Tax treaty relief for non-resident salary income required fresh verification of residency and service-location evidence.

Salary income of a non-resident was examined for Indian taxability under section 5(2)(a) and the India-USA tax treaty, with treaty relief claimed on the basis that services were rendered outside India. The tax authorities had not reviewed the Tax Residency Certificate or supporting evidence on residency, place of work, and stay outside India, so the record was insufficient to decide treaty entitlement or domestic taxability conclusively. The matter was therefore restored for fresh adjudication, with the assessee allowed to produce the Tax Residency Certificate and other relevant material.

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Issues: Whether salary income received by a non-resident assessee was taxable in India and whether the claim of exemption under the India-USA tax treaty could be examined afresh on production of a Tax Residency Certificate and supporting evidence.

Analysis: The assessee claimed that the salary was earned for services rendered outside India and therefore was not taxable in India under Article 16(1) of the India-USA Double Taxation Avoidance Agreement. The departmental authorities declined treaty benefit because no Tax Residency Certificate was furnished and also applied section 5(2)(a) of the Income-tax Act, 1961 on the view that the income was received or deemed to be received in India. The record before the authorities did not contain the material necessary to decide the claim conclusively, including the Tax Residency Certificate and evidence regarding the place of rendering services and stay outside India. Since such evidence was stated to be available and was relevant to both treaty entitlement and domestic taxability, the matter required fresh examination.

Conclusion: The issue was restored to the Assessing Officer for de novo adjudication with opportunity to the assessee to furnish the Tax Residency Certificate and other supporting evidence.

Final Conclusion: The dispute was not finally decided on merits and was sent back for reconsideration after verification of the relevant treaty and factual materials.

Ratio Decidendi: Where treaty benefit and domestic taxability depend on factual proof such as tax residency and the place where services were rendered, and the necessary evidence was not examined earlier, the matter may be remanded for fresh adjudication after granting an opportunity to produce the material.

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