Treaty exemption for overseas salary income restored for fresh verification of residence and employment evidence

Treaty exemption for a non-resident employee's salary depended on proof of residential status, the place and nature of employment services, and supporting assignment and tax-residency records. Because the material before the lower authorities was incomplete and the relevant documents had not been verified, the question whether the salary was taxable in India under Article 16(1) of the India-UK DTAA could not be finally decided. The matter was therefore restored to the Assessing Officer for de novo adjudication after examination of the evidence to be produced by the assessee, with an opportunity of hearing.

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Issues: Whether the salary received by a non-resident employee during assignment in the United Kingdom was taxable in India under the India-UK DTAA, and whether the matter required restoration to the Assessing Officer for verification of supporting evidence.

Analysis: The claim of treaty exemption depended on proof of the assessee's residential status, the nature and place of employment services, and supporting assignment and tax-residency records. The material before the lower authorities was incomplete, and the assessee indicated willingness to furnish the necessary documents including assignment letters, tax residency proof, and UK tax records. Since these documents were essential to determine the applicability of Article 16(1) of the India-UK DTAA and the correctness of the taxability of salary income, fresh verification was necessary.

Conclusion: The issue was restored to the Assessing Officer for de novo adjudication after examination of the evidence to be produced by the assessee. The assessee succeeded to that extent.

Final Conclusion: The assessment on this salary item was not finally sustained or deleted on merits, and the matter was sent back for reconsideration with an opportunity of hearing.

Ratio Decidendi: Where entitlement to treaty protection for employment income turns on unverified facts such as residential status and performance of services abroad, the matter may be remanded for fresh factual examination rather than decided on an incomplete record.

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