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Issues: Whether salary received by a non-resident for employment exercised in Korea was taxable in India or exempt under Article 15(1) of the India-Korea Double Taxation Avoidance Agreement.
Analysis: The assessee was a non-resident and had been deputed to Korea on an international assignment. The services against which the salary was paid were rendered outside India, and the salary was also offered to tax in Korea. Under section 9 of the Income-tax Act, salary is deemed to accrue or arise in India only to the extent it is payable for services rendered in India, including specified rest or leave periods connected with such Indian services. Since the services were rendered outside India, the income could not be treated as deemed to accrue or arise in India. Article 15(1) of the India-Korea DTAA also exempted the employment income because the individual was resident in Korea and the employment was outside India. The fact that tax was deducted at source in India and a part of the salary was voluntarily offered in the Indian return did not confer power on the Revenue to tax income not otherwise taxable under law.
Conclusion: The salary income was held not taxable in India under the Act or the India-Korea DTAA, and the issue was decided in favour of the assessee.
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