Mumbai ITAT decided in a recent judgment that it was not possible to cause a tax incident that the only receipt of salary income by the employee of the NRE Bank accounts in India (which works in a ship on international routes run by Singapore's shipping company).
Under the Indian tax laws, the tax incidence arises on the basis of residential status, which in turn depends on the No of days stayed in India. A resident taxpayer of India is required to be tax on his worldwide income. But, a non-resident is subject to tax in India only under 2 circumstances, i.e.
- Income accrued in India and
- income received in India. Hence, in the case of a non-resident, income is considered as taxable in India even if it is received in India (via employment done outside India).
In the existing case, The Mumbai Income Tax Appellate Tribunal dismissed the income tax dept argument that the compensation balance attributed to an Indian bank account should be required to be taxed. It was found that the employee had a legal right to collect his or her salary earned at his employment place, (that is situated at a foreign employer outside India).
The Mumbai Income Tax Appellate Tribunal stated that: "The meanings of an earned income and a received number are qualitatively different. In this situation, the salary is collected in India, However, salary income is earning outside India”.
In the above situation, Mumbai Income Tax Appellate Tribunal stated a new highlight of income received in India in this order. It distinguished itself by maintaining that salary pay was not received in India, as the employee had the legal right to earn salary wages outside of India. The salary amount was available to employees outside India and he merely exercised his own right to transfer the salary to India.
In conclusion, the contracts of employment should be structured properly. This case contracts of employment may point that the salary for services provided abroad is transferred to an Indian bank account; at the employee request for the sake of convenience, this Mumbai Income Tax Appellate Tribunal order may help to mitigate/originate lawsuits.
