TMI Blog2007 (8) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... here for more than 182 days and he is therefore a non-resident for ax purposes. 3 In the return of income filed by 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 Agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant is not taxed twice. In order to get relief the applicant has not submitted any proof of payment of tax on this 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 paragra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eption to or modification of sections 4 and 5 of the Income-tax Act. The provisions of such agreement cannot fasten a tax liability 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 "ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shall be determined in the see case of a person considered as resident of both the Contracting States as per paragraph 1. In that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity under section 245R(2) in the same case of British Gas India Pvt. Ltd. [2006] 285 ITR 218. The following observations towards the end of the order have been referred to (page 221) "A careful reading of Explanation (a) would show that the requirement of the Explanation is not leaving India for employment but it is leaving India for the purposes of employment outside India. For the purpose of the Explanation an individual need not be an unemployed person who leaves India for employment outside India. Therefore, the fact that Mr. Gupta was already an employee at the time of leaving India is hardly material or relevant. For all these reasons, we hold that Mr. Manish Gupta is not a resident in India in the financial year 2005-06." 17 These observations were made in the context of construing clause (a) of the Explanation to section 6(1) of the Income-tax Act according to which if an individual who is a citizen of India leaves India in any previous year for the purpose of employment outside India, then in relation to that year, he will be resident in India if he is in India for a period or periods amounting in all to 182 days or more. Section 6 of the Income-tax Act defines ..... X X X X Extracts X X X X X X X X Extracts X X X X
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