Foreign tax credit and salary taxation under the India-Australia DTAA: income from Australian services was outside Indian tax scope.

Salary received for services rendered in Australia was treated as taxable in Australia under Article 15 of the India-Australia DTAA, so the income was not chargeable to tax in India. The delayed filing of Form 67 under Rule 128(9) was not the core issue; the decisive point was that the salary itself fell outside Indian taxation because it arose from services performed in Australia. As a result, the foreign tax credit claimed for Australian tax did not survive once the income was excluded from India's tax base, and the credit was disallowed.

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Issues: Whether salary received in Australia for services rendered in Australia was taxable in India in the assessee's hands, and whether foreign tax credit for tax paid in Australia was admissible.

Analysis: The assessee rendered services in Australia and received salary there, which was also subjected to tax in Australia. In view of Article 15 of the India-Australia Double Taxation Avoidance Agreement, salary is taxable in the State where the services are rendered. The core issue, therefore, was not merely the delayed filing of Form 67 under Rule 128(9) of the Income-tax Rules, 1962, but whether the salary income itself could be brought to tax in India. Since the income was earned for services rendered in Australia, it was not chargeable to tax in India. Consequentially, foreign tax credit could not survive once the salary was excluded from Indian taxation.

Conclusion: The salary income earned in Australia was held not taxable in India, and the foreign tax credit claimed in respect of that income was disallowed. The issue was decided in favour of the assessee.

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