SHIRISHKUMAR KULKARNI Vs. STATE

JUDGEMENT

(1.) 1. Mr. Shirishkumar Kulkarni (for short 'the applicant') who is a citizen of India, has been living and working in the United States of America (for short 'the USA'). In his application filed under Section 245Q of the IT Act (for short 'the Act'), he has sought advance ruling on the following questions:

(2.) The applicant lives and works in the USA since December, 1993, and is a resident of that country. During the period of his employment in the USA, he contributed towards a 401K account which deals in employees' retiral benefit. A part of his salary used to be deposited by his employer into this account on tax deferred basis. As per the Internal Revenue Code (US law), tax is payable on these amounts at the time of their disbursement to the applicant. The applicant has from time to time invested moneys from out of this account in securities in the US market. He proposes to transfer his entire balance lying in the 40 IK account into another similar scheme known as the Individual Retirement Account (IRA) offered by the Brown company which is authorised in this regard by the United States Internal Revenue Services (IRS). The US law permits direct transfer of fund from a 401K account into the IRA, keeping its tax deferred character intact. The applicant is planning to come back to India shortly and settle down here. After his return to India, the applicant would be withdrawing moneys from time to time from the IRA, as and when he would need the same. The Brown company would withhold income-tax on such withdrawals and remit the same to the ERS. The applicant has nominated his wife, Mrs. Madhavi Kulkarni, who will be a resident in India, as the beneficiary of the money available in the IRA, in the event of his death.

(3.) THE applicant has in his rejoinder, stated that accruals in the IRA would arise in the USA. THE taxability in India of such accruals would depend on the residential status of the applicant at the relevant time. He would have these accruals subsequently transferred to his bank account in India. He has also stated that the fact that the US law treats the entire disbursement from the IRA taxable, would not change the above legal position in India. THE applicant has finally claimed the benefit of the provisions of the DTAA.