Foreign-sourced remuneration and stock option perquisites outside India were treated as non-taxable for a non-resident under the India-UK treaty.

A non-resident employee's foreign assignment allowance first credited outside India was held outside Indian tax under section 5(2), because non-resident income is taxable only on receipt, deemed receipt, accrual, or deemed accrual in India. The stock option perquisite linked to services rendered outside India was also treated as outside taxable income in India. On treaty residence being established by a UK tax residency certificate, exemption under Article 16(1) of the India-UK DTAA read with section 90(2) was applied to the salary income in question. Delay in filing the appeal was condoned to permit adjudication on merits.

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Issues: (i) Whether the delay in filing the appeal deserved to be condoned; (ii) whether foreign assignment allowance received outside India for services rendered in the United Kingdom was taxable in India in the hands of a non-resident; (iii) whether the stock option perquisite relating to foreign services formed part of the assessee's taxable income in India; and (iv) whether exemption under Article 16(1) of the India-UK DTAA read with section 90(2) of the Income-tax Act, 1961 was available.

Issue (i): Whether the delay in filing the appeal deserved to be condoned.

Analysis: The delay was explained on the basis that the assessee was abroad at the relevant time and there was no indication of mala fides or deliberate inaction. The delay was treated as an outcome of the assessee's absence from India, and the matter was approached with preference for adjudication on merits.

Conclusion: The delay was condoned and the appeal was admitted.

Issue (ii): Whether foreign assignment allowance received outside India for services rendered in the United Kingdom was taxable in India in the hands of a non-resident.

Analysis: The assessee was accepted as a non-resident for the relevant year. Income of a non-resident is taxable in India only when it is received or deemed to be received in India, or when it accrues or is deemed to accrue in India. The foreign assignment allowance was credited through the overseas mechanism to the travel currency card outside India, and the first receipt was found to be outside India. On that basis, the allowance did not fall within the scope of total income under section 5(2).

Conclusion: The foreign assignment allowance was not taxable in India and the addition was deleted.

Issue (iii): Whether the stock option perquisite relating to foreign services formed part of the assessee's taxable income in India.

Analysis: The stock option related amount represented value accrued in relation to services rendered outside India. Since the assessee was a non-resident and the perquisite arose from foreign services, it was held to fall outside the scope of taxable total income in India.

Conclusion: The stock option perquisite was held not taxable in India.

Issue (iv): Whether exemption under Article 16(1) of the India-UK DTAA read with section 90(2) of the Income-tax Act, 1961 was available.

Analysis: The assessee produced a tax residency certificate and was treated as a tax resident of the United Kingdom for the relevant tax year. In that position, the treaty provisions were applied and the salary income in question was held eligible for exemption under the India-UK DTAA.

Conclusion: The treaty exemption was available to the assessee.

Final Conclusion: The appeal succeeded on the substantive issues relating to foreign-sourced remuneration and the related perquisite, while the remaining matters did not require further adjudication in view of the relief already granted.

Ratio Decidendi: For a non-resident, income is taxable in India only if it is received or deemed to be received in India, or accrues or is deemed to accrue in India; where foreign assignment remuneration is first received outside India and is supported by treaty residency, it is not includible in Indian total income.

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