Emmerich Jaegar v. CIT - Taxpublishers.in

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The Tax Publishers2005 TaxPub(DT) 0986 (Guj-HC) : (2005) 002 (I) ITCL 0246 : (2005) 274 ITR 0125 : (2005) 193 CTR 0057 : (2005) 144 TAXMAN 0203 Emmerich Jaegar v. CIT () INCOME TAX --Double taxation relief----AGREEMENT BETWEEN INDIA AND AUSTRALIARetention remuneration to foreign technician-- Catch Note: Assessee was a foreign technician under the employment of a foreign company. The assessee was deputed for rendering technical services to an Indian company. The assessee was to be paid 'retention remuneration' during the period of stay in India and such payment was to be made in foreign currency by foreign employer. The assessee claimed that such remuneration received abroad would be outside the purview of the Act since he was a non-resident. Further, alternatively it was claimed that under DTAA he is subject to Austria tax. The revenue authorities and also the Tribunal negatived the plea of the assessee. According to the Tribunal, all the conditions in sub-clause (2) of article 14 of the Double Taxation Avoidance Agreement with Austria had to be satisfied as the conditions were cumulative, and before this country gave up its right to tax the income earned in India, it had to be satisfied that the assessee was liable to pay tax in respect of that income in Austria. Held: Justified. As the assessee was claiming benefit under an exception (exemption) provision, it would be upon assessee to discharge the onus to show that he was subject to Austrian tax. Therefore, the Tribunal was directed to decide the issue in accordance with law after taking into consideration further, evidence that may be advanced by the assesssee to show that he is subject to Austrian tax. Ratio: Retention remuneration paid by foreign employer, to foreign technician deputed in India, is not to be taxed under Indian tax statutes in accordance with DTAA if the assessee discharges the onus to show that he is subject to tax in foreign country under that country's statute. Held: There is no dispute between the parties that the assessee fulfils conditions of sub-clauses (a), (b) and (d) of clause (2) of article 14. The only controversy between the parties is in relation to meaning to be assigned to sub-clause (c) which states that the profits or remuneration are subject to Austrian tax. On a plain reading, it becomes apparent that the condition does not stipulate actual payment of tax which has been insisted upon by the revenue authorities. All that the provision provides is that the individual should be liable to tax under the Austrian statute. In other words, the Austrian statute must be shown to be levying tax on such remuneration. Being liable to tax and being actually taxed are two different things, and in a given situation, it is always possible that a person may be liable to tax under a statute, but may not be actually taxed by virtue of, may be, some other provision under the same statute. Therefore, the approach of the authorities below to treat the liability to tax as being actually taxed is not warranted by the language of the provision. Therefore, the view taken by the authorities below that unless and until the assessee produces proof for payment of tax, he would not be entitled to claim relief under the Agreement does not accord with the terms of the Agreement and the language employed in article 14(2)(c) of the Agreement. In fact, the Tribunal did observe on these lines but did not insist thereafter for applying the Austrian law when it observed that, if India was to give up its right to tax for the income earned in India, it had to be satisfied that the assessee was liable to pay tax in respect of that income in the foreign country with whom the Agreement was concluded. In the circumstances, it is necessary that the provisions of the Austrian statute are brought on record and the parties get an opportunity to make their submissions thereon. As the applicant-assessee is claiming benefit under an exception (exemption) provision, it will be upon the assessee to discharge the onus to show that it is subject to Austrian tax. It will be open to the assessee to rely upon provisions of the Austrian tax statute as well as any other evidence that the assessee may choose to bring on record and the Tribunal shall, after taking the same into consideration, decide the issue between the parties. Case Law Analysis: Applied :Union of India & Anr. v. Azadi Bachao Andolan & Anr. (2003) 263 ITR 706 (SC) Decision: Matter remanded. Date of Judgment: 25 November 2004 Cases Referred: CIT v. P.V.A.L. Kulandagan Chettiar (Dead) through LRs (2004) 267 ITR 654 (SC) and CIT v. S.G. Pgnatale (1980) 124 ITR 391 (Guj). SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2005 TaxPub(DT) 0986 (Guj-HC) : (2005) 002 (I) ITCL 0246 : (2005) 274 ITR 0125 : (2005) 193 CTR 0057 : (2005) 144 TAXMAN 0203

Emmerich Jaegar v. CIT ()

INCOME TAX

--Double taxation relief----AGREEMENT BETWEEN INDIA AND AUSTRALIARetention remuneration to foreign technician--

Catch Note:

Assessee was a foreign technician under the employment of a foreign company. The assessee was deputed for rendering technical services to an Indian company. The assessee was to be paid 'retention remuneration' during the period of stay in India and such payment was to be made in foreign currency by foreign employer. The assessee claimed that such remuneration received abroad would be outside the purview of the Act since he was a non-resident. Further, alternatively it was claimed that under DTAA he is subject to Austria tax. The revenue authorities and also the Tribunal negatived the plea of the assessee. According to the Tribunal, all the conditions in sub-clause (2) of article 14 of the Double Taxation Avoidance Agreement with Austria had to be satisfied as the conditions were cumulative, and before this country gave up its right to tax the income earned in India, it had to be satisfied that the assessee was liable to pay tax in respect of that income in Austria. Held: Justified. As the assessee was claiming benefit under an exception (exemption) provision, it would be upon assessee to discharge the onus to show that he was subject to Austrian tax. Therefore, the Tribunal was directed to decide the issue in accordance with law after taking into consideration further, evidence that may be advanced by the assesssee to show that he is subject to Austrian tax.

Ratio:

Retention remuneration paid by foreign employer, to foreign technician deputed in India, is not to be taxed under Indian tax statutes in accordance with DTAA if the assessee discharges the onus to show that he is subject to tax in foreign country under that country's statute.

Held:

There is no dispute between the parties that the assessee fulfils conditions of sub-clauses (a), (b) and (d) of clause (2) of article 14. The only controversy between the parties is in relation to meaning to be assigned to sub-clause (c) which states that the profits or remuneration are subject to Austrian tax. On a plain reading, it becomes apparent that the condition does not stipulate actual payment of tax which has been insisted upon by the revenue authorities. All that the provision provides is that the individual should be liable to tax under the Austrian statute. In other words, the Austrian statute must be shown to be levying tax on such remuneration. Being liable to tax and being actually taxed are two different things, and in a given situation, it is always possible that a person may be liable to tax under a statute, but may not be actually taxed by virtue of, may be, some other provision under the same statute. Therefore, the approach of the authorities below to treat the liability to tax as being actually taxed is not warranted by the language of the provision. Therefore, the view taken by the authorities below that unless and until the assessee produces proof for payment of tax, he would not be entitled to claim relief under the Agreement does not accord with the terms of the Agreement and the language employed in article 14(2)(c) of the Agreement. In fact, the Tribunal did observe on these lines but did not insist thereafter for applying the Austrian law when it observed that, if India was to give up its right to tax for the income earned in India, it had to be satisfied that the assessee was liable to pay tax in respect of that income in the foreign country with whom the Agreement was concluded. In the circumstances, it is necessary that the provisions of the Austrian statute are brought on record and the parties get an opportunity to make their submissions thereon. As the applicant-assessee is claiming benefit under an exception (exemption) provision, it will be upon the assessee to discharge the onus to show that it is subject to Austrian tax. It will be open to the assessee to rely upon provisions of the Austrian tax statute as well as any other evidence that the assessee may choose to bring on record and the Tribunal shall, after taking the same into consideration, decide the issue between the parties.

Case Law Analysis:

Applied :Union of India & Anr. v. Azadi Bachao Andolan & Anr. (2003) 263 ITR 706 (SC)

Decision:

Matter remanded.

Date of Judgment:

25 November 2004

Cases Referred:

CIT v. P.V.A.L. Kulandagan Chettiar (Dead) through LRs (2004) 267 ITR 654 (SC) and CIT v. S.G. Pgnatale (1980) 124 ITR 391 (Guj).