Tax Exemption cannot be disallowed under India-Austria Double Taxation Avoidance Agreement only for want of Tax Residency: ITAT Hyderabad.

In the recent case of ITAT, the tribunal held that the exemption cannot be disallowed under India-Austria Double Taxation Avoidance Agreement (DTAA) only for want of Tax residency certificate. According to the facts of the case, the petitioner is a non-resident who filed his income returns for Assessment year 2014-15 wherein he admitted total income of Rs. 10,04,580/-. The petitioner was required to furnish certain information during the proceedings under Section 143 (2) of the Act. On further verification by the Assessment Officer, it was determined that the gross salary of the petitioner was Rs. 31,11, 185/- and therefore, it was observed the employer of the petitioner had deducted the tax at source of Rs. 7,76,564/-.

Later, when the total income filed by the petitioner was verified, the AO found that the assessee has claimed the double taxation relief under Section 90 of the IT Act and admitted total income but claimed TDS of Rs.7.66,567/- in his return. For this, the petitioner was required to furnish the Tax residency certificate to claim the relied under Section 90 of the salary received outside India for the services provided outside India and the copy letter between the Employer and employee.

On such demand, the petitioner stated that he qualifies as a non-resident under Section 6(1) of the Act. With the same reason, the foreign allowance of Rs. 20,72,238 was not offered to tax in India in the income return as the same was received by him outside India for the services rendered outside India and shall not form part of total income under section 5(2) of the Act.

The tribunal, after considering all the submissions, directed the Assessing Officer to allow exemption under DTAA and held that it is a very hectic task to obtain the certificated from the foreign countries for the compliance of domestic statutory obligations. In such conditions, the assessee cannot be obligated to do impossible task and penalized for the same. If the taxpayer provides the circumstantial evidence in such cases, the requirement of Section 90(4) is to be relaxed.