Non-resident's Indian income taxable. Boarding not a perk. Interest compensatory, not penal. Assessee wins appeal.

The court ruled that salary earned during the off period by a non-resident technician working in India is taxable in India under section 9(1)(ii) of the Income-tax Act. Free boarding provided in hazardous work environments like oil rigs is deemed a necessity, not a perquisite. The court clarified that interest under section 234B is compensatory, not penal, and favored the assessee, emphasizing the importance of genuine disputes and proper reasoning. The appeal was disposed of in favor of the assessee, with no order as to costs.

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Issues:
1. Taxability of salary paid to a non-resident for off period outside India.
2. Whether free boarding facility provided by the employer constitutes a perquisite.
3. Legality of directing the Assessing Officer to charge interest under section 234B.

Issue 1 - Taxability of Salary for Off Period:
The judgment addresses the interpretation of section 9(1)(ii) of the Income-tax Act, 1961 concerning the taxability of salary earned in India by a non-resident. The court emphasizes that income under the head "Salaries" is deemed to accrue in India if services are rendered in India, regardless of the place of receipt. The case involved a technician employed by a foreign company executing contracts in India, where both on and off periods were integral to the contract. The court reasoned that even if the off period was for training or standby, it was directly connected to the services in India, making the salary earned during the off period taxable in India. The judgment highlighted the importance of the contract terms, surrounding circumstances, and the intention of the parties in determining tax liability.

Issue 2 - Free Boarding Facility as Perquisite:
Regarding the second issue, the court concluded that in hazardous and continuous work environments like oil rigs, free boarding provided by the employer is a necessity, not a perquisite. The court differentiated between luxury and necessity, stating that the value of free food and beverages should not be added to the employee's income as a perquisite.

Issue 3 - Charging Interest under Section 234B:
On the question of directing the Assessing Officer to charge interest under section 234B, the court clarified that the interest imposed is compensatory and not penal in nature. The judgment highlighted the importance of estimating current income for advance tax computation and the necessity to consider conflicting tribunal decisions when determining tax liability. The court ruled in favor of the assessee, emphasizing the need for a bona fide dispute and proper reasoning before imposing interest under section 234B.

In conclusion, the court ruled against the Department on the taxability of salary for the off period, stating it was taxable in India. However, it favored the assessee on the perquisite issue, determining that free boarding was not a perquisite, and on the interest charge under section 234B, citing the need for a genuine dispute and proper hearing. The appeal was disposed of accordingly, with no order as to costs.

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