Salary income earned by a non-resident from a foreign employer for services rendered on a foreign ship in international waters is exempt from taxation in India.

आदेश/ORDER

PER SHRI MAKARAND V. MAHADEOKAR, AM:

This appeal is filed by the Assessee as against the order passed by the Ld.Commissioner of Income-tax(Appeals)-13, Ahmedabad [hereinafter referred to as “the Ld.CIT(A)”], dated 01/06/2022, arising out of the assessment order passed by the Assessing Officer (AO) under section 143(3) r.w.s.144C(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 22/10/2021 relevant to the Assessment Year (AY) 2018-19.

Facts of the case:

2. The assessee filed his original return of income u/s.139(1) of the Act for the A.Y. 2018-19 declaring total income of Rs.16,590/-. The case was selected for scrutiny under CASS. During the course of assessment proceedings, the assessee submitted that, he is an Engineer (Under Water Inspector) working at offshore fields. During the year under consideration, the assessee shown income from other sources and capital gains. The assessee also received salary income from his employer (Oceaneering International GMBH) to the tune of Rs.61,74,262/- on which TDS of Rs.18,35,210/- u/s.192 of the Act was deducted, however, the same was shown as “exempt income” in the return of income filed by the assessee.

2.1. The assessee was requested to provide details of the offshore sites/rig/ship (including its name, ownership details, its control & management, coordinates of its location, etc.), where the work has been performed by him during the year under consideration. He was also asked to explain whether location of these offshore sites/rig/ship was within the part of "India" as defined in section 2(25A) of the Act?

2.2. The assessee in his reply contested that the place of duty of the assessee is in KG-D6 Oil Fields in Bay of Bengal in International water. The job is in international water, and it is not part of India as defined in section 2(25A) of the Income-tax Act.

2.3. The AO concluded that the KG-D6 Oil Fields in Bay of Bengal is part of Indian Territory and therefore, the work performed by the assessee cannot be termed as work outside Indian Territory. He further concluded that co-ordinates of KG-D6 Oil Fields in Bay of Bengal are situated within Exclusive Economic Zone of India and the same is within the part of "India" as defined in section 2(25A) of the Act.

2.4. The assessee was issued a show-cause notice as to why salary of Rs.61,74,262/- claimed as “exempt income”, should not be taxed u/s.5(2)(b) r.w.s.9(1)(ii) of the Act. In response thereto, the assessee furnished his reply and contested that, sailing foreign ship beyond Indian territorial waters even in Exclusive Economic Zone also is not covered in term "India" as per section 2(25A) of the Income tax Act. The assessee relied upon the case of ITAT Kolkatta bench, in the matter of Basab Mukherjee, Jalpaiguri vs Department of Income Tax , wherein case of CIT vs. Indo Oceanic Shipping Co. Ltd. [2001] 247 ITR 247 (Bom], was also discussed.

2.5. Not satisfied with the explanation submitted by the assessee, the Assessing Officer, added back Rs.61,74,262/- to the total income of the assessee under section 5(2)(b) r.w.s. 9(1)(ii) of the Income Tax Act.

3. The assessee filed an appeal before the Ld.CIT(A), who dismissed the appeal concluding that the income is earned by assessee is a salary for activities within India. For the sake of clarity, we reproduce the relevant part of the order of CIT(A) hereunder:

“9.3 Facts of the case are that the appellant is an employee of Oceaneering International GMBH, Singapore and received a salary of Rs. 61,74.262/- in US dollars. The nature of work performed by the appellant in KG-06 Oil Fiel