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2020 (6) TMI 432 - HC - Income TaxIncome accrued in India - Characterization of income - 'Salary' or 'Profit in lieu of Salary' OR 'Business income' - Remittance of amounts to employees under non compete agreements are chargeable to tax under Section 5(2) of the Act - head of income under which it is liable for taxation under the Act and issue of its taxability under Double Taxation Avoidance Agreement 'DTAA' - Whether the Tribunal was correct in holding that a sum by the assessee is in the course of employment and would fall under the head 'Salary' or 'Profit in lieu of Salary' and not under the head 'Business income' as per Section 28(va) as held by the assessing officer? - HELD THAT:- Employees were rendering services outside India i.e., U.S. and payments were also made in U.S., Article 16 of DTAA applies and the same is taxable only in U.S.A. As held that income in the hands of the employees is salary / profit in lieu of salary and it has to be treated as such and in view of Article 16 of DTAA, the same is taxable in U.S. It was inter alia held that where the payments are in nature of salary, the payer need not approach the appropriate authority u/s 195(2) of the Act. Held that amount paid to the employees of the assessee being in the nature of salary is not taxable in India in view of Article 16 of DTAA between India and United States and therefore, the assessee was not under an obligation to deduct at source. The assessee, therefore, cannot be deemed to be an assessee in default under Section 201(1) of the Act. It was also held that since, the assessee has not been held to be an assessee in default, therefore, the interest under Section 201(1A) of the Act is not leviable. Accordingly, the appeal was allowed. From perusal of the substantial questions of law, on which the appeal has been admitted, we find that the findings of fact recorded by the tribunal have not been assailed as perverse. Even in the memo of appeal neither any grounds have been urged nor any material has been placed on record to demonstrate that findings of fact recorded by the tribunal are perverse. Therefore, the substantial questions of law as framed by a bench of this court, in fact, do not arise for consideration in this appeal, as the matter stands concluded by findings of fact. The amount paid to the employees under the non compete agreement is covered by the expression 'salary / profits in lieu of salary', which is not taxable in India in view of Article 16 of DTAA. We find that matter stands concluded by findings of fact and the revenue has not been able to either plead or place on record material to show that findings of fact recorded by the tribunal are perverse. - Decided in favour of assessee.
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