2019 (4) TMI 1533 - HC - Income Tax

Resident of India - Assessee not an ordinary resident - number of days of stay in India - a citizen of India, or a person of Indian origin - scope of amendment brought in Section 6(6) by the Finance Act, 2003 w.e.f. 1.4.2004 - Assessee shifted to USSR for his higher education in 1978 and worked there and get permanent resident status in Ukraine till 2002 thereafter shifted to England but continued his business interest in Ukraine, Russia and CSI Countries - HELD THAT - Tribunal on material on record came to factual finding that the assessee was in India during the previous year relevant to the assessment year in question for 173 days. This factual finding is unassailable. In that view of the matter, clause (a) of Section 6(1) would not apply. It is true that in absence of clause (b) of Explanation 1 below Section 6(1), the assessee would have fulfilled the requirements of clause (c) of Section 6(1). However, as per the explanation, if the assessee comes to a visit in India, the requirement of stay in India in the previous year would be 182 days and not 60 days as contained in clause (c). These facts would demonstrate that the assessee had migrated to a foreign country where he had set up his business interest. He pursued his higher education abroad, engaged himself in various business activities and continued to live there with his family. His whatever travels to India, would be in the nature of visits, unless contrary brought on record. We do not find that the Tribunal, therefore, committed any error. Revenue submitted that Section 6(6) has been amended by virtue of Finance Act of 2003 and this amendment is declaratory in nature. We need not go into this issue because in our opinion, Section 6(6) has no relevance. The question in the present case is not whether the assessee is not ordinary resident of India. The question is during the previous year relevant to the present assessment year, whether he was a resident in India which question must be answered with reference to sub-section (1) of Section 6. In some of the appeals, Revenue has raised additional question as to the date of the travel outside India should be included as a day of resident in India or not. This question would be academic since even after inclusion of the said day, the assessee would not cross the minimum 182 days required for his residence in India - revenue appeals are dismissed

Summary

Issues:
1. Residency status of the assessee for the assessment year 2006-07.
2. Addition of funds deposited in foreign bank accounts.
3. Deletion of addition made under Section 69.
4. Interpretation of Section 6(1) of the Income Tax Act, 1961.

Analysis:

Issue 1: Residency status of the assessee for the assessment year 2006-07
The primary issue in this case was whether the assessee was a resident of India for the assessment year 2006-07. The relevant provision under consideration was Section 6(1) of the Income Tax Act, 1961. The Tribunal found that the assessee had spent 173 days in India during the relevant previous year, falling short of the 182-day requirement under clause (a) of Section 6(1). While the assessee could have satisfied the clause (c) requirement, the Tribunal noted that the provision in Explanation 1 below Section 6(1) stipulated that if an individual comes on a visit to India, the 60-day requirement would be substituted by 182 days. The Tribunal considered the detailed history of the assessee's education and business activities abroad, concluding that his visits to India were in the nature of visits and not residency. The Court upheld the Tribunal's decision, dismissing the Revenue's argument regarding the amendment to Section 6(6) of the Act, emphasizing that the relevant question was the assessee's residency status during the previous year.

Issue 2: Addition of funds deposited in foreign bank accounts
The second issue pertained to the addition of funds amounting to ?41,71,89,166 deposited in foreign bank accounts under Section 68 of the Income Tax Act, 1961. The Tribunal had deleted this addition, stating that the assessee, not being an ordinary resident, and the funds deposited in the foreign bank were not taxable in India. The Tribunal highlighted that Section 68 required the assessee to establish the source and nature of funds transferred from foreign bank accounts to Indian bank accounts. However, the Tribunal found that the source of investment was established and upheld the CIT(A)'s decision to delete the addition.

Issue 3: Deletion of addition made under Section 69
The third issue involved the deletion of an addition of ?5,60,00,000 made under Section 69. The Tribunal upheld the CIT(A)'s order, stating that the assessee, not being an ordinary resident, and money earned overseas were not taxable in India. The Tribunal found that the source of the investment was established, leading to the deletion of the addition under Section 69.

Issue 4: Interpretation of Section 6(1) of the Income Tax Act, 1961
The judgment extensively analyzed the provisions of Section 6(1) of the Income Tax Act, 1961, to determine the residency status of the assessee for the assessment year 2006-07. The Court emphasized the requirements of clauses (a) and (c) of Section 6(1) and the implications of Explanation 1 regarding visits to India by Indian citizens or persons of Indian origin. The detailed factual findings regarding the assessee's activities abroad were crucial in establishing the nature of his visits to India and the consequent residency status determination.

In conclusion, the High Court dismissed the appeals, emphasizing the factual findings regarding the assessee's residency status, source of funds, and interpretation of relevant provisions of the Income Tax Act, 1961.