Non-resident salary earned and received outside India stays outside Indian tax net despite later credit to an NRE account.

Salary earned by a non-resident employee of a foreign company for services rendered outside India, and received outside India on board a ship, did not become taxable in India merely because part of it was later remitted to an NRE account in India. The relevant consideration was that the source, accrual, and initial receipt of the salary were all outside India, so the later credit to an Indian NRE account did not change the character of the income or bring it within the Indian tax net under the Income-tax Act, 1961.

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Issues: Whether salary earned by a non-resident employee of a foreign company for services rendered outside India and received on board a ship, with a portion later remitted to an NRE account in India, was taxable in India.

Analysis: The assessee was a non-resident during the relevant assessment years and was employed by a foreign company. The salary was earned for services rendered in international waters outside India, and the payment was received outside India on board the ship. The mere fact that a part of the salary was subsequently credited to the assessee's NRE account in India did not alter the character of the income or attract taxability in India when the source, accrual, and receipt of the salary were outside India. On these facts, the provisions of the Income-tax Act, 1961 governing total income and receipt in India did not apply to bring the salary within the Indian tax net.

Conclusion: The salary income was not taxable in India, and the appeal by the revenue failed.

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