Treaty residence under DTAA tie-breaker turned on habitual abode; foreign assignment salary was not taxable in India.

For treaty residence under Article 4 of the DTAA, mere ownership of a house in India did not by itself show that a permanent home was available in India. The residence enquiry had to consider the full set of connecting factors, including the family's relocation, foreign residency certificate, accommodation in Indonesia, children's schooling, insurance, bank account and employment assignment. On those facts, the assessee's habitual abode and centre of personal and economic life were in Indonesia, so the treaty tie-breaker treated him as resident there and the salary from the foreign assignment was not taxable in India to that extent.

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Issues: Whether the assessee's salary earned during the Indonesia assignment for the relevant period was taxable in India on the footing that he had a permanent home available in India, and whether, under the treaty tie-breaker rules, his residence had to be determined by habitual abode and other connecting factors.

Analysis: The residency test under Article 4 of the DTAA required a proper application of the tie-breaker rules. Mere ownership of a residential property in India did not, by itself, establish that a permanent home was available in India. The surrounding facts, including the family's relocation to Indonesia, the foreign tax residency certificate, lease of accommodation in Indonesia, children's schooling there, insurance, bank account, and employment assignment, had to be considered together. On those facts, the assessee did not have a permanent home available in India in the treaty sense, and the enquiry moved to habitual abode. The record showed that the assessee's habitual abode and personal and economic life were in Indonesia for the relevant period. The treaty provisions therefore prevailed to the extent more beneficial, and the income could not be treated as global income taxable in India for that period.

Conclusion: The residential status was to be determined in favour of Indonesia under the DTAA tie-breaker rules, and the salary income for the foreign assignment period was not taxable in India.

Final Conclusion: The addition made on account of foreign assignment salary was unsustainable, and the assessee succeeded in the appeal.

Ratio Decidendi: For treaty residence under Article 4, a "permanent home available" requires more than mere ownership of a house in India; the residence enquiry must be made on the treaty's qualitative connecting factors, and where the assessee's habitual abode and centre of personal and economic life are abroad, the foreign assignment income is not taxable in India to the extent the treaty grants relief.

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