ITAT Mumbai: If the taxpayer has left India for the purpose of business or profession, the same has been considered to be for the purpose of employment outside India under Explanation–1(a) to section 6(1) of the Act. The assessee has rightly claimed to be a “Non-Resident” during the year for the purpose of the Act.

Facts of the case

A search and seizure action was conducted under section 132/133A of the Act on 10/05/2018, in the case of Matix (Nishant Kanodia) Group. Consequent to the search, notice u/s 153A was issued to the assesee, in response to which the assessee had filed its return of income. The assessee claimed to be a non-resident and did not offer global income to tax India.

The assessee submitted before the AO that his stay in India during the PY 2012-13 was 176 days and he stayed for more than 365 days during 4 immediately preceding previous years (PY’s), but during the PY he went to Mauritius for the purpose of employment. The assessee submitted that as per Section 6(1)(c), a person shall be resident in India if he/she stays in India for more than 60 days during the PY and stays for more than 365 days during the immediately preceeding 4 PY. However, as per explanation 1(a) to Section 6(1) the period of 60 days under section 6(1)(c) shall be substituted with 182 days, if a person leaves for employment outside India. Thus, the assessee claimed to be non-resident since he stayed in India only for 176 during the relevant PY which is less than 182 days and was outside India for the purpose of employment. The assessee produced the documents in support of its claim viz., passport, appointment letter, occupation permit issued by the Government of Mauritius.

Revenue did not agree with the submissions of the assessee and on the basis of the status as Investor in the Occupation Permit issued by the Government of Mauritius as well as the business visa issued to the assessee concluded that the assessee had left India not for the purpose of employment but as an Investor. Revenue determined Assessee’s residential status to be ‘resident’, thereby made addition towards assessee’s global income of Rs.28.14 Lacs.

ITAT Ruling

ITAT has relied on Hyderabad ITAT ruling in K. Sambasiva Rao, Delhi ITAT ruling in Jyotinder Singh Randhawa and Col. Joginder Singh, and Kerala HC judgment in Abdul Razak, wherein it was held that no technical meaning can be assigned to the word ‘employment’ used in Explanation 1(a) to Section 6(1), thus going abroad for the purpose of employment also means going abroad to take up self–employment like business or profession. Thus, opined that if the taxpayer has left India for the purpose of business or profession the same has been considered to be for the purpose of employment outside India under Section 6(1) Explanation 1(a).

Accordingly, even if it is accepted that the assessee went to Mauritius as an Investor, in view of the ratio of aforesaid decisions the assessee is entitled to claim the benefit of the extended period of 182 days. Since it is undisputed that the assessee has stayed in India only for a period of 176 days during the year, which is less than 182 days, the assessee has rightly claimed to be a “Non-Resident” during previous year.

ITA no.2155/Mum./2023 Nishant Kanodia

The above information has been complied by CA Ankit Karanpuria and CA Ankush Karanpuria. Please connect on karanpuriaankit@gmail.com for further information.

Disclaimer:

The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.