Tribunal held that since the employees were rendering services outside India, i. e., the U. S. A., and payments were also made in the U. S. A., article 16 of Double Taxation Avoidance Agreement applied and the payments were taxable only in the U. S. A. It held that income in the hands of the employees was salary or profits in lieu of salary and it had to be treated as such and in view of article 16 of the Double Taxation Avoidance Agreement, it was taxable in the U. S. A. It held that where the payments were in nature of salary, the payer need not approach the appropriate authority under section 195(2) , that the assessee could not be deemed to be an assessee in default under section 201(1) and the interest under section 201(1A) of the Act need not be levied. On appeal ,High Court affirmed the order of the Tribunal . ( AY.2006-07)
DIT (IT ) v. Sasken Communication Technologies Ltd. (2020) 428 ITR 194/193 DTR 214/ 315 CTR 320 / 117 taxmann.com 278 (Karn)(HC)
S. 15 : Salaries – Non -Compete fee – Service rendered outside India – Held to be not taxable – Cannot be treated as assessee in default – DTAA -India – USA [ S.5(2), 17 , 195(2) , 201(IA), Art, 16(1) , 23 ]