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Case analysis of Tapas Kumar Bandopadhyay vs Assessee Background of the case:

The Income tax Act, 1961 brings various classes of income like Salaries, House
property, Profits and Gains of Business or Profession, Capital Gains and Other
Incomes within the ambit of taxation based on the residential status of each
taxpayer. So, recently the Kolkata Bench of the Income tax Appellate Tribunal in
the case of Tapas Kumar Bandopadhyay, held that the income received in India
by a non resident taxpayer is taxable in India by virtue of such income received in
India. Facts of the case: Mr.

Tapas Kumar Bandopadyay was employed as a marine engineer and had worked
in the international waters during the relevant financial year and he received
remuneration from 2 entities Based on his residential status, he claimed the
incomes received from both these entities were exempted from tax in India on
the basis that such income which were earned outside India in foreign currency
and were mainly remitted to his NRE account in India on his instructions. Mr.

Tapas Kumar Bandopadyay was on International waters rendering services during

the course of the voyage and had stayed for less than 182 days in India during
the relevant previous Financial year. Hence, he qualified as a non resident in India
for the relevant financial year. Mr. Tapas Kumar Bandopadyay's with overseas
shipping entities were through an Indian agent and the contracts were executed
in India.
After submitting the passport and other details of Mr. Tapas Kumar
Bandopadyay, the Assessing Officer (AO) concluded that the residential status of
Mr. Tapas Kumar Bandopadyay as a non-resident. However, the Assessing Officer
had sought to tax the incomes which were claimed exempt by Mr. Tapas Kumar
Bandopadyay on the ground that the said incomes were received in India and
hence, were taxable in India under Section 5(2)(a) of the Income Tax Act, 1961,
irrespective of the residential status of Mr. Tapas Kumar Bandopadyay.

The Assessing Officer further observed that these incomes were credited to his
NRE account by his employers and therefore, Mr. Tapas Kumar Bandopadyay
claimed that he had control over such accounts for the first time in India. As Mr.
Tapas Kumar Bandopadyay was not a resident of any other state, tax treaty
benefits will not be applicable for his incomes. Arguments Advanced: Mr.

Tapas Kumar Bandopadyay appealed before the Commissioner of Income Tax

Appellate Tribunal and are argued as under: Since, Mr. Tapas Kumar
Bandopadyay was proved as a non-resident because his entire services were
rendered outside India and argued that neither of the employers for which
services were rendered had a permanent establishment in India.

Also, the payment made for the services by the employers rendered outside India
was made by those two entities in foreign currency which was in turn remitted to
the NRE accounts in India. Mr. Tapas Kumar Bandopadyay argued that the term
'Received in India' in the Income Tax Act, 1961 should be interpreted as income
received in India in foreign currency.

Remittance made in foreign currency to NRE account cannot be considered as

'income received in India. Mr. Tapas Kumar Bandopadyay relied on the judgment
of Prahlad Vijendra Rao, where the Karnataka High Court held that the salary
received by the non-resident marine engineer for services rendered by him on a
foreign going Indian ship which mainly remained away from the Indian coast
accrued outside India and was not taxable in India. Mr.

Tapas Kumar Bandopadyay also argued that the criteria for applying the
definition of Section 5(2)(b) of the Income Tax Act, 1961 would be such income
which is earned in India for the services rendered in India and not otherwise. The
accrual basis salary income which is under Section 15 of the Income Tax Act, 1961
does not matter whether the salary earned is taxable or not but it depends on the
services rendered in India is taxable but the services were rendered outside India,
hence not taxable.
Therefore, if the income earned by the non-resident while working outside India
has not accrued in India, then it will also not deemed to accrue in India. Mr. Tapas
Kumar Bandopadyay relied on the judgment of Avtar Singh Wadhwan, where the
High Court of Bombay had held that in case of a non-resident, the income which
accrues outside India cannot be taxable Under Section 9(1)(ii) of the Income Tax
Act, 1961, the High Court of Bombay applied the relevant test that where the
services were rendered thats where the taxation lies. So applying the test in the
current case, Mr.

Tapas Kumar Bandopadyay came to the conclusion that since the services were
rendered outside India he is not liable to pay tax in India. Mr. Tapas Kumar
Bandopadyay also relied on the judgment of Arvind Singh Chauhan, where the
Agra tribunal held that the connotation of Income having been received and an
amount having been received is quantitatively different. Salary amount was
received in India, but the salary income was received outside India.

The Agra tribunal rightly held that an income cannot be taxed at every point of
receipt. Salary was accrued outside India and by arrangement of his employers,
were remitted to India. Hence, it will not constitute receipt of a salary in India to
trigger taxability under Section 5(2)(a) of the Income Tax Act, 1961.

Decision of the Court: The Commissioner of Income Tax was not convinced by the
arguments put forth by Mr. Tapas Kumar Bandopadyay and therefore, upheld the
decision of Assessing Officer, after applying the decision of Captain A L
Fernandez where the Mumbai Tribunal held that the salary for the services
rendered abroad in a ship outside the territorial waters of any country would be
taxable in India if it were received in India as per Section 5(2)(a) of the Income Tax
Act, 1961. Also when the salary income received by Mr.

Tapas Kumar Bandopadyay has accrued or arisen in India under the Section 5(2)
(a) of the Income Tax Act, 1961, it is not necessary to examine whether the salary
is also deemed to accrue or arisen in India. Aggrieved by the order of the
Commissioner of Income Tax, Mr. Tapas Kumar Bandopadyay preferred an appeal
before the tribunal after stating that the decision in Captain A L Fernandez does
not apply in this case and seek to rely on other decisions.

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