Treaty relief for foreign employment income cannot be denied merely for lack of a Tax Residency Certificate

Salary income and foreign allowance paid for employment exercised in Austria were treated as exempt from Indian tax under Article 15(1) of the India-Austria DTAA because the assessee was a non-resident in India and a tax resident of Austria. The absence of a Tax Residency Certificate was not treated as an absolute bar to treaty relief where the surrounding facts established genuine entitlement, and section 90(4) could not override the treaty on those facts. The domestic charging provisions yielded to the treaty to the extent of inconsistency, so the tax addition was deleted and treaty-based exemption allowed.

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Issues: Whether the salary income and foreign allowance received for employment exercised in Austria were taxable in India, and whether denial of treaty benefits for non-production of a Tax Residency Certificate was justified.

Analysis: The assessee was found to be a non-resident in India and a tax resident of Austria for the relevant year. On the facts, the remuneration related to employment exercised in Austria, satisfying the conditions of Article 15(1) of the India-Austria DTAA. The absence of a Tax Residency Certificate was held not to defeat treaty relief where the surrounding circumstances showed genuine entitlement to the benefit and compliance with section 90(4) could not be treated as an absolute bar. The treaty was held to prevail over the domestic charging provisions to the extent of inconsistency.

Conclusion: The salary income and foreign allowance were not taxable in India under the treaty, and denial of relief solely for want of a Tax Residency Certificate was unsustainable.

Final Conclusion: The addition made by the tax authorities was deleted and the assessee's claim for treaty-based exemption succeeded.

Ratio Decidendi: Treaty relief under a double taxation avoidance agreement cannot be denied merely for non-production of a Tax Residency Certificate when the assessee otherwise establishes entitlement to the treaty benefit on the facts.

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