Treaty relief for employment income: U.S. resident salary held taxable only in the State of residence under the India-U.S. DTAA.

A U.S. resident employee's salary and related employment remuneration were treated as taxable only in the State of residence under Article 16 of the India-U.S. DTAA because the employee was present in India only briefly, the remuneration was paid by the foreign employer, and the amounts initially paid through an Indian entity were reimbursed. On those facts, the remuneration was not borne by a permanent establishment or fixed base in India, so the Article 16(2) exception applied and India had no taxing right over the salary income.

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Issues: Whether the applicant's salary and related employment remuneration were liable to tax in India under Article 16 of the India-U.S. DTAA, and whether the exception in Article 16(2) applied so as to make the income taxable only in the State of residence.

Analysis: The applicant was a resident of the U.S.A. and was present in India only for a brief period within the relevant year. The remuneration was paid by the foreign employer, and although an Indian entity made the initial payment of certain amounts, those amounts were reimbursed by the foreign employer. On the facts stated, the employment remuneration was not borne by a permanent establishment or fixed base in India, and the conditions of Article 16(2) were satisfied.

Conclusion: The applicant's remuneration was not taxable in India under the treaty, and question No. 1 was answered in the negative, in favour of the applicant. The remaining questions did not require adjudication.

Ratio Decidendi: Where a non-resident employee satisfies the treaty conditions for dependent personal services, including the 183-day presence test and the requirement that remuneration is not borne by a permanent establishment in the source State, the salary is taxable only in the State of residence.

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