MUMBAI: A recent decision of the Mumbai bench of Income Tax Appellate Tribunal (ITAT) will be of immense help to nonresidents, such as globally mobile employees, who owing to genuine causes are unable to file an overseas tax residency certificate (TRC) along their income tax (I-T) return in India, but furnish it after the assessment stage.
The ITAT has held denial of the lower rate of tax according to the India-US treaty, in the hands of a US tax resident, on his India source income was “absolutely misconceived and misplaced,” merely because a TRC from the US authorities was not furnished to the I-T officer during the course of assessment, but was produced at a later stage before the Commissioner (Appeals).
Non-residents are generally subject to tax in India, only in respect of their India source income — say bank interest, interest on fixed deposits, rent from property in India, dividends from investments in India. The taxpayer can opt to be governed by the Indian Income-tax Act or the tax treaty, whichever is more beneficial.
In this case, which was heard by the ITAT, in FY14, Haresh C Seth, a non-resident, had earned bank interest and interest on fixed deposits aggregating to Rs17.9 lakh. However, the I-T officer declined to apply the lower rate of tax of 10% and 15% available under the India-US tax treaty.
The commissioner (Appeals) also upheld this course of action, as he concluded that Seth had failed to file the TRC and Form10F (which provides overseas tax residency details) with the I-T officer during the course of assessment.
The ITAT took into consideration the genuine challenges such as the very short time period that was provided for furnishing the TRC to the I-T officer.
