Domestic law taxability of cross-border consultant payments remanded for fresh assessment after incomplete treaty-only examination.

The remittance to an overseas consultant had been examined only under treaty characterisation as royalty or fees for included services, while the domestic law taxability provision was not considered by the Assessing Officer. As the core question whether the payment was exigible to tax under domestic law required factual and legal examination, the matter was remitted for fresh adjudication at the assessment stage with opportunity to the assessee. The substantive taxability issue was therefore left open and not decided conclusively on the incomplete record.

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Issues: Whether the question of taxability of the payment under the domestic law provision had to be examined afresh by the Assessing Officer, since the authorities below had considered only the treaty characterisation of the remittance.

Analysis: The dispute before the lower authorities had been confined to whether the remittance to the overseas consultant was royalty or fees for included services under the treaty. The record showed that the domestic law issue under the relevant income-tax provision had not been examined at all by the Assessing Officer. In these circumstances, the fundamental question whether the payment was exigible to tax under domestic law required factual and legal examination at the assessment stage, with opportunity to the assessee.

Conclusion: The matter was remitted to the Assessing Officer for examination of the domestic law taxability issue.

Final Conclusion: The appeals succeeded only to the extent of obtaining a remand, and the substantive taxability question was left for fresh adjudication by the Assessing Officer.

Ratio Decidendi: Where the crucial domestic law basis for taxing a cross-border payment has not been examined by the authorities below, the proper course is to remit the matter for fresh consideration rather than decide the issue conclusively on an incomplete record.

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