Chitrank Goel vs Deputy Director Of Income Tax, International Taxation

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), Noida-2 [in short 'the CIT(A)'] dated 24.06.2025, for Assessment Year 2016-17.

The facts of the case in brief as emanating from records are: The assessee is working with Hindustan Unilever Ltd. (HUL). The assessee was seconded to Netherlands on assignment for a period of two years w.e.f. 01.05.2015, however, her payroll remained in India. The assessee offered to tax her salary for the month of April 2015 in India. The salary for the period from 1^st May 2015 till 31^st March 2016 was claimed as exempt as per Article 15(1) of India-Netherlands Double Tax Avoidance Agreement (DTAA). The Assessing Officer (AO) during the course of assessment asked the assessee to furnish proof of residence and reconciliation of salary claimed as exempt and salary offered to tax in the return filed. In order to substantiate that the assessee was non resident during AY 2016-17, the assessee furnished a copy of passport and Tax Residency Certificate (TRC) of Netherlands. The assessee also furnished reconciliation of salary income as per Form 16, tax return filed and copy of Form 26AS. The AO denied exemption claimed by the assessee on salary income in light of provisions of section 5(2)(a) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The assessee carried the issue in appeal before the CIT(A). The CIT(A) asked the assessee to furnish copy of tax return filed in Netherlands for Financial Year 2015-16. On 20.06.2025, the assessee furnished tax report for the calendar year 2015 and tax report for the calendar year 2016. The contention of the assessee was that the tax report furnished by assessee is the return of income for calendar year 2015 & 2016 filed by assessee as per Dutch laws. The CIT(A) held that the said tax reports are computations prepared by the assessee and not the tax returns. The CIT(A) rejected assessee’s claim of exemption on the ground that the assessee has failed to substantiate that income received by the assessee from HUL has been offered to tax in Netherlands. Thus, the CIT(A) upheld addition made by the AO on account of disallowance of assessee’s claim exemption of Rs.79,26,607/-.

Shri Nikhil Tiwari, appearing on behalf of the assessee submits that salary income of the assessee is taxable in Netherlands as per Article 15 of India-Netherlands DTAA. This position is accepted by the CIT(A). The only reason for denial of exemption by the CIT(A) is that the assessee has failed to furnish any documentary evidences to show that the salary income has been offered to tax in Netherlands. He contended that the assessee could not furnish assessment order passed by Dutch Tax Authority for calender year 2015 and 2016 as the same were not available with the assessee. The assessee has now placed on record assessment order passed by Dutch Tax Authority for calender year 2015 and 2016 at pages 91 to 94 of the paper book. The assessee has also placed on record reconciliation of salary with the Netherlands Tax Returns at page no. 95 of the paper book. He submitted that a perusal of the assessments made by Dutch Tax Authority would clearly show that the salary income has been offered to tax by the assessee to tax authorities in Netherlands. He thus prayed for reversing findings of the CIT(A) on the issue.

Per contra, Shri Vikram Singh Sharma, representing the department strongly supported the impugned order. He submitted that the documents now filed by the assessee at pages 91 to 95 of the paper book were not available to the AO or the CIT(A). Thus, the same are fresh evidences.

Both sides heard, orders of the authorities below examined. The issue before us, falls within narrow encompass that is, whether, the salary income received by the assessee for AY 2016-17 have been offered to tax by the assessee in return of income filed before Dutch Tax Authority and thus the assessee is eligible for claiming the same as exempt in India under India-Netherlands DTAA. It is an uncontroverted fact that during the period relevant to assessment year 2016-17 that is w.e.f. 1^st May 2015, the assessee had moved to Netherlands for an assignment and remained their till 31^st March 2016. It is also an undisputed fact that in terms of Article 15 of India-Netherlands DTAA, the salary income of the assessee was liable to tax in Netherlands. The solitary reason for denial of exemption by the CIT(A) is that the assessee has failed to discharge his onus in proving that the assessee has offered salary income for AY 2016-17 to tax before Dutch Tax Authority. The assessee has furnished a copy of assessment passed by the Dutch Tax Authority for calender year 2015 and 2016 at pages 91 to 94 and also reconciliation of salary received from HUL as per Form-26AS and tax return. Since the said document has been furnished by the assessee for the first time before the Tribunal, we deem it appropriate to restore the issue back to the file of AO for verification of the same. The AO shall after examining the assessments made by Dutch Tax Authority for calender year 2015 and 2016, shall grant exemption to the extent the salary is offered to tax in Netherlands by the assessee, in accordance with law.

In the result, appeal of the assessee is allowed for statistical purpose.