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2010 (2) TMI 15 - AAR - Income TaxResidential status - Whether the income earned by the applicant by way of salary from his employment in USA in the previous year 2008-09 (assessment year 2009-10) is liable to be taxed under section 5(1)(c) or any other provision of the Income-tax Act, 1961 on the basis that the applicant s status was that of a resident during that year held that - If the applicant was not present in India for more than 365 days in 4 preceding years, then clause (a) of sub-section (1) of section 6 would apply and it requires stay of 182 days or more in India to be treated as resident. On the other hand, if the applicant was present in India for 365 days or more during 4 preceding few years, then clause (c) of sub-section (1) to section 6 read with Explanation (a) would apply and it requires stay of 182 days or more for a person who leaves India for employment outside, to be treated as resident of India - the applicant satisfies neither clause (a) nor clause (c) of section 6(1) so as to merit treatment as a resident of India during the relevant period - the applicant was a non-resident during the relevant period. - Consequently his income that accrued outside India in USA by reason of his employment there cannot form part of the total income taxable in India.
Issues:
Determining the residency status of an individual for the previous year 2008-09 based on the days spent in India and abroad, and whether the income earned by the applicant in the USA is taxable in India. Analysis: The applicant filed an application under section 245Q of the Income Tax Act claiming to be a 'non-resident' for the previous year 2008-09. The applicant left India for the USA for employment on 31st March 2008 and returned on 29th November 2008, spending 122 days in India and 243 days abroad. The applicant sought a ruling on his residency status for the said year. The initial question posed by the applicant was rephrased to inquire whether the income earned in the USA during the previous year 2008-09 is taxable under section 5(1)(c) or any other provision of the Income-tax Act, 1961, considering the applicant's residency status. The applicant did not appear before the Authority for Advance Rulings. The crux of the matter lies in interpreting Section 5(1)(c) and Section 6(1) of the Income-tax Act to determine the applicant's residency status. Section 6(1) stipulates that an individual is considered a resident in India if they spend 182 days or more in India during the relevant year. The Explanation to this section clarifies the residency criteria for an Indian citizen leaving the country for employment. The judgment emphasizes that the applicant failed to meet the requirements of either clause (a) or clause (c) of Section 6(1) to be considered a resident of India during the relevant period. As a result, the applicant is deemed a 'non-resident,' and the income earned in the USA during that time is not taxable in India. The Department's comments supported the conclusion that the applicant should be treated as a Non-Resident Indian (NRI) due to spending 123 days in India during the financial year 2008-09. Consequently, the ruling was issued on 11th February 2010, stating that the income earned by the applicant in the USA is not subject to taxation under the Income-tax Act, 1961, as he was a non-resident during the previous year 2008-09.
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