Salary Received by NRI Outside India not Taxable Just Because it is Credited in Indian Bank a/c: ITAT

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  • Last Updated on 27 May, 2023


Case Details: Prasanth Nandanuru v. Income-tax Officer (International Taxation)-2 - [2023] 150 183 (Hyderabad-Trib.)

Judiciary and Counsel Details

    • Rama Kanta Panda, Accountant Member & K. Narasimha Chary, Judicial Member
    • Hiten Chande, AR for the Appellant.
    • Jeevan Lal Lavidiya, CIT-DR for the Respondent.

Facts of the Case

Assessee, an individual, was an employee of Wells Fargo (EGS) India Pvt. Ltd (“Wells India”) and was sent on a short-term assignment to Wells Fargo Bank N.A., USA (Wells USA). Later, he was directly employed by Wells USA. During his short-term assignment to Wells USA, the assessee made on the payrolls of Wells India. His salary for the services rendered was credited to his Indian bank account by Wells India after deducting tax at source.

Assessee claimed that he was a tax resident of the USA and, therefore, eligible to avail the provisions of the India-US Double Taxation Avoidance Agreement (DTAA). He claimed that the income earned from services rendered in the USA was only taxable in the USA and not in India.

Assessing Officer (AO) held that even if the assessee was a non-resident, his salary income in India would be governed by the Income-tax Act. The Dispute Resolution Panel (DRP) approved the AO’s order. Aggrieved-assessee preferred an appeal to the Hyderabad Tribunal.


The Tribunal followed the decision of AAR in the case of British Gas India (P.) Ltd. [2006] 157 Taxman 225 (AAR – New Delhi), wherein it held that the salary received in India by the employees of the Indian entity seconded to the foreign entity is no doubt taxable in India under the provisions of section 5(2)(a).

However, as per Article 4(1) of the Indo-US DTAA, the term ‘resident of contracting state’ includes a resident, and, Article 16(1) of the DTAA mandates that in respect of the salaries derived by a resident of the USA in respect of an employment shall be payable only in the USA. Therefore, because of residence in the USA, the assessee is liable to income tax in the USA regarding the salary he derived from his employment in the USA.

Consequently, though the provision under section 5(2)(a) fastens tax liability on the assessee, but because of the overriding effect of section 90, Article 16 of the DTAA would prevail over the 5(2)(a) of the Act. Thus, the salary received by the assessee in India for the services rendered in the USA was not liable to tax in India.

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