DTAA treaty relief and salary taxation, while house-property income estimation was remanded for fresh verification.

Treaty relief under the India-China DTAA was tested against Article 23 and section 5(2), and the claimed exemption for salary income failed because the treaty conditions for eliminating double taxation were not satisfied on the assessee's non-resident status; the salary was therefore taxable in India. The estimated house-property rental income lacked adequate supporting verification, so the matter was sent back to the Assessing Officer for fresh examination after giving an opportunity of hearing. The appeal thus succeeded only to the limited extent of remand on the rental-income issue, while the salary exemption claim was rejected.

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Issues: (i) Whether salary income was entitled to exemption under Article 15(1) of the Double Taxation Avoidance Agreement between India and China in view of Article 23 and section 5(2) of the Income-tax Act, 1961; (ii) Whether the estimation of rental income from the house property required interference or remand.

Issue (i): Whether salary income was entitled to exemption under Article 15(1) of the Double Taxation Avoidance Agreement between India and China in view of Article 23 and section 5(2) of the Income-tax Act, 1961.

Analysis: The treaty provisions were read together and the relief claimed under Article 15(1) was tested against Article 23. The assessee was treated as a non-resident for the Indian tax law purposes and, on that basis, the Tribunal held that the treaty mechanism for elimination of double taxation did not support the claimed exemption. The salary received in India was therefore held taxable under section 5(2).

Conclusion: The exemption claim was rejected and the disallowance was sustained, against the assessee.

Issue (ii): Whether the estimation of rental income from the house property required interference or remand.

Analysis: The rental income was estimated without supporting documentary evidence, but the assessee disputed the basis of valuation and sought a lower estimate. As the correctness of the claim had not been properly verified on the available material, the matter required fresh examination by the Assessing Officer after granting an opportunity of hearing.

Conclusion: The issue was remitted for fresh verification, in favour of the assessee for statistical purposes.

Final Conclusion: The appeal succeeded only to the limited extent of remand on the house-property income issue, while the treaty-based salary exemption claim failed.

Ratio Decidendi: Treaty relief must satisfy the specific conditions of the applicable double taxation agreement, and where the factual and residency conditions are not met, the claimed exemption cannot override taxation under the domestic charging provision.

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