Non-resident salary credited to an NRE account is not taxable in India if the services were rendered outside India.

Salary received by a non-resident for services rendered outside India does not become taxable in India merely because it is credited to an NRE account. The deeming rule for salary accrual applies only when the services are rendered in India, so credit into an Indian NRE account by itself does not create Indian tax liability. CBDT Circular No. 13/2017 was treated as a beneficial clarification addressing hardship in comparable situations, and its practical application was not confined narrowly to seafarers where the employment facts were similar. On that basis, the tax addition was deleted.

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Issues: Whether salary received by a non-resident in an NRE account in India for services rendered outside India was taxable in India, and whether CBDT Circular No. 13/2017 could be applied beyond seafarers to such onshore employment.

Analysis: The salary was held to have accrued for services rendered outside India, and the mere credit of the amount into an NRE account in India did not make it taxable as income in India. The provision deeming salary income to accrue or arise in India applied only where services were rendered in India. The circular was treated as a beneficial clarification intended to alleviate hardship where a non-resident's salary is credited to an Indian NRE account, and its use was not confined narrowly to the word "seafarer" when the underlying employment situation was comparable.

Conclusion: The addition was deleted and the assessee's challenge succeeded.

Final Conclusion: Salary of a non-resident for services rendered outside India does not become taxable in India merely because it is credited to an NRE account, and the beneficial circular was applied to the facts of the case.

Ratio Decidendi: Salary is deemed to accrue or arise in India only when the services are rendered in India, and credit of such salary to an NRE account by itself does not attract Indian tax liability.

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