TaxTMI 
TaxTMI 
2007 (8) TMI 36
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....the applicant the income by way of salary from the employers in India was disclosed and the tax due thereon was paid. No claim for exemption or deduction was put forward. Taking inspiration from the ruling of this Authority in British Gas India P. Ltd. [2006] 287 ITR 462;, [2006] 157 Taxman 225 (AAR) (Application No. AAR/ 725/2006), the present application was filed contending that the salary paid Infosys Technology Ltd. to a non-resident employee for rendering services outside India is not taxable in India in view of the Double Taxation Avoidance Agreement and, therefore, he was not legally liable to pay the 4 It is, thus, seen that the applicant received the salary income in India in Indian rupees for the services rendered by him in Norway for a period exceeding 182 days during the financial year. The applicant returned the income and paid the tax without claiming exemption. However, that does t disentitle him from seeking ruling to determine his legal liability to pay income-tax. 5 The applicant's claim is based on the Double Taxation Avoidance Agreement which in the instant case is the Indo-Norway Double Taxation Avoidance Agreement notified on September 9, 1987. The taxa....
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....is income in Norway. It is also pointed out that the ruling in British Gas India P. Ltd. [2006] 287 ITR 462 (AAR) ; [2006] 157 Taxman 225 (AAR) is distinguishable. 8 The following is the question framed in the application: Whether the salary paid by the employer in India is taxable in India, though the assessee is non-resident in India during the relevant financial year? 9 We have heard the arguments of learned counsel for the applicant and the departmental representative, Mr. A. N. Pahuja, Commissioner of Income-tax. The claim has to be decided on the basis of the provisions of the Double Taxation Avoidance Agreement referred to above. It is common ground that the applicant's liability to pay tax under the relevant charging provision of the Indian Income-tax Act is not in dispute. Paragraph 2 of article 16 does not come into play in the instant case for the reason that the applicant's stay in Norway was for a period exceeding 182 days in the financial year 2005-06. The taxability of his employment income has to be determined in the light of paragraph 1 of article 16 only. On an analysis of article 16(1), it is clear that unless employment is exercised in the other Contrac....
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....y where the liability is not imposed by a local Act. Where tax liability is imposed by the Act, the agreement may be resorted to either for reducing the tax liability or altogether avoiding the tax liability. In case of any conflict between the provisions of the agreement and the Act, the provisions of the agreement would prevail over the provisions of the Act, as is clear from the provisions of section 90(2) of the Act. Section 90(2) makes it clear that 'where the Central Government has entered into an agreement with the Government of any country outside India for granting relief of tax, or for avoidance of double taxation, then in relation to the assessee to whom such agreement applies, the provisions of the Act shall apply to the extent they are more beneficial to that assessee' meaning thereby that the Act gets modified in regard to the assessee in so far as the agreement is concerned if it falls within the category stated therein." 11 In that case, the High Court repelled the contention of the appellant (Revenue) that wherever the expression "may be taxed" is used, there is no prohibition or embargo against the authorities acting under the provisions of the Indian Income-ta....
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.... context, certain rules were spelt out in article IV(2). Among them, clause (a) is relevant for our purpose (page 665) "Article IV : Fiscal domicile 1... 2. Where by reason of the provisions of paragraph I of this article an individual is a resident of both Contracting States, then his residential status shall be determined in accordance with the following rules: (a) he shall be deemed to be a resident of the Contracting State in :he which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer ;" 13 This judgment does not in any way support the contention of the applicant. Firstly, the language of the treaty provision in which the expression "may be taxed" was used in article VI of the India-Malaysia treaty is not comparable to the language employed in article 16(1) of the Indo-Norway treaty with which we are concerned. Secondly, the question of determination of residential status by the application of criteria contained in article IV of the treaty does not arise here. Thirdly, even if suc....