Non-resident foreign assignment income not taxable in India; missing tax residency certificate was only a procedural lapse.

A non-resident employee's salary and foreign assignment allowances for services rendered in Indonesia were treated as not taxable in India because the income neither accrued nor arose in India and was not received there. The fact that the employer was an Indian company did not by itself make the foreign earnings taxable. Non-production of the tax residency certificate was treated as a procedural lapse, not a basis to deny treaty relief where the surrounding facts supported non-taxability. The addition was deleted.

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Issues: Whether the salary and foreign assignment allowances received by a non-resident employee for services rendered in Indonesia were taxable in India; and whether non-production of the tax residency certificate defeated the claim for treaty relief.

Analysis: The assessee stayed in India for only 61 days during the relevant previous year and was therefore treated as a non-resident. For a non-resident, only income received in India or income that accrues or arises, or is deemed to accrue or arise, in India is taxable. The record showed that the services were rendered in Indonesia and the foreign assignment allowances were received for such services outside India. No material established that the disputed amounts accrued or arose in India merely because the employer was an Indian company. The absence of the tax residency certificate was held to be a procedural lapse and not a ground to deny substantive relief when the surrounding facts supported non-taxability of the foreign income.

Conclusion: The foreign assignment income was held not taxable in India and the addition was directed to be deleted. The absence of the tax residency certificate did not defeat the assessee's claim.

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