Treaty benefit under India-USA DTAA kept salary earned in the USA taxable there, not in India.

Section 90 permits a treaty override where the India-USA DTAA is more beneficial to the assessee. Under Article 16, salary from employment exercised in the other Contracting State is generally taxable in that State, and the Article 16(2) exception applies only if all stipulated conditions are satisfied together. On the facts, the assessee met only the physical-presence condition and failed the remaining conditions, so the treaty exception was unavailable. The salary earned in the USA was therefore taxable in the USA and not in India, and the corresponding addition was deleted.

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Issues: Whether the salary received by the assessee in the USA was taxable in India or in the USA under the India-USA DTAA and section 90 of the Income-tax Act, 1961.

Analysis: Section 90 permits application of the double taxation avoidance agreement where it is more beneficial to the assessee. Under Article 16 of the India-USA DTAA, salary from employment exercised in the other Contracting State is generally taxable there, while the exception in Article 16(2) applies only if the stipulated conditions operate together. The assessee satisfied only the physical-presence condition, and the remaining conditions were not met. The lower authorities had relied only on section 5 and section 90 to deny treaty benefit, but section 90 does not exclude the operation of the DTAA where it is beneficial to the assessee.

Conclusion: The salary income earned in the USA was held taxable in the USA and not in India, and the addition on this account was deleted.

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