BALASUBRAMANIYAM, J.M. question for consideration in this appeal by Revenue is whether salary earned by assessee is taxable in India. asst. yr. is 1974-75 and previous year ended on 31st March, 1974. assessee was employee of Shipping Corpn. of India. He was Chief Engineer of vessel 'M.V. Bellary'. assessee was on board of this vessel and during entire accounting period relevant to this assessment, it was outside territorial limits of Union of India except for eight days commencing from 8th March, 1974. assessment had been completed under s. 143(1) on 28th Aug., 1975 by ITO. assessee filed revision petition and CIT, acting under s. 264 set aside assessment with direction to ITO to examine taxability of salary income. In original assessment, ITO had treated assessee as "resident" although it had claimed status of "non-resident", without affording opportunity of being heard. On this question, CIT modified order holding that assessee should be taken as "non-resident". Subsequently, ITO completed assessment under s. 143(a) r/w s. 144A, holding that salary income had accrued in India. There was appeal by assessee and AAC held that salary is not taxable in India. Appellate Order refers to decision of Supreme Court in case of Performing Right Society Ltd. & Anr. vs. CIT 1976 CTR (SC) 429: (1977) 106 ITR 11 (SC) and decision of Allahabad High Court in case of Laxmipat Singhania vs. CIT (1969) 72 ITR 512 (All). Objecting to first Appellate Order, Revenue has appealed. It was contended by Sri Rungta, ld. departmental representative, that assessee's employer (Shipping Corpn. of India) has its office in India and that funds of this public undertaking had been utilised for paying salary of assessee though he had remained outside India for whole of year barring eight days. It was also urged that since employer is Indian company having its base in India, accrual was within Indian limits since employer suffered liability in India. In substances, it was his argument that facts of this case would attract s. 5(2)(b). On behalf of assessee, Sri V.H. Patil, contended that situs of agreement or source of payment is not criterion to determine question. According to him, place of agreement is place where services were rendered by assessee. In this behalf, he relied upon several decisions and they are In matter of V.G. Every 1937 5 ITR 216 (Cal), CIT vs. Chunnilal B. Mehta (1938) 6 ITR 521 (PC), C.G. Krishnaswamy Naidu (1966) 62 ITR 686 (Mad), besides cases referred to by AAC in his order. We have considered submissions on either side and gone through authorities. In this case, agreement was outside India. For entire period, barring eight days commencing from 6th March, 1974, assessee had worked outside India as Chief Engineer of ship which was sailing outside. amount had been received outside India. It is clear from authorities that place of contract is not material. Neither source from which payment was made. real decider is where services were rendered. As pointed out in matter of V.G. Every (1937) 5 ITR 216 (Cal), "accruing or arising" indicates some origin or source of growth for income in question. It is therefore, place where services were rendered is important to know where income accrued or arose. There is some indication in Lakshmipat Singhania vs. CIT (1969) 72 ITR 512 (All) to show that place of payment is not decisive factor, for in that case, remuneration credited in books of company in India was stated to be not decisive factor. Shri Rungta brought to our notice Art. 61 of Service Conditions for floating Staff Personnel of Shipping Corpn. of India under which impugned payment had been made. payments had been made to assessee as advance. It was argument on behalf of Revenue that amounts had been paid outside India as advance and that final settlement was made in India at end of year. We have read Art. 61 and it does not support Revenue in matter. Officer is allowed to drew in foreign ports advance to extent of his net earning in foreign waters. Therefore, unless earnings are in foreign waters, officer is not eligible to draw any amount as advance. very wordings "earning in foreign waters" show that income had accrued to assessee outside India and that he was eligible to draw advance. In fact, Art. 61 which places limit of advance has reference to wage he has earned. Unless there is earning by assessee towards his age, no amount is payable as advance. This is not case advance is paid on account of some business contract. In case of salary, accrual is on account of work done every day and officer is entitled to salary as and when earnings made though payment is made at end of month. Therefore, it can not be said that assessee had not earned wages or salary so long as he was in foreign waters. Substantial income had been earned by assessee outside Indian territories. Consequently, there cannot be any apportionment merely because for eight days assessee had been in India. ld. counsel for assessee brought to our notice clarification issued by CBDT in Circular No. 356, dt. 17th March, 1983 (1983) 142 ITR, (State) 117-120, to question No. 7, and relevant portion reads: "No. 7: Whether 'advances' paid to seamen employed by Indian shipping companies in foreign currency while in foreign ports could be considered as remuneration received by seamen in foreign currency for purpose of s. 80RRA" Ans: Having regard to provisions of s. 10(14) of Merchant Shipping Act, 1958, and agreement entered into between Indian National Shipowners' Association and Maritime Union of India such advances are not mere facilities or loan but are in nature of part payment of wages in foreign currency. Remuneration received by seamen outside India in foreign currency for services rendered outside India would therefore, qualify for deduction under s. 80RRA of IT Act, 1961." above sheds some light to our present purpose. remuneration received by marine workers as advances in foreign currency outside India was stated to be wages in foreign currency; On this, it was urged by Shri Patil that advances received by assessee outside India in foreign currency, are wages earned by him outside India. rejoinder of Shri Rungta was that relief under s. 80RRA could be given if only income is taxable in India and submission is no doubt true. But, this can only be where such income is earned by resident or resident who is not ordinarily resident. In case of non resident where such wages are earned on account of services rendered outside India, it cannot be said that income had accrued or arose within Indian territory. For all above reasons, we hold that income earned by assessee as salary is not taxable in India and hence we decline to interfere with order of AAC. appeal fails. It is dismissed. *** THIRD INCOME TAX OFFICER v. AVTAR SINGH WADHWAN