ITAT: Taxpayer Staying In India For Less Than 182 Days Entitled To ‘Non-Resident’ Status Under Section 6(1)
ITAT: Taxpayer Staying In India For Less Than 182 Days Entitled To ‘Non-Resident’ Status Under Section 6(1)
Rejects the AO’s argument that since the assessee went on an ‘occupation’ permit to work as an investor and not an employee, the Section was not applicable
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the assessee was entitled to a ‘non-resident’ status as per explanation 1(a) of Section 6(1) of the Income Tax Act, 1961, as he stayed in the country only for 176 days.
The Coram of Sandeep Singh Karhail (Judicial Member) and Prashant Maharishi (Accountant Member) added that even if the taxpayer had left India for business purposes or profession, under Section 6(1), it would be considered employment outside the country.
The tribunal rejected the argument of the assessing officer (AO) that since the assessee went on an ‘occupation’ permit to stay and work in Mauritius as an investor and not as an employee, Section 6(1) was not applicable. It added that even if the assessee went as an investor in Firstland Holdings Ltd, Mauritius, wherein he held 100 percent of shareholding, he was still entitled to claim the benefit.
The ITAT observed, “Since it is undisputed that the assessee has stayed in India only for 176 days during the year, which is less than 182 days as provided in explanation 1(a) of Section 6(1) of the IT Act, the assessee has rightly claimed to be a ‘non-resident’ during the year.”
The assessee, an individual, was served with a notice under Section 153A, according to the search and seizure procedure under Section 132/133A in the Matix Group (Nishant Kanodia) case.
On his return to India, the assessee responded to the notice. He claimed his residential status to be non-resident, and did not offer his global income to tax in India. He submitted that as he stayed in India only for 176 days during the AY 2013-2014, and left the country for employment purposes in Mauritius, his residential status should be determined as non-resident. That’s because under Section 6(1)(c), the period of 60 days was to be substituted with 182 days as per explanation 1(a) of Section 6(1).
However, the AO rejected the application on the ground that as per the work permit issued by the Mauritian government, the assessee went to Mauritius on an occupation permit to stay and work there as an investor and not as an employee. The AO determined the assessee's residential status to be 'resident', and thereby made additions towards his global income.
The assessee appealed before the Commissioner of Income Tax (Appeals), who while deleting the addition, held that the assessee was away from India for employment purposes, and, hence was entitled to the benefit of explanation 1(a) of Section 6(1).
The AO challenged the CIT(A) order and approached the ITAT.
The tribunal observed that an individual is considered an Indian resident if within four years preceding the relevant year, he has been in India for 365 days or more and is in India for 60 days or more in the relevant year.
The ITAT held that there was no dispute that the assessee was in India for 365 days in the four years preceding the relevant year. However, it clarified that as per explanation 1(a) of Section 6(1), the 60-days was substituted with 182 days in the case of an Indian citizen who left India for employment purposes outside the country.
Thus, considering the summary of the number of days of the assessee’s stay in India, along with a copy of the relevant pages of his passport, the bench stated that he stayed in India only for 176 days during the relevant assessment year.
While dismissing the appeal of the revenue department, the tribunal held that the assessee had rightly claimed to be a 'non-resident'.
