Treaty exemption for overseas employment income applies where salary relates to services performed in China under the India-China DTAA.

Salary received in India for services performed in China was treated as exempt under Article 15(1) of the India-China DTAA because the income related to employment exercised in China. The assessee was on overseas assignment, stayed only a few days in India, and produced material showing tax residence and tax payment in China. The Tribunal also noted that the relevant income had already been offered to tax in China and no foreign tax credit was claimed in either jurisdiction. On those facts, treaty exemption applied to the salary earned for work done in China.

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Issues: Whether salary received in India for services rendered in China by a non-resident assessee was exempt under Article 15(1) of the India-China Double Taxation Avoidance Agreement.

Analysis: The assessee was on overseas assignment in China, had stayed only a few days in India, and produced material showing tax residence and tax payment in China. The salary in dispute related to services performed in China, and the Tribunal followed its coordinate-bench view that salary income is taxable where the employment is exercised. On the facts, the Tribunal held that the assessee had already offered the relevant income to tax in China and had not claimed foreign tax credit in either jurisdiction. The Tribunal therefore accepted that the treaty exemption under Article 15(1) applied to the salary earned for work done in China.

Conclusion: The salary income was held exempt in India under Article 15(1) of the India-China DTAA, and the assessee succeeded.

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