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Mere Securing a House on Rent in USA is not conclusive fact that Assessee is US Resident to Allow DTAA Benefit: ITAT
January, 24th 2023

The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) held that mere securing a house on rent in the USA is not the conclusive fact that the assessee is a US resident to allow DTAA benefit.

Jenendra Kumar Jain, the assessee is an individual. During the assessment year 2016-17, he was employed with Amazon Development Centre (India) Pvt. Ltd (Amazon India) between 1/4/2015 and 17/10/2015, and was subsequently transferred to Amazon Corporate LLC (Amazon USA) from 20/10/2015. The assessee resided in India for more than 183 days during the financial year 2015-16 and, therefore, he qualifies to be a Resident and Ordinarily Resident (ROR) in India for the assessment year 2016-17.

The Assessee filed the return of income for the assessment year 201617 but did not include his income between the period 17/10/2015 and 31/3/2016 the period during which the assessee was under the employment with Amazon USA as he was entitled to avail the benefit under the Income Tax Act, 1961 or India-USA Double Taxation Avoidance Agreement (DTAA).


The Assessing Officer viewed that the shift of the assessee to the USA was only a temporary one and that is the reason why no sites of employment were mentioned in the letter because the company treated his position to be based in Bangalore and once the assessee performed to satisfactory level then only you would get a fresh appointment at a given place of work.

Further, AO rejected the tiebreaker plea under Article 4(2)(a) of DTAA stating that the assessee had a permanent home available in India, and also he had personal relations like a spouse, parents, in-laws etc., in India during that period, brought the income of salary earned by the assessee in USA to tax in India.

The CIT(A) found that the assessee fits into the tiebreaker test and since he is an Indian national, such test breaks to India. Further found that the exemption claimed by the assessee in respect of salary earned in the USA is not correct not only as per the DTAA but also as per applicable provisions of the Act which emphasise that the global income of resident assessee needs to be taxed in India.

It was noted that for calculating the SPT in the context of US Tax resident consideration, it is enough if the assessee stays for 31 days in the current year or 183 days during the period of three years which includes the current year and two immediate preceding years counting all the days of the current year, 1/3rd of the days of presence in the first year and 1/6th of the days of presence in the second year before the current year. 

Article 4(1)(a) of DTAA excludes a person who is liable to tax in the USA in respect only to income from the sources in the USA from the definition of ‘resident’ who is otherwise liable to be taxed by reason of his domicile, residence, citizenship, place of management, place of incorporation etc.  

A Coram comprising of Shri Rama Kanta Panda, Accountant Member & Shri K Narasimha Chary, Judicial Member observed that merely securing a house on rent in the USA is not the conclusive fact that the assessee had become a USA resident the moment he moved from India to the USA.

The Tribunal upheld the impugned order and further directed the Assessing Officer to consider the request of the assessee in respect of the grant of a foreign tax credit of the taxes paid by the assessee in USA  in accordance with law.

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