Treaty salary exemption and cash donation deduction: managerial status under a tax treaty rejected, 80G relief sustained.

Salary earned from a Polish company was treated as taxable in India because the assessee's role, though managerial in a general sense, was not a top level managerial position under Article 17(2) of the treaty; the additional evidence was also not admitted, so the exemption failed and the Revenue's addition was restored. Deduction under section 80G for cash donations was sustained because the assessee produced receipts and supporting material, and the disallowance rested only on an unsubstantiated assumption that cash resources were insufficient. The result was mixed, with the Revenue succeeding on the salary issue and the assessee succeeding on the donation issue.

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Issues: (i) whether the assessee's salary received from the Polish company was exempt under the Double Taxation Avoidance Agreement on the footing that he occupied a top level managerial position; (ii) whether deduction under section 80G was allowable in respect of cash donations.

Issue (i): whether the assessee's salary received from the Polish company was exempt under the Double Taxation Avoidance Agreement on the footing that he occupied a top level managerial position.

Analysis: The assessee was described in the agreement and certificates as a service provider and his functions were to support establishing and preparing the Indian representative office at Bangalore. The work was performed from India and the assessee had only short visits to Poland. On the materials on record, the role was managerial in a general sense but did not amount to a top level managerial position contemplated by Article 17(2) of the agreement. The additional evidence sought to be produced was also not admitted.

Conclusion: The exemption under the Double Taxation Avoidance Agreement was not available and the addition made by the Assessing Officer was restored, in favour of Revenue.

Issue (ii): whether deduction under section 80G was allowable in respect of cash donations.

Analysis: The assessee produced material showing withdrawals, household expenses, and donation receipts. No cogent evidence was brought to show that the donations were not genuine. The disallowance proceeded only on assumption that the available cash was insufficient, which was not accepted.

Conclusion: The deduction under section 80G was upheld, in favour of the assessee.

Final Conclusion: The Revenue succeeded on the salary exemption issue and failed on the donation issue, resulting in one appeal being partly allowed and the other appeal being allowed.

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