as assigned toit in the Act and explanation, if any, given to it by theCentral Government.; 12)For the proper adjudication of the controversy in hand, it will also be appropriate to reproduce Article 22 of the Treaty. :Article 22 : Payments Received by Professors, Teachersand Research Scholars Following Explanation 4 shall be _ inserted afteExplanation 3 to Section 90 by the Finance Act, 2017,w.é.f. 1-4.2018 : Explanation 4.—For the removal of doubts, it is herebydeclared that where any term used in an agreemententered into under sub-section (1) 1s defined under thesaid agreement, the said term shall have the samemeaning as assigned to it in the agreement; and wherethe term is not defined in the said agreement, but defined in the Act, it shall have the same meaning as assigned toit in the Act and explanation, if any, given to it by theCentral Government.; 12)For the proper adjudication of the controversy in hand, it will also be appropriate to reproduce Article 22 of the Treaty. :Article 22 : Payments Received by Professors, Teachersand Research Scholars I. An individual who visits a Contracting State for aperiod not exceeding two years for the purpose ofteaching or engaging in research at a university, collegeor other recognised educational institution in that State,and who was immediately before that visit a resident ofthe other Contracting State, shall be exempted from taxby the first-mentioned Contracting State on anyremuneration for such teaching or research for a periodnot exceeding two years from the date he first visits thatStatefor such purpose. | 2. This Article shall apply to income from research onlyif such research is undertaken by the individual in thepublic interest and not primarily for the benefit of someotherprivate person orpersons.| 13.Section 90 of the 1961 Act is an enabling provision for the Central Government to enter into an agreement with the Government of anycountry outside India for granting relief to the assessee in respect of variousissues including for avoidance of double taxation of income. However, therelief of double taxation of income under the Treaty is subject to thecondition of the assessee providing a certificate of his being a resident in anycountry outside India or specified territory outside India as enumeratedunder Section 90(4) of the 1961 Act. 14|Thus, in order to claim benefit from double taxation as providedunder Article 22 of the Treaty, the petitioner is required to submit acertificate of him being a resident in country out side India i.e. USA in thepresent case from the Government of USA. — The claim of the petitioner is totally misfound. The objective of CWP-13703-2021 (O&M) the Treaty is to avoid double taxation and not to avoid taxation. In order toclaim benefit in India, the petitioner has to provide TRC from theGovernment of USA which admittedly he does not possess. Case of thepetitioner in our view is hit by Section 90(4) of the 1961 Act whichcontemplates that a non-resident assessee claiming benefit under the doubletaxation avoidance agreement is not entitled for such benefit unless the saidassessee obtains TRC from the country of which he is resident. In theabsence of TRC as contemplated under Section 90(4) of the 1961 Act andhaving his source of income based in India, the petitioner cannot claimexemption under Article 22 of the Treaty, 16.Finding no merits in the present case, the writ petition is dismissed. (PANKAJ JAIN)JUDGE (AJAY TEWARITJUDGE 14.1272021adhikari Whether speaking/non-speakingYes/NoWhether reportableYes/No