The taxability of salary received by a seafarer is based on the residential status of the seafarer. The salary received by a resident seafarer will be taxable as per the Income Tax law. The salary of a non-resident seafarer will not be included in the total taxable income of the seafarer.
Who is a seafarer ?
A seafarer, sailor,
merchant navy, mariner or seaman is an individual person, who works aboard on a
ship or watercraft. Generally, these individuals are Citizens of India and can
be said as Non-Resident Indian (NRI) also. Seafarer
holds a variety of ranks and professions, each of which carries unique
responsibilities which are integral to the successful operation of an
ocean-going vessel. Work performed by
seafarers includes assisting as a crew member in the operation and maintenance
of ships as part of his/her contractual employment.
How does Seafarer Earn Income
Generally,
a seafarer earns income under a contract of employment or otherwise, where the
shipping company pays the seafarer on the basis of terms of the contract.
Generally, this payment to seafarer happens to his Indian NRE Bank Account in
foreign currency.
Taxability
of Seafarer Income in India
Under
Income Tax Act, 1961 (‘Act’), there is no such term as Seafarer. The Act
provides the taxability based on Residential Status of Individual. Under the
Act, seafarer tax liability calculation can be on the basis of residential
status.
Salary of Resident
Seafarer
If stay in India is for 182 days or more during a
financial year then straightaway the seafarer shall be Resident in India. If
so, and he is also categorized as Ordinary Resident, then global income of that
person shall be taxable in India. Hence, his income from working on ship shall
be taxable in India.
Salary of Non-Resident or Not Ordinary Resident Seafarer
If
a crew member of a ship stays outside India for 183 days or more during the
financial year (184 days or more in case of a leap year) as per his/ her CDS
(Continuous Discharge Certificate) or passport, he/ she becomes a Non-Resident.
If seafarer stay in India is less than 182 days in a financial year then he may be categorized as Non-Resident in India and the salary of a Non-Resident seafarer would not be included in the total taxable income of the seafarer. Also, if on the basis of past year records, the seafarer is Not Ordinary Resident in India then his foreign income will not be taxable in India. However, in this case he need to ensure that he receives the income outside India.
KEY NOTE
Salary accrued to a
non-resident seafarer for services rendered outside India on a foreign going
ship (with Indian flag or foreign flag) shall not be included in the total
income merely because the said salary has been credited in the NRE account
maintained with an Indian bank by the seafarer.
What is the CDC?
Continuous Discharge Certificate is a sailor’s id document.
It must be prepared as per the Merchant Shipping Act, 1958 and comply with
Merchant Shipping (Continuous Discharge Certificate-cum-seafarer’s Identity
Document) Rules, 2001.
How is the period of stay outside India
calculated?
Period of stay of seafarers outside India will be calculated
from the date stamped on their continuous discharge certificate (CDC) - a
seafarer’s identity document - at the time of joining the ship for the voyage
till the date entered in the CDC at the time of signing off. As a result, the
period spent by a ship in Indian coastal waters is also taken into account for
computing the non-resident status and the resultant tax concessions.
Parity for Indian seafarers employed on Indian
flag ships vis-à-vis those employed on foreign flag ships.
Government has, on August 17, 2015, brought
parity in the tax regime of Indian seafarers employed on Indian flag ships
vis-à-vis those on foreign flag ships and mandated that the period of stay in
India shall be counted as per the entries made in his/her Continuous Discharge
Certificate (CDC).
Thus, Seafarers working
on Indian registered ships will now be on par with those working on foreign
ships for the computation of non-resident status.
Residential Status for Seafarers
As
per Section 6 of the Income Tax Act, a person is said to be resident in India
in a financial year, if he : –
(a)
is
in India during that financial year for a period or periods amounting in all to
one hundred and eighty-two days or more; or
(b)
having
within the four years preceding that financial year been in India for a period
or periods amounting in all to three hundred and sixty-five days or more and is
in India for a period or periods amounting in all to sixty days or more in that
financial year.
Explanation 1(a) of Section 6
There
is a special benefit provided under Explanation 1 of Section 6 which specify: –
(a)
person
being a citizen of India, who leaves India in any financial year as a member of
the crew of an Indian ship as defined in clause (18) of section 3 of the
Merchant Shipping Act, 1958 (44 of 1958), or
(b)
for
the purposes of employment outside India.
the above condition of
sixty days gets extended to one hundred and eighty-two days.
In
other words, a seafarer is called non-resident person if he is out of India for
184 days or more (185 days in case of a leap year) during a financial year.
Persons employed on a ship would be treated as resident
in India for any year only if the stay in India is for 182 days or more in that
year
Under
the Income-tax Act (Explanation 1(a) to Section 6(1)), if an Indian
citizen leaves India in any year as a member of crew of an Indian ship, then
instead of 60 days, even if he is in India for up to 181 days, he will be a
non-resident. CBDT Circular No. 572, dated 03.08.1990 has further clarified
that crew members who are already employed on the Indian ship, will also be
considered as a non-resident if he is in India for up to 181 days. CBDT
Circular No. 586, dated 28-11-1990 has further clarified that Indian ships
operating beyond Indian territorial waters, will not be considered as operating
in India. Thus a person on an Indian ship which is operating outside the
territorial waters of India will be considered as outside India. (Indian
territorial waters mean a distance of up to 12 nautical miles from the nearest
point of appropriate baseline).
Finance
Act, 2015 has inserted Explanation 2 to Section 6(1). It states that the
period of days in India for an “eligible voyage” in case of foreign bound ship
leaving India will be determined as per Rule 126.
Rule
126 states that the period between the date of joining the ship and date of
signing off that ship will not be considered as period of stay in India.
These
days will be considered as per ‚Continuous Discharge Certificate‛ issued under
Merchant Shipping (Continuous Discharge Certificate-cum-Seafarer’s Identity Document)
Rules, 2001 made under Merchant Shipping Act, 1958.
Eligible
voyage has been explained to mean voyage undertaken by a ship:
(i)
Where the voyage originates in India, the destination is a port outside India;
(ii)
Where the voyage originates outside India, the destination is a port in India.
Thus
in some situations, where the person has signed on the ship but the ship sails
after a few days, the person will be considered as outside India.
Rule of Residential Status - 120 Days Stay in India Rule
Generally,
Seafarers/Merchant Navy Employees sail into sea for more than 185 days (i.e.
less than 182 days in India) and this makes them a Non-Resident in India as per
Indian Tax Law. Though their stay in India remains less than 182 days, however,
most of times their stay remains more than 120 days in India.
Income
Tax law says that 120 days rule will apply to those who have Total Taxable
Income in India for more than Rs 15 Lakh. In general, most of Seafarers or
Merchant Navy Employees does not have Taxable Income in India for more than Rs.
15 Lakh, hence, they will still qualify as Non-Resident on the basis of 182
days rule and 120 days rule will not attract them. For this 15 Lakh Rupees
calculation, their ship income will not be included. Further, even if a
seafarer qualifies this 120 days clause (on the basis of his income in India
more than Rs. 15 Lakh), he will be categorised as Not Ordinary Resident (NOR)
in that year.
In case of Sailing on
Foreign ships
If a sailor works (Indian
crew serving) on
a foreign sailing ship for 182 days or more in a financial year, they are
considered as non-residents even if the ship trades in Indian waters, and are
exempt from income tax for sailors.
In case a seafarer serving on Indian ships
A seafarer serving on
Indian ships outside India for a period of 182 days or more in a year is
considered to be a non-resident. However, the time spent by a ship in Indian
territorial waters is considered as period of service in India, according to
tax rules framed in 1990. The number of days outside India of Indian crew
working on such Indian ships gets counted only from the date when the Indian
ship crosses the coastal boundaries of India.
For instance, an Indian
ship going from India to Singapore passes through various Indian ports on its
route, such as Nhava Sheva, Kochi, Kandla, etc. Thus, the Indian ship starting
its journey from Nhava Sheva in Maharashtra heading for Singapore remains in
Indian coastal waters for quite some days before crossing the coastal
boundaries of India.
In this case, the number of days outside India of Indian crew working on such Indian ships gets counted only from the date when the Indian ship crosses the coastal boundaries of India. However, Indian crew serving on foreign ships for 182 days or more are treated as non-resident, irrespective of where the ship trades (including Indian waters).
Calculation of period outside India
As per Notification No. 70/2015/
F.No.142 /12/2015-TPL, dated 17.08.2015, the period beginning on the date
entered into the “Continuous Discharge Certificate” (CDC) in respect of joining the ship by the
individual for the eligible voyage and ending on the date entered into the CDC
in respect of signing off by that individual from the ship in respect of such
voyage should be considered as period outside India.
Text of Rule 126
[1][126. Computation
of period of stay in India in certain cases.
(1). For the purposes of clause (1) of
section 6, in case of an individual, being a citizen of India and a member of
the crew of a ship, the period or periods of stay in India shall, in respect of
an eligible voyage, not include the period computed in accordance with sub-rule
(2).
(2). The period referred to in sub-rule
(1) shall be the period beginning on the date entered into the Continuous
Discharge Certificate in respect of joining the ship by the said individual for
the eligible voyage and ending on the date entered into the Continuous
Discharge Certificate in respect of signing off by that individual from the
ship in respect of such voyage.
Explanation: For the purposes of this
rule,-
(a) “Continuous Discharge Certificate” shall have the meaning
assigned to it in the Merchant Shipping (Continuous Discharge Certificate-cum Seafarer’s
Identity Document) Rules, 2001 made under the Merchant Shipping Act, 1958 (44
of 1958);
(b) “eligible voyage” shall mean a voyage undertaken by a ship
engaged in the carriage of passengers or freight in international traffic
where-
(i) for the voyage having originated from any port in India, has as
its destination any port outside India; and
(ii) for the voyage having originated from any port outside India,
has as its destination any port in India.’.]
KEY NOTE
1. Inserted by the Income-tax (Twelfth Amendment) Rules, 2015, vide Notification
No. 70 of 2015, dated 17.08.2015, with retrospective effect from 01.04.2015.
Remuneration received (by a Crew of Foreign Ship) for
employment on a foreign ship [Section 10(6)(viii)]
Any
income chargeable under the head “Salaries” received by or due to any such
individual being a non-resident as remuneration for services rendered in
connection with his employment on a foreign ship where his total stay in India
does not exceed in the aggregate a period of ninety days in the previous year
is available as an exemption under section 10(6)(viii). The exemption is
available only if the below mentioned conditions are satisfied:
(i) The exemption is available towards any income
received or due to any individual being a non-resident. Such income should be
chargeable under the head “Salary”.
(ii) The remuneration should have been received
towards the services rendered in connection with his employment on a foreign
ship.
(iii) The total stay of the
employee in India should not exceed the aggregate period of 90 days in the
previous year.
Difference between NRO and
NRE account
In NRE account only foreign
currency or a cheque from another NRE account can be deposited. However, NRO is
a saving account for non-resident in which they can deposit Indian currency or
any cheque from normal saving account.
Whether
Seafarer, Mariner need to file an Income Tax Return in India, if they are
Resident in India or Non-Resident in India? - ITR Form generally applicable to
Seafarers NRIs
Everyone,
including seafarer or mariners, need to file an ITR in India if there is any
income taxable in India. Filing of ITR in India has no connection with the
Residential status of seafarer. Seafarers NRIs have to choose Form 2 for ITR
filing.
CBDT clarified taxability of remuneration received in Non-Resident External (NRE) bank account with Indian banks by a non-resident seafarer
Based
on the representations received, the Central Board of Direct Taxes (CBDT) has
issued a Circular No. 13/2017, dated 11.04.2017 (as corrected by Circular No.
17/2017 dated 26.04.2017), clarifying the taxability of remuneration received
in the Non-Resident External (NRE) bank account in India of a non-resident
seafarer who has rendered services outside India on a foreign ship.
The
CBDT has clarified that the remuneration received by a non-resident seafarer
for the services rendered outside India on a foreign ship shall not be included
in the total income of the individual merely because it has been credited in
the NRE account maintained by the seafarer with a bank in India.
Circular No. 17/2017 - F. No. 500/07/2017-FT &
TR-V, dated 26.04.2017 (Corrigendum)
Subject : Corrigendum to Circular No. 13/2017
dated 11.04.2017 on the clarification regarding liability to income-tax in
India for a non-resident seafarer receiving salary in NRE (Non Resident
External) account maintained with an Indian Bank.
In
Line 4 of Paragraph No. 2 of the captioned circular, the word‚ ‘foreign ship’
may be read as “foreign going ship with Indian flag or foreign flag”.
Board‘s Circular No. 13/2017, dated 11.04.2017
Subject : Clarification regarding liability
to income-tax in India for a non-resident seafarer receiving remuneration in NRE
(Non-Resident External) account maintained with an Indian Bank
Representations
have been received in the Board that income by way of salary, received by
non-resident seafarers, for services rendered outside India onboard foreign
ships, are being subjected to tax in India for the reason that the salary has
been received by the seafarer into the NRE bank account maintained in India by
the seafarer.
2.
The matter has been examined in the Board. Section 5(2)(a) of the Income-tax
Act provides that only such income of a non-resident shall be subjected to tax
in India that is either received or is deemed to be received in India. It is
hereby clarified that salary accrued to a non-resident seafarer for services
rendered outside India on a foreign ship shall not be included in the total
income merely because the said salary has been credited in the NRE account
maintained with an Indian bank by the seafarer.
CBDT Circular
No. 586, dated 28.11.1990.
Subject : Clarification regarding liability to income-tax in
India and deduction of tax at source
of
members of the crew of foreign going Indian ship
1. A person resident in India in
any year is liable to pay tax in India on his global income. A non-resident, on
the other hand, is charged to tax in India only on income which is received or
is deemed to be received in India or which accrues or arises or is deemed to
accrue or arise to him in India. Thus, in the case of a non-resident, income
which accrues or arises outside India and is also received outside India is not
subjected to tax in India.
2. After the amendment made in
section 6 of the Income-tax Act, 1961 by the Finance Act, 1990, w.e.f. 01.04.1990,
an Indian citizen who is a member of the crew of an Indian ship as defined in
clause (18) of section 3 of the Merchant Shipping Act, 1958 is regarded
as a resident in India only if he is in India for 182 days or more during the
relevant year irrespective of the extent of his stay in India in earlier years.
For this purpose, it is necessary to note that the term "India" as
defined in section 2(25A) of the Income-tax Act, 1961 does not extend to
Indian ships operating beyond Indian territorial waters. However, if he is
outside India and comes on a visit to India in any year, and leaves India
otherwise than as a member of the crew of an Indian ship he will be regarded as
a resident in India if his stay in India during that year is for 150 days or
more if during the 4 years preceding that year he has been in India for 365
days or more.
3. Thus, generally, Indian members
of the crew of a foreign-going Indian ship would be non-resident in India if
they are on board such ship outside the territorial waters of India for 182
days or more during any year. Accordingly, such seamen will be charged to tax
in India only in respect of earnings received in India or the earnings for the
period when they are working within the Indian waters on coastal ships, etc.
4. Under section 192 of the
Income-tax Act, persons responsible for paying salary and other incomes
chargeable under Income-tax Act under the head “Salaries” are required to
deduct income-tax from such income at the time of payment. For this purpose,
the amount of tax to be deducted is computed at the average rate of income-tax
arrived at by applying the rates in force for the financial year in which the
payment is made on the estimated income of the person to whom salary is paid.
Since, as explained above, in the case of members of crew of foreign-going
Indian ships, who are not likely to be in India for a period or periods
exceeding 182 days in a year, income which accrues or arises outside India and
is also received outside India is not liable to tax in India, the shipping
companies and other persons responsible for paying salary to such members of
crew may take these factors into account while computing the amount to be
deducted as tax and deduct only so much of tax as would be chargeable on the
estimated income liable to tax in India. If the shipping company or other
person responsible for paying to such members of crew subsequently finds that
any person who was earlier considered as not likely to be resident in India and
deduction of tax at source was made on that basis is now likely to be resident
in India, the shipping company or the other person responsible for making the
payment, may increase the deduction so as to adjust any deficiency arising out
of an earlier short deduction or non-deduction during the same financial year.
Where assessee-seafarer
working in Marine Shipping rendered services outside India and earned salary
which was remitted by his foreign employer in his NRE account maintained with
an Indian bank, said salary would not be taxable in India
From the CBDT Circular
No. 13/2017, dated 11.04.2017, it is very clear that the income earned by the
seafarer outside India credited in the NRE account cannot be taxed in India. In
the instant case, the salary income earned by the assessee has been credited to
the NRO account maintained with the State Bank of India, Guntur. It does not
make any difference whether the amount is credited to NRE/NRO. From the above
circular, the only point for consideration is that the assessee should be a
non-resident seafarer and received a salary for his services rendered outside
India, the same cannot be taxed in India. Therefore, the Assessing Officer
ought not to have taxed the income earned by the assessee outside India as per
the above CBDT circular. However, the Commissioner (Appeals), by considering
the circular and also the various case laws, directed the Assessing Officer to
delete the addition.
Therefore, considering
the facts and circumstances of the instant case and also by considering the
CBDT Circular No. 13/2017, dated 11.04.2017 and by following the various
judicial pronouncements, it is to be held that there is no infirmity in the
order passed by the Commissioner (Appeals). Thus, the instant appeal filed by
the Revenue is to be dismissed. [In favour of assessee] (Related Assessment year
: 2015-16) – [DCIT v. Chukkapalli Mallikarjuna (2019) 177 ITD 582 : 107
taxmann.com 285 (ITAT Visakhapatnam)]
Salary paid to seafarer for rendering services outside India is not chargeable to tax in India
On
the question whether the income earned by way of salary which became due and
had accrued to the assessee, a non-resident seafarer, for services rendered
outside India, and which was not chargeable to tax in India on “due” or “accrual”
basis, could be said to be chargeable to tax on “receipt” basis merely because
the foreign employers, on the instructions of the assessee, had remitted a part
of the amount of salary to the assessee’s non-resident external bank account in
India; Allowing the appeal the Court held that; the Assessing Officer was wrong
in adding the income earned by way of salary which had become due and had
accrued to the assessee, a non-resident, for the services rendered outside
India to the income chargeable to tax of the assessee for the relevant
assessment year. The interpretation given to section 5(2)(b) could be applied
to section 5(2) (a). The Circular No. 13 of 2017, dated 11.04.2017 was
clarificatory in nature and was applicable for construing the provision for the
relevant assessment year (Related Assessment Year : 2010-11) - [Sumana
Bandyopadhyay (Smt.) v. DDIT (2017) 396 ITR 406 (Cal)]
Residential status - Non-resident - Condition
precedent Salary earned by the foreign employer for services rendered outside
India directly credited to NRE bank account of the non-resident seafarer in
India cannot be brought to tax in India in terms of section 5
Assessee,
a Marine Engineer was engaged with ‘W’ Ltd., Hongkong in the capacity as a
Master and earned salary therefrom in US dollars. The said salary was earned
outside India and since he was a non-resident the said income was not
chargeable to tax in India. Circular No. 13/2017, dated 11.04.2017, shows that
the salary accrued to a non-resident seafarer for services rendered outside
India on a foreign going ship shall not be included in the total income merely
because the said salary has been credited in the NRE account maintained with an
Indian Bank by seafarer. (Related Assessment Year : 2011- 12) - [Shyamal
Gopal Chattopadhyay v. DDIT (2017) 189 TTJ 327 : 165 ITD 437 : 156 DTR 297
(ITAT Kolkata)]
Where foreign employer directly credited salary for services rendered outside India into NRE bank account of non-resident seafarer in India, same could not be brought to tax in India in terms of section 5
The
assessee was a non-resident individual engaged for his service as Captain of
the ship in a Foreign Shipping company (Crew). The assessee was paid Rs. 38.27
lakhs which was credited in his NRE account after conversion of US dollar in
India for which necessary FRC (Foreign Remittance Certificate) from Standard
Chartered Bank, Mumbai had been submitted.
The assessee stated that the above income was received from outside India in foreign currency and, therefore, claimed as exempt. The assessee stated that he used to get his contract to do service with foreign shipping company. According to the assessee, he had to float on foreign water to render services during the course of voyage and accordingly when he was staying for more than 182 days outside India or on foreign water, his residential status was to be treated as 'Non-resident' and his salary income received in the NRE account remitted from outside India in converted foreign currency shall not be exigible to tax under section 5.
The Assessing Officer
accepted the residential status of the assessee as non-resident after
verification of copy of passport and other details submitted, however, opined
that the income was remitted by the employer to the bank accounts of the
assessee maintained in India, therefore, the assessee got the money under his
control for the first time in India. Accordingly, the Assessing Officer added said
amount as income chargeable to tax in India under section 5(2)(a). On appeal, the Commissioner (Appeals) upheld the
order of the Assessing Officer. On appeal to the Tribunal:
Held : The impugned
issue has been duly addressed by the CBDT Circular No. 13/2017, dated
11-4-2017. A perusal of said circular shows that salary accrued to a
non-resident seafarer for services rendered outside India on a foreign going
ship (with Indian flag or foreign flag) shall not be included in the total
income merely because the said salary has been credited in the NRE account
maintained with an Indian bank by the seafarer. Remittances of salary into NRE
account maintained with an Indian Bank by a seafarer could be of two types: (i) Employer directly crediting salary to the NRE account
maintained with an Indian Bank by the seafarer; (ii) Employer directly crediting salary to the account
maintained outside India by the seafarer and the seafarer transferring such
money to NRE account maintained by him in India. The latter remittance would be
outside the purview of provisions of section 5(2)(a), as what is remitted is not 'salary income' but a mere
transfer of assessee's fund from one bank account to another which does not
give rise to 'Income'. It is not clear as to whether the expression 'merely
because' used in the circular refers to the former type of remittance or the
latter. To this extent the circular is vague.
In the instant case, the
employer has directly credited the salary, for services rendered outside India,
into the NRE bank account of the seafarer in India. The aforesaid circular is
vague inasmuch as it does not specify as to whether the circular covers either
of the situations or both the situations contemplated above. Hence it is
considered fit to give the benefit of doubt to the assessee by holding that the
circular covers both the situations referred to above. The result of such
interpretation of the circular would be that the provisions of section 5(2)(a) is rendered redundant. Be that as it may, it is well settled
that the circulars issued by CBDT are binding on the revenue authorities.
In the result, the appeal of the assessee is allowed. (Related Assessment
year : 2012-13) - [Arnab Bose v. DCIT (2017) 166 ITD 404
: 85 taxmann.com 89 (ITAT Kolkata)]
Salary accruing to a
non-resident seafarer for services rendered outside India on a foreign ship
shall not be included in total income merely because salary has been credited
in NRE account maintained with an Indian Bank by seafarer
Assessee filed his
return of income, showing Income from other sources of Rs. 30,628/-, chapter
VI-A deduction of Rs. 1,04,977/- and tax liability of NIL. Further on perusal
Schedule ‘S’ of ITR it was found by the Assessing Officer that the assessee has
shown salary of Rs. 36,96,150/- and claimed it exempt under section 5 of the Act offering ‘Nil’ salary income to
tax. Assessee was asked why the salary is exempt from tax, when it is received
in India from its employer. Assessee vide his submission dated 23.02.2015
submitted to the Assessing Officer stating that the Assessee is a Marine
Engineer and was engaged with OMI Crewing Services in the capacity as Marine
Engineer. The assessee was paid US Dollar Rs. 73,923/- equivalent to Rs.
36,96,150/- and out of his earning he sent his allotment duly received from the
master of the vessel from outside India and remitted to his SB A/c SBI (NRE) from
time to time. Further he added That the foreign shipping company did not
deducted any tax as per their provision or law. As per CDC already filed before
Assessing Officer, the assessee sign on 10.05.2011 and sing off on 11.11.2011
i.e. 185 days and as per passport, assessee was outside India together 187 days
and his status was Non-Resident. That is, the entire income duly rendering
services from salary received from outside India in US dollar being
Non-Resident also not taxable in India under section 5 of the Act. However, the Assessing Officer
rejected the submissions of the assessee and made the addition of Rs.
36,96,150/-
Held
: Having heard the rival submissions, perused the material available on record,
we are of the view that CBDT has issued a Circular No. 13/2017 dated 11.04.2017
wherein CBDT has clarified that the salary accrued to a non-resident seafarer
for services rendered outside India on a foreign ship shall not be included in
the total income merely because the salary has been credited in the NRE account
maintained with an Indian Bank by the seafarer. It is well settled that the
circular issued by the CBDT are binding on the Revenue authority. This position
has been confirmed by the Hon'ble Apex Court in the case of Commissioner of
Customs v. Indian Oil Corporation Ltd. (2004) 267 ITR 272 : 136 Taxman 491
wherein Their Lordships examined the earlier decisions of the Apex Court with
regard to binding nature of the Circulars and laid down that when a Circular
issued by the Board remains in operation then the revenue is bound by it and
cannot be allowed to plead that it is not valid or that it is contrary to the
terms of the Statute.
Therefore,
based on the CBDT circular and the principles laid down by the hon'ble Supreme
Court in the case of Indian Oil Corporation Ltd. (supra), we are of the view
that salary accrued to a non-resident seafarer for services rendered outside
India on a foreign ship shall not be included in the total income merely
because the salary has been credited in the NRE account maintained with an
Indian Bank by the seafarer, therefore, based on the reasons mentioned above,
the grounds raised by the assessee are allowed. [In favour of assessee] – [Asim Kumar Bera
v. Deputy Director of Income-tax, Kolkata (2017) 85 taxmann.com 275 (ITAT
Kolkata)]
Residential status - Assessee was working as master of ship - He received salary from his employer in Indian currency, which was claimed to be exempt as foreign income on ground that he was a non-resident as entries in passport showed that period of stay outside India was 201 days - However, certificate issued by employer of assessee showed that assessee had spent 158 days in foreign waters while being employed in ship - Since there was no material to show that his presence outside India beyond 158 days was as a member of crew of an Indian ship or for purpose of employment within meaning of Explanation (a) of section 6, assessee did not qualify to be ‘non resident’ and his income was to be assessed as that of a resident
According to the
Commissioner (Appeals), the assessee has not been able to establish that
assessee has remained abroad for the purpose of employment for a period
exceeding 182 days and, therefore, it follows that assessee is a resident
within the meaning of section 6(1)(c) read with Explanation (a)
thereof. In this regard, it is found that as per the certificate of employment
issued by the assessee’s employer, the assessee has spent 158 days in foreign
waters while being employed on the ship during the previous year
relevant to the assessment year under consideration. This implies that the
assessee is a resident in terms of section 6(1)(c) read with Explanation (a)
thereof. However, as per the assessee on the basis of the details as per his
passport, his stay abroad during the previous year relevant to the assessment
year under consideration is 201 days and thus his stay in India is for 164 days
thereby demonstrating that in terms of section 6(1)(c) read with Explanation (a)
thereof the assessee is a non-resident. The crucial point is the presence of
the words ‘leaves India in any previous year as member of the crew of
an Indian ship or for the purposes of employment outside India’
in Explanation (a) to section 6(1)(c). In terms of the
aforesaid Explanation the assessee has to establish that he was
outside India as a member of the crew of an Indian ship or
for the purposes of employment for a period of 182 days or more during the
previous year relevant to the assessment year under consideration so as to qualify
to be non-resident. In this connection, the Commissioner (Appeals) has
appreciated whatever evidence was on record, namely, the certificate issued by
the employer of the assessee which clearly depicts that the assessee was
outside India for the purpose of employment only for 158 days. The claim of the
assessee that he was abroad for 201 days is supported by his Passport details,
so however, there is no material or evidence to show that his presence outside
India beyond 158 days was as a member of the crew of
an Indian ship or for the purpose of employment within the meaning
of Explanation (a) read with section 6(1)(c). The Commissioner
(Appeals) in para 5.1.3 has categorically asserted that the assessee has not
furnished any evidence to show that he was abroad during the relevant period in
connection with or for purposes of the present employment. Even in instant
appeal, no material has been laid by the assessee to negate the aforesaid
assertion of the Commissioner (Appeals). In view of aforesaid, the assessee
qualifies to be a resident in the previous year relevant to the assessment year
under consideration on the basis of the tests mentioned in section 6(1)(c) read
with Explanation (a) thereof. The order of the Commissioner (Appeals)
is to be confirmed. As a consequence to aforesaid decision, the Assessing
Officer is directed to compute income of the assessee thereof in accordance
with law. [In favour of revenue] (Related Assessment
year : 2006-07) – [Madhukar Vinayak Dhavale v. ITO (Intl. Taxation), Pune (2011)
48 SOT 202 : 15 taxmann.com 36 (ITAT Pune)]
Well researched article...
ReplyDeleteThank you So much Sir
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