Treaty relief without Tax Residency Certificate where residency is proven and Austrian employment income is taxable only abroad.

A Tax Residency Certificate is treated as procedural rather than an absolute precondition for claiming treaty relief under the India-Austria DTAA where residency and entitlement are otherwise established. The text also states that salary and foreign allowance for employment exercised in Austria fall within Article 15(1) and are outside Indian taxability when the assessee is non-resident in India and tax resident of Austria. It further notes that receipt in India and absence of foreign bank records do not defeat treaty relief once the place of employment and treaty conditions are proved, and that such foreign employment income is excluded from section 5(2) to the extent it arises from services rendered abroad.

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Issues: (i) Whether the assessee was entitled to the benefit of the India-Austria DTAA under Article 15(1) despite non-production of a Tax Residency Certificate from Austria; (ii) Whether the salary and foreign allowance received for employment exercised in Austria were taxable in India.

Issue (i): Whether the assessee was entitled to the benefit of the India-Austria DTAA under Article 15(1) despite non-production of a Tax Residency Certificate from Austria.

Analysis: The assessee claimed treaty relief as a resident of Austria and explained that procurement of the foreign residence certificate was not possible despite efforts. The relief under section 90(4) was treated as procedural and not as a substantive bar to treaty benefits where the assessee otherwise established residency and the relevant employment facts. Treaty provisions were held to prevail over the domestic law to the extent of inconsistency.

Conclusion: The non-production of the Tax Residency Certificate did not disentitle the assessee from claiming treaty relief under Article 15(1).

Issue (ii): Whether the salary and foreign allowance received for employment exercised in Austria were taxable in India.

Analysis: The assessee was found to be a non-resident in India and a tax resident of Austria for the relevant year. The remuneration related to services rendered in Austria, satisfying the conditions of Article 15(1) and Article 4(1) of the DTAA. The objections regarding receipt in India and absence of foreign bank records were held to be irrelevant once the place of employment and treaty entitlement were established. The income was also considered outside the scope of total income under section 5(2) to the extent it arose from services rendered abroad.

Conclusion: The salary and foreign allowance earned for services rendered in Austria were not taxable in India.

Final Conclusion: The assessee was held entitled to treaty relief and deletion of the tax demand on the impugned foreign salary and allowance income.

Ratio Decidendi: A Tax Residency Certificate is not an absolute precondition to treaty relief where residency and treaty entitlement are otherwise established, and remuneration for employment exercised in the other contracting state is taxable only in that state under the applicable DTAA.

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