2017 (5) TMI 774 - AT - Income Tax

Determination of residential status of assessee - Resident v/s not resident - period of stay in India - business activity in India - status of the assessee - Held that - Relaxation of period of 60 days as per section 6(1)(a) to 182 days when employment is taken outside India as per clause (a) of Explanation 1 is applicable only in relation to that year i.e. the year in which employment is taken outside India. Thereafter, for subsequent years, the residential status has to be seen as per the provisions of clause (b) to Explanation 1 since owing to employment/self-employment the assessee is being outside India . In the instant case the assessee is having a special visa type allowing him to work in the UK and the fact that he is working abroad in the UK as a retainer-cum-incentive basis in the year under consideration has also not being doubted by either the Assessing Officer or by the learned Commissioner of Income-tax (Departmental representative). The Assessing Officer has also not doubted the submissions made by the assessee that it has not rendered any services in India with regard to its overseas assignments during visits to India and further that no business activity is being carried on by assessee in India. The basic document which would show intention of assessee is his passport. In the instant case copies of visa s issued by the UAE and the UK have been placed on record of the Assessing Officer. The Assessing Officer has noted in his order that in the present case, the assessee is a citizen of India. Assessee is on Indian pass port. For Dubai or the UK he might be having some special visa however after noting as such undue importance has thereafter been given by the Assessing Officer to the economic/legal presence of the assessee in India. Thus no reason to interfere with the finding of CIT(Appeals) directing the Assessing Officer to assess the assessee as a non- resident . - Decided in favour of assessee Deletion of addition made by the learned Assessing Officer being the total amount remitted by the assessee in India therefore does not warrant an interference and we are inclined to uphold the same

Issues Involved:
1. Determination of tax residency status.
2. Application of Explanation (b) to section 6(1) of the Income-tax Act.
3. Jurisdiction of the Assessing Officer based on residency status.
4. Deletion of addition of ?10,21,66,137 by the Assessing Officer.

Detailed Analysis:

1. Determination of Tax Residency Status:
The primary issue in the appeals pertains to the tax residency status of the assessees, Shri Sudhir Choudhrie, Shri Dhruv Choudhrie, and Shri Bhanu Choudhrie. The Assessing Officer (AO) determined the assessees as "residents" based on their economic and personal ties to India, despite their claim of being "non-residents." The AO emphasized the assessees’ extensive economic presence, such as directorships in Indian companies, partnerships, property ownership, and significant financial remittances to India. The AO argued that the gravity of their personal and economic relationships in India outweighed their physical presence outside India.

2. Application of Explanation (b) to Section 6(1) of the Income-tax Act:
The assessees contended that they were "non-residents" under Explanation (b) to section 6(1), which allows a threshold period of 182 days for individuals of Indian origin visiting India. They argued that their stay in India was less than 182 days, thus qualifying them as "non-residents." The Commissioner of Income-tax (Appeals) (CIT(A)) upheld this view, stating that the residency status should be determined solely based on the number of days present in India, as per the provisions of section 6, without considering economic and legal presence.

3. Jurisdiction of the Assessing Officer Based on Residency Status:
The AO’s jurisdiction was challenged on the grounds that the determination of residency status during assessment proceedings does not affect the jurisdiction assumed based on the status returned by the assessee. The CIT(A) found merit in the assessees' submissions, emphasizing that the residency status should be determined based on the number of days in India, as per section 6, and not on economic or legal presence.

4. Deletion of Addition of ?10,21,66,137 by the Assessing Officer:
The AO added ?10,21,66,137 to the income of Shri Sudhir Choudhrie, treating the foreign remittances as part of his global income taxable in India. The CIT(A) deleted this addition, holding that once the assessee is determined as a "non-resident," only the income accrued or received in India is taxable, not the global income. The Tribunal upheld this view, referencing the co-ordinate Bench decision in Deputy CIT v. Finlay Corporation Ltd., which supports the non-taxation of global income for non-residents.

Conclusion:
The Tribunal dismissed the appeals filed by the Revenue, affirming the CIT(A)’s decision to treat the assessees as "non-residents" based on the number of days stayed in India. Consequently, the addition of ?10,21,66,137 was deleted, as the global income of non-residents is not taxable in India. The Tribunal also refrained from adjudicating the defensive plea regarding the validity of action under section 147, as the appeals were dismissed on merits.

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