It should be defined inline. If you are using the img tag, that image should have semantic value to the content, which is why the alt attribute is required for validation. If the image is to be part of the layout or template, you should use a tag other than the img tag and assign the image as a CSS background to the element. In this case, the image has no semantic meaning and therefore doesn't require the alt attribute. I'm fairly certain that most screen readers would not even know that a CSS image exists.