2024 (1) TMI 746 - AT - Income Tax

Residential status of the assessee - period of stay in India - assessee claimed his residential status to be Non Resident and accordingly did not offer his global income to tax in India - it is the plea of the assessee that as he stayed in India only for 176 days during the year under consideration, he is Non Resident during the year for the purpose of the Act - whether the term employment outside India includes doing Business ? - Whether CIT(A) erred in interpreting the provisions of section 9A of the Immigration Act of Mauritius relating to Occupation permit which allows assessee to stay and work in Mauritius as an investor not an employee? HELD THAT - Assessee filed his return of income with Mauritius Revenue Authorities for the period from August 2012 to December 2012 declaring a total income of MUR 1,65,12,353 and a tax deduction of MUR 24,76,852, against the same. Revenue however, 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. In this regard, the A.O. has also taken into consideration that the assessee was holding 100% shareholding in Firstland Holdings Ltd., Mauritius, from which the assessee received alleged salary and fees for negotiation and obtained investments for the company. Accordingly, as per the A.O., the assessee has considerable control over affairs of the company i.e., Firstland Holdings Ltd., Mauritius, and the copy of the appointment letter and salary slips provided by the assessee are self serving documents in view of the fact that the assessee had no permit for employment in Mauritius. We find that the issue of whether the term employment outside India includes doing Business by the taxpayer, came up for consideration before in CIT v/s O. Abdul Razak 2010 (12) TMI 940 - KERALA HIGH COURT wherein the Hon ble Court while deciding the issue in favour of the taxpayer took into consideration the CBDT Circular no.346 dated 30/06/1982 and held that no technical meaning can be assigned to the word employment used in the Explanation and thus going abroad for the purpose of employment also means going abroad to take up self employment like business or profession. Therefore, the Hon ble Kerala High Court has interpreted the term employment in wide terms. The Hon ble Kerala High Court, however, held that the term employment should not mean going outside India for purposes such as tourists, medical treatment, studies, or the like. Even if the taxpayer has left India for the purpose of business or profession, in the aforesaid decisions, 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. Accordingly, even if it is accepted that the assessee went to Mauritius as an Investor in First land Holdings Ltd., Mauritius, in which he holds 100% shareholding, we are of the considered view that by applying the ratio of aforesaid decisions the assessee is entitled to claim the benefit of the extended period of 182 days, as provided in Explanation-1(a) to section 6(1) of the Act, for the determination of residential status. 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 as provided in 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. Accordingly, we find no infirmity in the findings of the learned CIT(A) on this issue. As a result, the grounds raised by the Revenue are dismissed.

Summary

Issues Involved:

1. Interpretation of section 9A of the Immigration Act of Mauritius.
2. Deletion of income received in Mauritius and its tax implications.
3. Determination of the residential status of the assessee for the assessment year 2013-14.

Summary:

Issue 1: Interpretation of section 9A of the Immigration Act of Mauritius

The Revenue contended that the learned CIT(A) erred in interpreting section 9A of the Immigration Act of Mauritius relating to the Occupation permit, which allows the assessee to stay and work in Mauritius as an investor, not an employee. The Tribunal did not find any significant discussion on this specific legal interpretation in the judgment.

Issue 2: Deletion of income received in Mauritius and its tax implications

The Revenue argued that the learned CIT(A) erred in deleting the addition of income received in Mauritius amounting to USD 43,75,000, converted into INR 23,79,53,188/-, despite the fact that the assessee did not pay any taxes in Mauritius on this income. The Tribunal found that the assessee had filed returns with the Mauritius Revenue Authorities, declaring income and tax deductions, which supported the assessee's claim.

Issue 3: Determination of the residential status of the assessee

The primary dispute was whether the assessee was a "Non-Resident" or "Resident" for the assessment year 2013-14. The assessee claimed to be a "Non-Resident" based on Explanation 1(a) to section 6(1) of the Income Tax Act, which extends the period of stay in India to 182 days for those who leave India for employment. The Revenue argued that the assessee left India as an investor, not for employment, and thus the standard 60-day period should apply, making the assessee a "Resident."

The Tribunal referred to the assessee's appointment letter and other documents, which indicated that the assessee was employed as a Strategist - Global Investment with Firstland Holdings Ltd., Mauritius. The Tribunal also cited the Kerala High Court's decision in CIT v/s O. Abdul Razak, which interpreted "employment" to include self-employment like business or profession. Therefore, the Tribunal concluded that the assessee's stay in India for 176 days qualified him as a "Non-Resident" under Explanation 1(a) to section 6(1) of the Act.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the learned CIT(A)'s decision that the assessee was a "Non-Resident" for the assessment year 2013-14. Consequently, the cross-objection by the assessee was deemed academic and infructuous, and thus dismissed.

Order pronounced in the open Court on 08/01/2024.