Treaty exemption for China-based employment income rejected, with bonus sustained as taxable in India.

Under the India-China tax treaty, remuneration and bonus received by a non-resident employee resident in China for services rendered in China were held not to qualify for exemption under Article 15(1) on the facts found. The Tribunal followed its earlier view on the same treaty provisions and rejected the claim that the amounts were outside Indian tax net. The bonus component was therefore sustained as taxable in India, and the assessee's treaty-based exemption claim failed.

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Issues: Whether the assessee, a non-resident of India and resident of China, was entitled to exemption under Article 15(1) of the India-China Double Taxation Avoidance Agreement in respect of salary and bonus received for services rendered in China, and whether the bonus component could be taxed in India.

Analysis: The assessee claimed that the remuneration related to services rendered outside India and therefore fell within Article 15(1) of the treaty. The Revenue relied on the view that the bonus formed part of the employment compensation and was attributable to the original employer, and that Article 23 of the treaty granted relief only to a resident of India in the relevant context. The Tribunal followed its earlier decision on the same treaty provisions and held that, on the facts of a non-resident employee resident of China, the assessee was not entitled to the claimed treaty exemption under Article 15(1).

Conclusion: The claim for exemption under Article 15(1) was rejected and the addition of the bonus amount in India was sustained.

Final Conclusion: The appeal failed and the assessment was upheld insofar as it denied treaty exemption on the disputed remuneration.

Ratio Decidendi: Under the India-China treaty, a non-resident assessee who is resident in China was not entitled to the claimed exemption under Article 15(1) on the facts found by the Tribunal, and the corresponding remuneration could be brought to tax in India.

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