Case Law ITAT

No Income Tax in India for salary earned by a Korean Resident outside India: ITAT Delhi

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No Income Tax in India for salary earned by a Korean Resident outside India: ITAT Delhi

Amit Laroya Vs ACIT (ITA No.1457/Del/2022)

Facts:
1. Amit Laroya, the appellant, challenged the decision of the Commissioner of Income Tax (CIT) in an appeal dated 29/04/2022 against the order issued by the Dispute Resolution Panel (DRP) under Section 144C(5) of the Income Tax Act for the Assessment Year 2018-19.

2. The primary point of contention was whether Laroya’s salary income of Rs.5,11,71,307, earned in Korea, qualified for exemption under Article 15(1) of the India-Korea Double Taxation Avoidance Agreement (DTAA).

3. During the assessment year, the appellant, classified as a non-resident, filed an income return disclosing a total income of Rs.57,69,390. The Assessing Officer (AO), relying on Form 26AS, noted that Laroya received Rs.5,40,07,330 as salary from an Indian resident company, 3M India Limited. Despite Laroya’s brief stay of 31 days in India during the relevant year, he declared a sum of Rs.29,86,022 as a salary proportionate to his Indian residency.

4. The pivotal argument centred around the interpretation of Article 15(1) of the India-Korea DTAA, which grants an exemption for employment income if the individual is a resident of Korea and the employment takes place outside India. Laroya fulfilled both criteria, making his salary earned in Korea not subject to taxation in India.

5. The revenue’s argument, referencing Section 9 of the Income Tax Act, underscored the taxation of all incomes directly or indirectly linked to India. However, the tribunal clarified that Section 9 should be interpreted alongside the explanation, which considers income earned in India only when services are provided in India.

ITAT Delhi held as under:
1. Concerning Laroya’s voluntary offer of Rs.29,86,022, the tribunal asserted that the revenue’s authority to impose taxes is contingent upon the provisions outlined in the Act, and an incorrect submission by the taxpayer does not confer such authority.

2. Laroya’s services were rendered outside India, and as a result, the income could not be considered as accruing or arising in India. Furthermore, Article 15(1) of the India-Korea DTAA explicitly exempted employment income that meets the specified conditions.

3. Laroya’s services were rendered outside India, and as a result, the income could not be considered as accruing or arising in India.