I am a non-resident. I worked on a foreign employer's ship outside India for most of the year and was paid by that foreign company. The department says the salary is taxable in India. Where does salary accrue?
Where the services are rendered. The Calcutta High Court held that for a non-resident, whose total income is governed by s.5(2), the place of accrual has to be found, and for that purpose the place where the services were rendered is what matters; the source of the income is not relevant. A marine engineer who had rendered services outside India for 286 days and had received his remuneration from a foreign company had received income outside India, and both the s.143(1) intimation and the s.264 order were set aside.
Decided by the High Court (Debangsu Basak J (High Court at Calcutta, Constitutional Writ Jurisdiction, Original Side)) on 2016-12-15, reported as W.P. No. 369 of 2014 (Calcutta High Court); hearing concluded 1 December 2016. It bears on section 5(2), section 143(1), section 246A, section 264 of the Income Tax Act 1961, in Salary & Perquisites, Residence & Treaty Benefit and Revision & Rectification matters.
This is the situs rule for salary, stated by a High Court and applied to the commonest non-resident salary case — a seafarer or an engineer on a foreign employer's payroll. Three practical things come out of it. First, the day count matters as evidence of where services were rendered, not as an independent test; the Court noted 286 days abroad but reasoned from the place of rendering, following the Bombay High Court in Avtar Singh Wadhwan and the Karnataka High Court in Prahlad Vijendra Rao (where 225 days sufficed). Second, the Court used s.264 to give relief even though the assessee had let the appeal period against the s.143(1) intimation go by, holding the Commissioner's revisional power wide enough to have set the intimation aside and to have held the income not taxable, and faulting him for merely remanding. That is a route worth knowing where an intimation has gone unappealed. Third, the Court invoked the departmental instruction that officers must not take advantage of an assessee's ignorance and should draw attention to reliefs he has omitted to claim, together with the Supreme Court in Mahalaxmi Sugar Mills, to the effect that the officer has a duty to determine the true taxable income. Note the limits: the Court did not consider s.9(1)(ii) or its Explanation, which deems salary earned in India to accrue in India, and it did not consider any treaty; both would need separate attention in an advice.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner, an Indian citizen, worked as a marine engineer and rendered services as such to a foreign shipping company during AY 2011-12. He filed his return for that year with the residential status of non-resident Indian, disclosing remuneration of Rs 5,63,850 received in US dollars. He was issued an intimation cum assessment order under s.143(1) dated 7 December 2012. He filed no appeal against it and instead applied under s.264. In the course of the s.264 proceedings he claimed he had in fact received Rs 27,92,417 from his employer during the year rather than the Rs 5,63,850 returned. The Commissioner disposed of the s.264 application by order dated 25 September 2013 in two parts: the first found the petitioner's income assessable under the Act, and the second noted that the exemptions available had not been claimed by him, the order ultimately leaving the Assessing Officer to take necessary action. The Revenue's answer to the writ petition was that the s.143(1) order was appealable under s.246A, that s.264(7) and Explanation 1 stood in the way, and that having chosen not to avail of the appeal the petitioner should not be permitted to raise these grounds. It was not disputed that the petitioner had rendered services outside India for 286 days.
The writ petition was disposed of with no order as to costs, and both the intimation under s.143(1) dated 7 December 2012 and the order under s.264 dated 25 September 2013 were set aside. The income received by the petitioner for services rendered outside India was to be considered as income received out of India; and the Commissioner, exercising the wide powers under s.264, could and should have set aside the intimation and held that the income was not taxable for the relevant assessment year instead of remanding the matter to the Assessing Officer.
The Court began from s.5, sub-section (2) of which governs a non-resident and brings in income received or deemed received in India and income accruing or arising or deemed to accrue or arise in India. Reading the two Explanations, the Court held that it therefore has to be found out where the income accrued, and that for that purpose the place where the services have been rendered becomes material — the place where the income arose is what determines whether it was in India or outside India. It applied Avtar Singh Wadhwan, in which the relevant test was held to be the place where the services were rendered and in which the source of the income was held not relevant to whether income accrued in India, and Prahlad Vijendra Rao, in which income derived by a person working outside India for 225 days was held not to have accrued in India. Whether services had been rendered in India was a question of fact, and it was undisputed that the petitioner had rendered services outside India for 286 days and had been paid for that work by a foreign company; the income was accordingly received outside India. On the procedural objection the Court relied on Phool Lata Somani for the width of the Commissioner's powers under s.264 and his discretion to grant relief where an assessee detects, after assessment, a mistake by which he was over-assessed; on the departmental circular directing officers not to take advantage of an assessee's ignorance and to draw attention to reliefs omitted to be claimed; and on the Supreme Court in Mahalaxmi Sugar Mills for the duty cast on the Income Tax Officer to apply the relevant provisions to determine the true figure of taxable income, a duty from which an assessee's failure to claim a benefit does not relieve him.
The question whether the petitioner has rendered services in India or not is a question of fact. It is not disputed that the petitioner as a marine engineer had rendered services outside India for the period of 286 days. He has received his remuneration for such work from a foreign company. Consequently, the income received by the petitioner for services rendered outside India has to be considered as income received out of India and treated as such.
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Handle my notice → Ask a CA on WhatsAppWhere the services are rendered. The Calcutta High Court held that for a non-resident, whose total income is governed by s.5(2), the place of accrual has to be found, and for that purpose the place where the services were rendered is what matters; the source of the income is not relevant. A marine engineer who had rendered services outside India for 286 days and had received his remuneration from a foreign company had received income outside India, and both the s.143(1) intimation and the s.264 order were set aside. This was decided by the High Court (Debangsu Basak J (High Court at Calcutta, Constitutional Writ Jurisdiction, Original Side)) and bears on section 5(2), section 143(1), section 246A, section 264 of the Income Tax Act 1961. It is reported as W.P. No. 369 of 2014 (Calcutta High Court); hearing concluded 1 December 2016. This is the situs rule for salary, stated by a High Court and applied to the commonest non-resident salary case — a seafarer or an engineer on a foreign employer's payroll. Three practical things come out of it. First, the day count matters as evidence of where services were rendered, not as an independent test; the Court noted 286 days abroad but reasoned from the place of rendering, following the Bombay High Court in Avtar Singh Wadhwan and the Karnataka High Court in Prahlad Vijendra Rao (where 225 days sufficed). Second, the Court used s.264 to give relief even though the assessee had let the appeal period against the s.143(1) intimation go by, holding the Commissioner's revisional power wide enough to have set the intimation aside and to have held the income not taxable, and faulting him for merely remanding. That is a route worth knowing where an intimation has gone unappealed. Third, the Court invoked the departmental instruction that officers must not take advantage of an assessee's ignorance and should draw attention to reliefs he has omitted to claim, together with the Supreme Court in Mahalaxmi Sugar Mills, to the effect that the officer has a duty to determine the true taxable income. Note the limits: the Court did not consider s.9(1)(ii) or its Explanation, which deems salary earned in India to accrue in India, and it did not consider any treaty; both would need separate attention in an advice. If it applies to you, the first step is this: Fix residential status first under s.6 for the year in question, and only then apply s.5(2); the whole analysis depends on the assessee being a non-resident.
The petitioner, an Indian citizen, worked as a marine engineer and rendered services as such to a foreign shipping company during AY 2011-12. He filed his return for that year with the residential status of non-resident Indian, disclosing remuneration of Rs 5,63,850 received in US dollars. He was issued an intimation cum assessment order under s.143(1) dated 7 December 2012. He filed no appeal against it and instead applied under s.264. In the course of the s.264 proceedings he claimed he had in fact received Rs 27,92,417 from his employer during the year rather than the Rs 5,63,850 returned. The Commissioner disposed of the s.264 application by order dated 25 September 2013 in two parts: the first found the petitioner's income assessable under the Act, and the second noted that the exemptions available had not been claimed by him, the order ultimately leaving the Assessing Officer to take necessary action. The Revenue's answer to the writ petition was that the s.143(1) order was appealable under s.246A, that s.264(7) and Explanation 1 stood in the way, and that having chosen not to avail of the appeal the petitioner should not be permitted to raise these grounds. It was not disputed that the petitioner had rendered services outside India for 286 days. The matter was decided on 2016-12-15 by the High Court (Debangsu Basak J (High Court at Calcutta, Constitutional Writ Jurisdiction, Original Side)). On those facts the High Court held as follows. The writ petition was disposed of with no order as to costs, and both the intimation under s.143(1) dated 7 December 2012 and the order under s.264 dated 25 September 2013 were set aside. The income received by the petitioner for services rendered outside India was to be considered as income received out of India; and the Commissioner, exercising the wide powers under s.264, could and should have set aside the intimation and held that the income was not taxable for the relevant assessment year instead of remanding the matter to the Assessing Officer.
The Court began from s.5, sub-section (2) of which governs a non-resident and brings in income received or deemed received in India and income accruing or arising or deemed to accrue or arise in India. Reading the two Explanations, the Court held that it therefore has to be found out where the income accrued, and that for that purpose the place where the services have been rendered becomes material — the place where the income arose is what determines whether it was in India or outside India. It applied Avtar Singh Wadhwan, in which the relevant test was held to be the place where the services were rendered and in which the source of the income was held not relevant to whether income accrued in India, and Prahlad Vijendra Rao, in which income derived by a person working outside India for 225 days was held not to have accrued in India. Whether services had been rendered in India was a question of fact, and it was undisputed that the petitioner had rendered services outside India for 286 days and had been paid for that work by a foreign company; the income was accordingly received outside India. On the procedural objection the Court relied on Phool Lata Somani for the width of the Commissioner's powers under s.264 and his discretion to grant relief where an assessee detects, after assessment, a mistake by which he was over-assessed; on the departmental circular directing officers not to take advantage of an assessee's ignorance and to draw attention to reliefs omitted to be claimed; and on the Supreme Court in Mahalaxmi Sugar Mills for the duty cast on the Income Tax Officer to apply the relevant provisions to determine the true figure of taxable income, a duty from which an assessee's failure to claim a benefit does not relieve him. In the words reproduced by the source cited on this page: "The question whether the petitioner has rendered services in India or not is a question of fact. It is not disputed that the petitioner as a marine engineer had rendered services outside India for the period of 286 days. He has received his remuneration for such work from a foreign company. Consequently, the income received by the petitioner for services rendered outside India has to be considered as income received out of India and treated as such." The decision followed or applied Commissioner of Income Tax v. Avtar Singh Wadhwan, 2001 (247) ITR 260 — applied for the place-of-rendering test; Director of Income Tax v. Prahlad Vijendra Rao, 2011 (198) Taxman 551 — applied; Smt. Phool Lata Somani v. Commissioner of Income Tax, 2005 (276) ITR 216 — relied on for the width of s.264; Commissioner of Income Tax, Delhi v. Mahalaxmi Sugar Mills Co. Ltd., 1986 (160) ITR 920 (SC) — applied for the officer's duty to determine true taxable income.
It was decided by the High Court on 2016-12-15 and is reported as W.P. No. 369 of 2014 (Calcutta High Court); hearing concluded 1 December 2016. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 5(2), section 143(1), section 246A, section 264, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The writ petition was disposed of with no order as to costs, and both the intimation under s.143(1) dated 7 December 2012 and the order under s.264 dated 25 September 2013 were set aside. The income received by the petitioner for services rendered outside India was to be considered as income received out of India; and the Commissioner, exercising the wide powers under s.264, could and should have set aside the intimation and held that the income was not taxable for the relevant assessment year instead of remanding the matter to the Assessing Officer. It arises in Salary & Perquisites, Residence & Treaty Benefit and Revision & Rectification matters, on section 5(2), section 143(1), section 246A, section 264 of the Income Tax Act 1961, and was decided by Debangsu Basak J (High Court at Calcutta, Constitutional Writ Jurisdiction, Original Side). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Build the record of where the services were physically rendered — continuous discharge certificate or passport stamps for a seafarer, contract of employment, and the employer's letter — rather than resting on a day count alone. Show that the remuneration came from a foreign employer and was not received in India; s.5(2)(a) taxes what is received or deemed received in India regardless of where it accrued. Where the intimation under s.143(1) was never appealed, consider s.264: this judgment holds the Commissioner's power under it wide enough to set the intimation aside and grant relief, and criticises a merely remanding order. Cite the departmental instruction that officers should draw an assessee's attention to reliefs he has omitted to claim, and Mahalaxmi Sugar Mills for the officer's duty to determine the true taxable income, where the claim was not made in the return. Check s.9(1)(ii) and any applicable treaty separately — neither was argued or decided here.
Searched for later treatment; none was found. That is not the same as a source affirming it. WATCH THIS ONE. Six later decisions cite the judgment, all Tribunal decisions, and none of them applies it - while one declines to follow it. In Ramesh Kumar v ITO (International Taxation), Tuticorin (Chennai Tribunal, 16 November 2017) the Bench recorded at para 5 the assessee's reliance on Utanka Roy 'wherein held that income received by the assessee towards salary for an employment outside India to be considered as income received out of India and not to be taxable in India', and then declined to apply it, holding at para 5.7, on the authority of the Mumbai Tribunal in Captain A.L. Fernandez (81 ITD 203), that 'the salary income received by the non-resident taxpayer in the present case were held as taxable in India by virtue of receipt in India as per Section 5(2)(a) of the Act.' A Tribunal cannot overrule a High Court, so the judgment is not displaced, but a practitioner outside Calcutta should expect the point to be contested. Two other citations look like support and are not: in Shri Santanu Sanyal v ACIT (Kolkata Tribunal, 23 July 2024) the judgment sits in counsel's list at para 2.2 and the Bench decided on Prahlad Vijendra Rao and Ranjit Kumar Bose instead, and in Sivakarthick Raman v ACIT (Chennai Tribunal, 7 July 2025) it appears only in the advocate's submissions at para 36 - the Bench's own reasoning at paras 40 to 43 rests on a coordinate bench decision in the assessee's own case and never names it. No High Court or Supreme Court decision cites it and no challenge is traceable. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The report has real defects and the reader should know them before quoting from it. (i) The judgment discusses 'Tapan Kumar Mitra (supra)' and 'Ashok Mondal (supra)' although neither case is cited anywhere earlier in the report — the citations appear to have been lost. (ii) The circular is described as 'Circular Bearing No. 14 (XL-35) dated April 11, 1995'; the well-known circular of that number is dated 11 April 1955, and the year in the report is very probably a misprint. (iii) The Court's paraphrase of Explanation 2 to s.5(2) ('income will not be treated to be received in India solely on the basis that such income was received or deemed to be received in India') does not match the words of the Explanation it has just quoted, which is about income already included on an accrual basis not being included again on a receipt basis. (iv) The reported text of Explanation 1 reads 'received I India' for 'received in India'. (v) There is an unexplained quantum anomaly the Court itself notes: the return disclosed Rs 5,63,850 while in the s.264 proceedings the petitioner claimed to have received Rs 27,92,417, and the Court directed the larger figure be considered as such. The quotes reproduced in this entry were confirmed word for word on a second fetch. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petition was disposed of with no order as to costs, and both the intimation under s.143(1) dated 7 December 2012 and the order under s.264 dated 25 September 2013 were set aside. The income received by the petitioner for services rendered outside India was to be considered as income received out of India; and the Commissioner, exercising the wide powers under s.264, could and should have set aside the intimation and held that the income was not taxable for the relevant assessment year instead of remanding the matter to the Assessing Officer.
TaxSphere, “Utanka Roy v Director of Income Tax”, https://taxnotice.vittsphere.com/caselaw/case/utanka-roy-v-dit-non-resident-salary-services-rendered-abroad/ (validity last checked 2026-09-07)
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