2025 (1) TMI 1273 - AT - Income Tax

Status of the Appellant is a Non-Resident Indian and not a Resident of India - Period of stay in India - interpretation of the provisions of DTAA and section 6 of the Act defining the residential status of assessee - HELD THAT - According to second condition if assessee has remained in India in last four years for more than 365 days and in relevant previous year for more than 182 days then only shall be treated as non-resident Assessee submitted that in relevant previous year he was in India for 132 days only which is less than 182 days and therefore assessee is not resident as per either of the conditions of section 6(1) of the Act. The assessee has filed evidence in support of employment outside India and also filed visit passes. In view of the evidences filed before us we feel it appropriate to restore this issue back to the file of the Assessing Officer for verification of residential status of Singapore as well non-residential state in India particularly in view of the Explanation 1 to section 6(1)(c) of the Act and decide the issue in accordance with law. The grounds Nos. 1 to 3 of the appeal of the assessee are accordingly allowed for statistical purposes.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment were:

1. Whether the appellant qualifies as a Non-Resident Indian under the provisions of Section 6(1) of the Income Tax Act, 1961, and the applicability of Explanation 1 to Section 6(1)(c).

2. The correct taxation rate applicable to the dividend income received by the appellant from M/s. Saurashtra Freight Pvt. Ltd., considering the Double Taxation Avoidance Agreement (DTAA) between India and Singapore.

3. The applicability of surcharge on the tax imposed on the dividend income received by the appellant.

4. The justification for levying interest under sections 234A, 234B, and 234C of the Income Tax Act, 1961.

ISSUE-WISE DETAILED ANALYSIS

1. Residential Status under Section 6(1) of the Income Tax Act, 1961:

- Relevant legal framework and precedents: Section 6(1) of the Income Tax Act defines the conditions under which an individual is considered a resident in India. Specifically, it considers the number of days spent in India during the relevant year and the preceding years. Explanation 1 to Section 6(1)(c) provides exceptions for individuals leaving India for employment purposes.

- Court's interpretation and reasoning: The Tribunal analyzed whether the appellant, who claimed to be a non-resident, satisfied the conditions of Section 6(1). The appellant argued that he was in India for only 113 days during the relevant year and was employed outside India, thus qualifying for the exception under Explanation 1 to Section 6(1)(c).

- Key evidence and findings: The appellant provided evidence of his stay in India and his employment outside India. The Tribunal noted the appellant's submission of a Tax Residency Certificate from Singapore.

- Application of law to facts: The Tribunal considered whether the appellant's employment outside India qualified him for the extended 182-day threshold instead of the 60-day requirement under Section 6(1)(c).

- Treatment of competing arguments: The Tribunal examined the Assessing Officer's conclusion that the appellant was a resident based on his permanent home and business ties in India. However, the Tribunal focused on the statutory definitions and exceptions provided in the Act.

- Conclusions: The Tribunal restored the issue to the Assessing Officer for verification of the appellant's residential status, considering the provisions of Explanation 1 to Section 6(1)(c).

2. Taxation of Dividend Income and Double Taxation Avoidance Agreement (DTAA):

- Relevant legal framework and precedents: Article 10 of the India-Singapore DTAA provides for a reduced tax rate on dividends for residents of Singapore. The appellant claimed this benefit.

- Court's interpretation and reasoning: The Tribunal assessed whether the appellant was eligible for the DTAA benefits, considering his claim of being a Singapore resident.

- Key evidence and findings: The appellant submitted a Tax Residency Certificate from Singapore, which was not disputed by the authorities.

- Application of law to facts: The Tribunal considered the applicability of the DTAA rate of 15% on dividends instead of the 30% rate applied by the Assessing Officer.

- Treatment of competing arguments: The Tribunal noted the Assessing Officer's reliance on the appellant's ties to India but emphasized the need to verify the appellant's residential status under the DTAA.

- Conclusions: The Tribunal restored the issue to the Assessing Officer for a fresh decision, considering the DTAA provisions.

3. Applicability of Surcharge on Dividend Income:

- Relevant legal framework and precedents: The appellant argued against the surcharge levied on the dividend income, citing the DTAA provisions.

- Court's interpretation and reasoning: The Tribunal considered whether the surcharge was justified, given the appellant's claim of non-resident status and DTAA applicability.

- Key evidence and findings: The Tribunal noted the appellant's submission of DTAA benefits, which exclude surcharge.

- Application of law to facts: The Tribunal emphasized the need to determine the appellant's residential status to decide on the surcharge applicability.

- Treatment of competing arguments: The Tribunal acknowledged the Assessing Officer's application of the surcharge but highlighted the need for a correct determination of residency.

- Conclusions: The Tribunal restored the issue to the Assessing Officer for reconsideration in light of the appellant's residential status.

4. Levy of Interest under Sections 234A, 234B, and 234C:

- Relevant legal framework and precedents: Sections 234A, 234B, and 234C of the Income Tax Act provide for interest on delayed filing and payment of taxes.

- Court's interpretation and reasoning: The Tribunal considered the appellant's challenge to the interest levied, contingent on the determination of his residential status.

- Key evidence and findings: The Tribunal noted the appellant's argument that the interest was unjustified due to his claimed non-resident status.

- Application of law to facts: The Tribunal emphasized the need for a correct determination of the appellant's residential status to assess the interest liability.

- Treatment of competing arguments: The Tribunal acknowledged the Assessing Officer's imposition of interest but highlighted the dependency on the residency determination.

- Conclusions: The Tribunal restored the issue to the Assessing Officer for a fresh decision, contingent on the appellant's residential status.

SIGNIFICANT HOLDINGS

- Preserve verbatim quotes of crucial legal reasoning: The Tribunal emphasized the importance of correctly determining the appellant's residential status under Section 6(1) and the DTAA provisions.

- Core principles established: The Tribunal highlighted the necessity of applying the correct legal framework and exceptions provided in the Income Tax Act and DTAA to determine residency and tax liability.

- Final determinations on each issue: The Tribunal restored all issues to the Assessing Officer for reconsideration, emphasizing the need for a thorough verification of the appellant's residential status and the application of relevant legal provisions.