Residential status and treaty tie-break rules determine foreign salary taxation, visit-day computation, and section 234B credit treatment.

Section 6(1)(c) is analysed to determine residential status of an Indian citizen deputed abroad, with the discussion treating a genuine visit to India as excludable from the day-count and excluding the day of arrival under the General Clauses Act. Article 4(2) of the India-USA DTAA is applied to tie-break dual residence by examining permanent home, centre of vital interests, habitual abode and nationality, with stronger family and economic links to India being decisive. The notes also explain that foreign salary taxation depends on residential status and treaty rules, and that section 234B interest must be computed after giving credit for treaty-based relief under section 90.

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Issues: (i) whether the assessee, a citizen deputed abroad by an Indian employer, was resident in India under section 6(1)(c) of the Income-tax Act, 1961, and whether the period of visit to India and the fraction of the day of arrival were to be excluded in computing the statutory period; (ii) whether the assessee could be treated as a resident of India or the United States under Article 4 of the India-USA DTAA; (iii) whether salary earned in the United States was taxable in India and whether credit for foreign tax was available in computing tax liability and interest under section 234B; and (iv) whether the Assessing Officer had jurisdiction to complete the assessment.

Issue (i): Whether the assessee was resident in India under section 6(1)(c), and whether the visit period and fraction of a day were to be excluded.

Analysis: The statutory scheme of section 6(1)(c) was read with its Explanations and the legislative history. Clause (a) of the Explanation was held inapplicable because it operates for the previous year in which the assessee leaves India for employment outside India. For clause (b), the reasoning turned on the purpose of the 182-day substitute limit for a person who, being outside India, comes on a visit to India. The period spent in India during a genuine visit was held not to be counted for the 60-day threshold. The order further applied the General Clauses Act to exclude the first day of arrival, holding that the counting of days for section 6(1)(c) must exclude the day of arrival when the period is computed from the date of entry to the date of exit. On that basis, the stay fell below the threshold.

Conclusion: The assessee was held to be non-resident under section 6(1)(c), and the visit period and day of arrival were excluded from computation.

Issue (ii): Whether the assessee was to be treated as a resident of India or the United States under Article 4 of the India-USA DTAA.

Analysis: Article 4(2) was applied because the assessee was found to have connections with both States. The concepts of permanent home, centre of vital interests, habitual abode, and nationality were considered. The family's residence in India, the Indian employment, the use of Indian address in the passport, and the short-term rented accommodation in the United States were treated as showing closer personal and economic relations with India and habitual abode in India. Although the assessee had rented accommodation abroad, the arrangement was linked to deputation and did not displace the stronger Indian connection.

Conclusion: The assessee was held to be a resident of India for treaty purposes under Article 4(2).

Issue (iii): Whether salary earned in the United States was taxable in India and whether foreign tax credit and the manner of computing interest under section 234B were correctly dealt with.

Analysis: Under Article 16 of the DTAA, remuneration of a resident of a Contracting State is taxable in that State unless the employment is exercised in the other State, in which event taxation may also arise there subject to the treaty conditions. The reasoning accepted that if the assessee were resident in India, the salary could be taxed in India with relief by way of credit for tax paid in the United States under Article 25. On section 234B, the order treated interest as compensatory and applied the principle that credit of tax relief under section 90 must be given before computing interest, so that interest is not levied on an amount for which credit is available.

Conclusion: Salary earned abroad was not taxable in India in view of the finding that the assessee was non-resident, and the computation of section 234B interest after allowing section 90 credit was upheld in favour of the assessee.

Issue (iv): Whether the Assessing Officer had jurisdiction to complete the assessment.

Analysis: The assessment was upheld on the basis that the assessee had originally disclosed resident status and later sought treatment as non-resident, resulting in transfer to International Taxation jurisdiction. The officer completing the assessment was held competent to determine the correct status and to continue with the assessment.

Conclusion: The jurisdictional challenge failed.

Final Conclusion: The appeal succeeded on the core residential-status and taxability questions, but failed on the jurisdictional objection, resulting in partial relief to the assessee.

Ratio Decidendi: For determining residential status under section 6(1)(c), a genuine visit to India is excluded from the day-count computation, and the first day of arrival is not counted; where the assessee is found non-resident, foreign salary is not taxable in India, while section 234B interest must be computed after allowing treaty-based relief under section 90.

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