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2020 (8) TMI 804 - AT - Income TaxDeduction of tax at Source - taxability of Non-residents employees - joint venture partners - Reimbursement of salary on actual basis to the non–resident employees of the joint venture partners - deemed to have accrued or arisen in India or not? - clause (ii) of section 9(1) of IT Act - HELD THAT:- As per the provision of said section, the income falling under the head salary is deemed to accrue or arise in India if it is earned in India. Explanation to this provision further clarifies that the salary income referred to must be payable for services rendered in India and will also include the rest/leave period which is preceded and succeeded by service rendered in India - If we keep the facts of the present case in juxtaposition to the conditions enshrined in section 9(ii), it can be seen that the salary income earned by the non–resident individuals were for the services rendered out side India and not in India. Therefore, such salary income cannot be deemed to have accrued or arisen in India as per section 9(ii) of the Act. The Assessing Officer in his anxiety to bring the salary income to tax in India has completely overlooked the impact of section 9(1)(ii) of the Act. The attempt on the part of the Assessing Officer to rope in the reimbursement of salary payment under section 9(1)(i) of the Act is completely misconceived. Having held so, taxability or otherwise of the income under the respective Tax Treaty provisions needs to be examined. We must hasten to add, neither the Assessing Officer nor learned Commissioner (Appeals) has examined the issue from the aforesaid angle.Thus, any income derived by them is taxable only in their country of residence and not in India. Therefore, the Treaty provisions being more beneficial as per section 90(2) of the Act, will override the provisions of the Act. Therefore, there is no need for the assessee to deduct tax at source while reimbursing the salary expanses - the decision of learned Commissioner (Appeals) upheld. Appeal dismissed.
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