Foreign salary and deputation benefits are not taxable in India for a not ordinarily resident assessee absent Indian accrual or receipt.

For an assessee who is not ordinarily resident, salary earned for foreign employment is outside the Indian tax net to the extent it does not accrue or arise in India, and section 90(2) requires the more beneficial statutory provision to prevail over any treaty position. Rent-free accommodation linked to the foreign deputation was therefore not taxable once the foreign salary was held outside Indian taxation. Daily allowance also could not be taxed where the record showed it was paid to the foreign employer and not actually received by the assessee, since an addition cannot rest on assumption without proof of receipt or taxable nexus.

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Issues: (i) Whether salary earned outside India by an assessee who was "not ordinarily resident" in India was taxable in India; (ii) whether rent-free accommodation and daily allowance provided in connection with the deputation were taxable as perquisites or other income in the hands of the assessee.

Issue (i): Whether salary earned outside India by an assessee who was "not ordinarily resident" in India was taxable in India.

Analysis: The assessee's residential status was undisputedly that of "not ordinarily resident" under the Act. On that footing, the relevant provisions governing scope of total income confined taxation to income accruing or arising in India, while income earned abroad did not enter the Indian tax net. The treaty-based reliance did not displace this result because section 90(2) required application of the provision more beneficial to the assessee. The salary paid in Japan for foreign employment was therefore outside Indian taxability.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

Issue (ii): Whether rent-free accommodation and daily allowance provided in connection with the deputation were taxable as perquisites or other income in the hands of the assessee.

Analysis: The accommodation component was treated as not taxable once the salary earned abroad was held outside the Indian tax net on the assessee's residential status and the beneficial operation of the Act over the treaty. As regards daily allowance, the record showed that the amount was paid by the Indian company to the foreign employer and was not in fact received by the assessee. In the absence of evidence of receipt by the assessee, the addition could not be sustained on assumption or surmise, and the exemption contention also supported the non-taxability claim.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

Final Conclusion: The questions of law were answered in favour of the assessee, and the Revenue's challenge to the Tribunal's deletion of the additions failed.

Ratio Decidendi: For an assessee who is not ordinarily resident, foreign salary is taxable in India only to the extent permitted by the Act, and section 90(2) requires the more beneficial statutory provision to prevail over the treaty where applicable; additions for alleged perquisites cannot stand without proof of actual receipt or taxable nexus.

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