Facts :
(i) A design Engineer is NOT Ordinary Resident in India for Income Years 08-09 and 09-10. He is a FULL TIME employee of a company in USA. The employer US company has no connection, nexux or place of business with/in India. He receives salary in USA from the employer company in USA and pays tax in USA. The US Company does not have any other employee in India.
(ii) He resides in India and works directly for his US employer by rendering his services over internet, conference calls etc. His work being of such a nature, he need not be physically present in USA to discharge his job duties and he has been permitted by his employer company to stay wherever he likes. He makes short visits to US several times a year.
(iii) Under DTA treaty he is eligible for tax relief in India for tax paid in US on his salary there.
Law :
(i) U/s 5(2)(b) of IT Act 1961, income accrued or deemed to have accrued IN India is chargeable to tax for Not Ordinary Resident.
(ii) U/s 9(ii) if income is “earned” IN India, it is deemed to have accrued IN India. AND if salary is for service rendered IN India, it is earned IN India.
(iii) IN SC judgement (288 ITR 408) it is held (for Not Resident) that service should have been rendered in India AND it should have been UTILISED IN India TOO. Both tests should be satisfied. (this may be applicable for NOT Ordinary Resident too???)
Is the design engineer’s salary, received IN USA during 08-09 and 09-10 for services rendered FROM India over internet etc taxable in India? Can it be said, when the US employer company does not have ANY NEXUS/connection, place of business nothing in India, that his income is for service rendered FROM India and NOT IN India and hence is not covered U/s 5(2)(b) and hence not taxable in India?
CAclubindia
