The Income Tax Appellate Tribunal (ITAT), Chennai Bench, has held that salary income earned by a Chinese tax resident for work performed in China will be taxable only in China even if such salary was credited to the taxpayer’s Indian bank account due to administrative convenience.
The bench Manu Kumar Giri (Judicial Member) and S. R. Raghunatha (Accountant Member), held that the assessee was a tax resident of China and rendered services in China. Under Article 15(1) of the India-China Double Taxation Avoidance Agreement (DTAA), salary income is taxable only in the state where the employment is exercised. The mere credit of salary in an Indian bank account for administrative convenience does not trigger taxability in India.
The appellant/assessee, Sivakarthick Raman is an employee of BMW India Pvt. Ltd., who was seconded to BMW Brilliance Automotive Limited, China (BMW China), during FY 2021–22. While his payroll remained in India, the Tribunal ruled that the situs of employment—not the place of salary receipt—determines taxability.
The appellant, who was not present in India during the relevant fiscal year and qualified as a tax resident of China, received salary in his Indian bank account for services rendered exclusively in China. The AO, however, denied exemption under Article 15(1) of the DTAA and taxed the salary in India, citing that it was credited by an Indian employer.
In his return for AY 2022–23, the taxpayer claimed a refund of ₹52.22 lakh on tax deducted at source in India, arguing that the salary of ₹1.53 crore was not taxable in India under DTAA provisions. His claim was backed by documentary evidence including employment contracts, secondment agreements, China tax returns, and reconciliation of Indian Form 16 data with actual cross-charge to BMW China.
The Tribunal overruled the AO’s reliance on Section 5(2) of the Income Tax Act and Article 23 of the DTAA, stating that Article 15 operates independently and was clearly applicable in this case.
Case Details
Case Title: Sivakarthick Raman Versus Assistant Commissioner Income Tax
Case No.: ITA No.:281/Chny/2025
Date: 07.07.2025
Counsel For Appellant: Preeti Goel, Advocate
Counsel For Respondent: Anitha, Addl. C.I.T.
Read More: Income Tax Dept. Cracks Down on Bogus Deductions, Rs. 1,045 Crore in False Refunds
