Appellant's USA salary not taxable in India; Tribunal orders interest recalculation under Section 234B with Section 90 relief.

The Tribunal partly allowed the appeal, determining the appellant as a non-resident for the relevant assessment year. Consequently, the salary earned in the USA was not taxable in India. The Tribunal directed that interest under section 234B be computed after considering tax relief under section 90. It upheld the jurisdiction of the Assessing Officer (International Taxation) and dismissed the grounds concerning the validity of issuing notice within the time limit.

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Issues Involved:
1. Determination of the residential status of the appellant.
2. Applicability of Article 4(2) of the Indo-US DTAA.
3. Taxability of salary earned in the USA under Article 16 of the DTAA.
4. Computation of interest under section 234B of the Income-tax Act.
5. Jurisdiction of the Assessing Officer.
6. Validity of issuing notice within the time limit.

Issue-wise Detailed Analysis:

1. Determination of the Residential Status of the Appellant:
The appellant, an employee of IBM Global Services India (P.) Ltd., was deputed to work in Chicago, USA. The Assessing Officer determined the appellant's status as 'resident' based on section 6(1)(c) of the Income-tax Act, which states that an individual is a resident if they have been in India for 365 days or more in the preceding four years and for 60 days or more in the current year. The appellant argued that Explanation (b) to section 6(1) should apply, extending the 60-day period to 182 days for citizens of India who come on a visit. The Tribunal held that the appellant's stay in India from 18-8-2004 to 6-9-2004 was a visit and should be excluded from the 60-day count, making the appellant a non-resident.

2. Applicability of Article 4(2) of the Indo-US DTAA:
The Assessing Officer and CIT(A) determined that the appellant had a permanent home in India and closer personal and economic relations with India, thus deeming the appellant a resident of India under Article 4(2) of the DTAA. The Tribunal noted that the appellant's family lived in India, and he was employed by an Indian company, reinforcing his closer ties to India. However, since the Tribunal held the appellant as a non-resident under section 6(1)(c), this issue became secondary.

3. Taxability of Salary Earned in the USA under Article 16 of the DTAA:
The Assessing Officer included the salary earned in the USA as taxable in India, citing Article 16 of the DTAA, which allows taxation in the resident country. The Tribunal referenced Article 16/18, which states that salary is taxable in the country where the employment is exercised unless specific conditions are met. Since the Tribunal held the appellant as a non-resident, the salary earned in the USA was not taxable in India. However, if the appellant were considered a resident, the salary would be taxable in India with relief under Article 25 of the DTAA.

4. Computation of Interest under Section 234B:
The appellant argued that interest under section 234B should be computed after giving credit for relief under section 90(2). The Tribunal agreed, citing that interest is compensatory and should be charged after giving credit for tax relief under section 90. This aligns with the principle that the assessee should not pay interest on amounts for which they are entitled to credit.

5. Jurisdiction of the Assessing Officer:
The appellant claimed that the Assessing Officer (International Taxation) should not have jurisdiction once the status was determined as resident. The Tribunal held that since the appellant initially claimed non-resident status, the International Taxation Officer had jurisdiction. The Assessing Officer is authorized to determine the correct status during assessment.

6. Validity of Issuing Notice within Time Limit:
These grounds were not pressed by the appellant and were dismissed by the Tribunal.

Conclusion:
The appeal was partly allowed, with the Tribunal holding that the appellant was a non-resident for the relevant assessment year, thus excluding the salary earned in the USA from Indian taxation and directing that interest under section 234B be computed after giving credit for tax relief under section 90. The Tribunal upheld the jurisdiction of the Assessing Officer (International Taxation) and dismissed the grounds related to the validity of issuing notice within the time limit.

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