Is Merchant Navy Officer's Salary Credited In Indian Bank Account Exempt From Income Tax? Supreme Court To Decide

The Supreme Court on Monday (Aug. 18) agreed to decide whether the income credited in an Indian bank account while working with a Foreign Entity would be exempted from the payment of Income Tax under the Income Tax Act, 1961..

The issue arose before the bench of Justices Pankaj Mithal and Prasanna B. Varale while hearing the appeal filed against the Punjab & Haryana High Court's decision upholding the Motor Accident Claims Tribunal (“MACT”) decision to deduct 30% towards tax liability while computing the compensation claim of the Appellant's deceased husband, who was employed with British Marine PLC, London as Merchant Navy Officer earning 3,200 USD monthly income.

Initially, the MACT awarded Rs. 36,04,000/- as final compensation to the Appellant, which included the 30% deduction as the tax liability payable towards the income earned by the deceased. The High Court upheld the MACT's decision, but enhanced compensation to ₹1.01 crores by adding 40% future prospects

Challenging the said deduction, the Appellant, wife of the deceased, approached the Supreme Court.

Agreeing to consider the issue, the bench granted leave in the matter, and framed a question of Whether Merchant Navy officers' foreign-earned income is taxable in India, and if not, whether the Tribunal and High Court erred in deducting 30% income tax while calculating compensation.

“One of the legal issues arising in this matter is whether a person employed in merchant navy as an officer and drawing salary in the accounts maintained in India is exempt from payment of income tax. In the event, he is exempted from payment of tax, the Tribunal ought not to have applied any deduction on account of income tax.”, the court said.

Because the issue has broader implications, the Court expedited the hearing.

Cause Title: VANDANA & ORS. VERSUS KESHAV & ORS.

Click here to read/download the order

Appearance:

For Petitioner(s) Mr. Aditya Hooda, Adv. Dr. Surender Singh Hooda, AOR Mr. Gagan Gupta, Sr. Adv. Mr. Rajeev Maheshwaranand Roy, AOR Mr. Nilesh Kumar, Adv. Mr. P Srinivasan, Adv.

For Respondent(s) Mr. Gagan Gupta, Sr. Adv. Mr. Rajeev Maheshwaranand Roy, AOR Mr. Nilesh Kumar, Adv. Mr. P Srinivasan, Adv.