The Income Tax Appellate Tribunal (ITAT) Ahmedabad has established a significant precedent for non-resident Indians by ruling that foreign salary earned outside India does not become taxable merely because it is credited to a Non-Resident External (NRE) account or because tax has been deducted using an Indian Tax Deduction and Collection Account Number (TAN). According to reports from Mint, the Tribunal set aside revision proceedings initiated under Section 263 of the Income-tax Act against taxpayer Pralay Pradyotkanti Ghosh, holding that the tax department cannot reopen a completed assessment merely because it holds a different view from the Assessing Officer (AO), provided the AO had conducted proper enquiries.
For Assessment Year 2016-17, Ghosh declared taxable income of about ₹1.16 lakh and claimed exemption on ₹45.66 lakh received as salary from Oceaneering International GmbH. As reported by Mint, he argued that the income was earned while working outside India in international waters and, as a non-resident, it was not taxable in India. The Assessing Officer accepted the claim after scrutiny under Section 143(3), but the Principal Commissioner of Income Tax (PCIT) later invoked Section 263, contending that the AO had failed to adequately verify the taxpayer's employment agreement, work location, passport records and other supporting documents.
The Tribunal found that the Assessing Officer had carried out detailed verification during assessment by seeking documents including the employment contract, passport, travel records, bank statements, Form 26AS and proof of residential status. According to Mint, since these enquiries had already been made, the assessment order could not be termed erroneous simply because the PCIT disagreed with its conclusion. The ruling emphasizes that salary earned outside India does not become taxable merely because it is remitted to an NRE account in India, and deduction of tax using an Indian TAN is not, by itself, determinative of either the taxpayer's residential status or the taxability of foreign income.
The ruling is significant for NRIs, seafarers and overseas employees, as reported by Mint. It reiterates that the taxability of foreign salary depends on the provisions of the Income-tax Act and the place where services are rendered, rather than the mode of remittance. The decision underscores the importance of preserving documents such as employment contracts, passport records, travel details and bank statements to substantiate exemption claims during tax scrutiny. The Bench relied on earlier judicial precedents involving NRIs and seafarers to reinforce this principle.
