Treaty exemption for foreign technicians' remuneration where non-resident conditions and no Indian permanent establishment were satisfied.

Foreign technicians' remuneration was treated as exempt from Indian tax under article 15 of the India-Czechoslovakia double taxation treaty because they were non-residents present in India for less than 183 days, the payments were in substance made on behalf of a non-resident employer, and the employer had no permanent establishment in India. On those facts, article 15(2) applied and Indian taxation was barred. The challenge to tax paid on behalf of the technicians also failed once treaty exemption was accepted, and the assessments could not stand.

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Issues: Whether the remuneration of the foreign technicians was exempt from Indian tax under article 15 of the double taxation avoidance agreement between India and Czechoslovakia.

Analysis: Article 15 applied to salaries, wages and similar remuneration derived by a resident of one contracting state in respect of employment exercised in the other state. The technicians were treated as non-residents and were present in India for less than 183 days. The payments shown by BHEL were in substance remittances to the foreign employer, Skoda Export, and there was no permanent establishment of that employer in India. On those facts, the conditions in article 15(2) were satisfied and the remuneration, if any, could not be taxed in India. The challenge to tax paid on behalf of the technicians did not survive once exemption under the treaty was accepted.

Conclusion: The remuneration of the foreign technicians was not taxable in India under the treaty, and the assessments could not stand.

Ratio Decidendi: Where a non-resident employee is present in India for less than 183 days and the remuneration is paid by or on behalf of a non-resident employer without being borne by a permanent establishment in India, article 15 of the treaty bars Indian taxation of that remuneration.

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