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TMI Blog2009 (4) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... h deals with taxation of salary income - AO adopted the status of the assessee as resident and included the salary income earned from rendering services in USA as taxable in India - CIT(A) was of the view that since the assessee has left India in an earlier previous year and not the previous year relevant for AY 2005-06, therefore, Explanation (a) will not be applicable. CIT(A) further held that Explanation (b) is not available to the assessee to claim relief. HELD THAT:- Section 6 was subsequently amended by Direct Tax Laws (Second Amendment Act, 1989). On comparison of the above-referred Explanation as was introduced by the Finance Act, 1982 and clause ( a ) of Explanation to section 6(1), it is clear that clause (a) of the new Explanation is, in substance, the same as clause (a) of earlier Explanation. Hence, it is clear that clause ( a ) of Explanation to section 6( 1 ) will be applicable for the previous year in which the assessee leaves India for the purpose of his employment. Hence, we hold that Explanation (a) is not applicable in the instant case. Contention of the ld AR before us is that in case a person has made a visit to India in any previous year, then the words 60 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue from a different angle. When one has to compute the period for which an assessee is in India, one has to start the counting from a particular day and to end the same with specific day. The period is to be counted from the date of arrival of the assessee in India to the date he leaves India. Thus, the words from and to are to be inevitably used for ascertaining the period though these words are not mentioned in the statute. As per the General Clauses Act , the first day in a series of a day is to be excluded if the word from is used . Since for computation of the period, one has to necessarily import the word from and, therefore, accordingly, the first day is to be excluded. In the instant case, if the first day, i.e., 31-1-2005 is excluded then the period of stay will be 59 days. Since the period of stay will be less than 60 days, therefore, section 6(1)( c) will not be applicable and the status of the assessee will be non-resident. We, therefore, accept the alternate contention of the appellant and hold that the status of the assessee will be non-resident. Grounds of appeal Nos. 3 to 5 are against the finding of the ld CIT(A) that the assessee cannot be considered as a reside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent instead of resident and the status was wrongly mentioned. Once the status is being claimed by the assessee as non-resident, then we understand that the jurisdiction was with AO (International Taxation). The AO (International Taxation) while completing the assessment can make the assessment on a correct status. The AO is authorized to take the correct status while making the assessment. It is not the case of the assessee that he claimed the status of resident after filing letter with the AO. Hence, we hold that AO was having jurisdiction. In the result, the appeal is partly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... side India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two days" had been substituted." 3.2 There is no dispute amongst the parties that the assessee was in India for a period amounting to 365 days and more during the four years preceding the previous year 2004-05. The words 'sixty days' occurring in section 6(1)( c) are to be substituted with the words '182 days' in case the assessee satisfies the following conditions :-- He must be a citizen of India. He must leave India for the purpose of employment outside India. He must leave India during the previous year. During the previous year relevant to the assessment year under consid-eration, the assessee was in the employment of an Indian Company though he performed the work outside India. According to the Assessing Officer, the assessee has left India on 1-2-2004, i.e., during the previous year 2003-04 and, therefore, according to the learned Assessing Officer, the Explana-tion (a ) will not be applicable as he has not left India during the previous year. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to certain conditions. If so taxed in USA, the assessee is entitled to relief from double taxation in terms of article 25 of the DTAA to the extent of tax paid in USA. Therefore, the Assessing Officer adopted the status of the assessee as resident and included the salary income earned from rendering services in USA as taxable in India. 3.5 Before the learned CIT(A), it was contended that clause (b) of Explanation to section 6(1) is applicable in case the assessee comes on a visit to India. The fact that the assessee came to India permanently, thereafter is not relevant for substituting 182 days in section 6(1)( c). In the instant case, the assessee has come on a visit to India for less than 182 days and, therefore, as per section 6(1)(c) read with Explanation ( b), the status of the assessee should have been taken as non-resident. Before the learned CIT(A), the assessee placed reliance on the decision of the Hon'ble Authority for Advance Ruling in the case of British Gas India (P.) Ltd., In re [2006] 285 ITR 218 (New Delhi), where it was held that for the purposes of employment outside India, covers the cases where an assessee is sent outside India on deputation by an Indian emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es do not mention the purpose of visit in the passport. 3.8 On the other hand, the learned DR supported the orders of the authorities below. The learned DR submitted that Explanation (a) to section 6(1) is not applicable because the assessee has not left India during the previous year. It was submitted that Explanation (b) is not applicable because the assessee is not a person of Indian Origin within the meaning of Explanation to clause (e) of section 115C. It was, therefore, argued that the authorities below have rightly held the status of assessee as resident. 3.9 We have heard both the parties. Explanation ( a) to section 6(1) is as under :-- "Explanation.--In the case of an individual -- (a )being a citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or for the purposes of employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty two days" had been substituted;" 3.10 The abovereferred Explanation is applicable to that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15C, who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two days" had been substituted." 3.13 Explanations (a) and (b) were introduced by Direct Tax Laws (Second Amendment Bill, 1989). By the Amendment effected by 1989 Bill, it was provided that the words '60 days' occurring in section 6(1)( c) will be read as 150 days in case a citizen of India comes on a visit to India in the previous year. In the statement of objects and reasons, it was mentioned as under:-- "One of the prime needs of the country is to ensure proper balance of payment and encourage inflow of foreign exchange into the country. With a view to achieve this, it is proposed to amend section 48 of the Income-tax Act in order to provide for computation of the capital gains in the case of non-resident Indians by calculating the cost price and the sale price in the foreign currency in which the investment was made instead of taking the value in Indian currency as at present. This will make investments in shares by non-resident Indians more at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a in the case of the aforesaid individuals from one hundred and fifty days to one hundred and eighty-two days, for being treated as resident in India, in the previous year in which they visit India. Thus, such non-resident Indians would not lose their 'non-resident' status if their stay in India, during their visits, is up to one hundred and eighty-one days in a previous year. The proposed amendment will take effect from 1-4-1995 and will, accordingly, apply in relation to the assessment year 1995-96 and subsequent years, i.e., each previous year commencing on or after 1-4-1994." 3.14 It is true that the word 'a visit' is available in Explanation (b) to section 6(1). According to the learned AR, if there is a visit then the period should be extended and other visits, even for permanently coming to India, should not be considered. The Hon'ble jurisdictional High Court in the case of CIT v. D Ananda Basappa [2009] 309 ITR 329 (Kar.) had an occasion to consider the meaning of the word "a" as appearing in section 54/54F of the IT Act. The Hon'ble jurisdictional High Court observed at page 332 as under :-- "The contention of the revenue is that the phrase "a" residential house would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year. Looking to the legislative intention, we hold that the status of the assessee cannot be taken as resident on the ground that he came on a visit to India and, therefore, the period of 60 days as mentioned in 6(1)(c ) should be extended to 182 days by ignoring his subsequent visit to India after completing the deputation outside India. 3.17 During the course of proceedings before us, the learned AR has raised an alternative contention regarding status given as resident. The learned AR submitted that 60 days referred to in section 6(1) should exclude the period of stay in India on visit. If this is not accepted, then it will lead to absurd result as stated in para 2.1 of rejoinder to remand report. The learned AR has tried to explain the absurdity in case the period of stay in India on visit is not excluded. In Example A, the learned AR submitted that a person comes on visit and his stay in India on visit is 120 days. He will be treated as non-resident as per clause (b) of the Explanation. In Example B, if a person comes on visit and stays in India for 90 days and returns abroad and, later on, comes back to India permanently and he stays in India for a period of 30 day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntil 9-4-2005. During this period, he resided at 320 W Illinois St. 801, Chicago. Thus, it is a fact that the assessee was on deputation from April, 2004 to January, 2005. Hence, the stay in India from 18-8-2004 to 6-9-2004 was in respect of a visit to India. Hence, this period is to be excluded while considering the applicability of section 6(1)( c). Hence, we accept the alternate contention of the learned AR that for the purpose of computing the period of 60 days as mentioned in section 6(1)(c ), the period of visit to India is to be excluded. 3.20 The second alternate contention of the learned AR is that the assessee arrived in India on 31-1-2005 at 4 A.M. According to the learned AR, the fraction of a day is not to be counted while determining the period. For this proposition, the learned AR has relied on the decision of the Hon'ble Delhi High Court in the case of Praveen Kumar v. Sunder Singh Makkar (sic). The learned AR, therefore, contended that if 31-1-2005 is excluded then the appellant's stay in India from 1-4-2005 to 31-3-2005 is only 59 days and, therefore, the appellant becomes non-resident. 3.21 On the other hand, the learned DR submitted that there is no provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 6 I.C. 886]. In Chick v. Smith [1840] bowl. 340 : 8 D.P.C. 337: 4 Jur. 86, Patterson, J., said: The good sense of the matter is that, where it is necessary to show which was the first of two acts, the Court is at liberty to consider fractions of a day. The rule of law would be otherwise absurd". The day on which a legal instrument is dated begins and ends at midnight. It is not necessary to consult the calendar to ascertain when it commences and ends. [Anderson: Law Dictionary]. The proviso in a will required the devisee to be personally present in the house devised for 168 days in each year; if the owner be personally present at the house for any part of one day, that will be sufficient residence for that day - Walcot v. Botfield 69 E.R. 226." 3.24 Thus, there are two views in respect of ignoring the fraction of a day. However, we can look at the issue from a different angle. When one has to compute the period for which an assessee is in India, one has to start the counting from a particular day and to end the same with specific day. The period is to be counted from the date of arrival of the assessee in India to the date he leaves India. Thus, the words 'from' and 'to' are to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has his center of vital interests cannot be determined, or if he does not have a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode; (c )if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national; (d )if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement." 4.2 The learned CIT(A) observed that the assessee stayed in leased or rented premises for a period of 10/11 months while on deputation to USA. Before the assessee left India in February, 2004 the assessee and his family lived in a rented premises in Bangalore. During his stay in USA until his return to India in January, 2005, the family of the assessee was allegedly staying with in-laws of the assessee. When the assessee returned back, the assessee and his family started living with his Aunt in Sanjay Nagar, Bangalore. From the factual position, the learned CIT(A) concluded that the assessee had no permanent home in either State. The assessee was having closer person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome taken on rent in USA is to be treated as a permanent home, then the home in India where the family of the assessee was living is also to be considered as a permanent home. Article 4.2 has already been reproduced. The assessee was an employee of an Indian Company and went to abroad on deputation. Hence, his personal and economic relations with India were closer. Hence, as per Article 4(2)(a), the assessee is to be considered as resident of India. The assessee was having a habitual abode in India. The abode in States was for the purpose of services and house was taken on rent for one year. Before going to States, the assessee was living in India. While applying for passport, the assessee has to give a permanent address in the application form. Thus, the assessee was having the habitual abode, In the copy of the passport, the assessee has given his address as 4/573, Netaji Road, Arvindnagar, Cuddappah, (A.P.). This passport was valid from 28-2-1996 to 27-2-2006. This also shows that the assessee was having habitual abode in India. Hence, by applying Article 4(2) of the DTAA, it is held that the assessee is a resident of India. Thus, the alternate contention raised by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the employment was exercised in US. For this proposition, the learned AR relied on the following decisions :-- CIT v. P.V.A.L. Kulangadan Chettiar [2004] 267 ITR 654 (SC); Dy. CIT v. Patni Computer Systems Ltd. [2008] 114 ITD 159 (Pune). 5.3 On the other hand, the learned DR supported the orders of the authorities below. 5.4 We have heard both the parties. Article 16/18 is relevant in this case. The same are reproduced as under for ready reference :-- "16. Dependent personal services.--(1) Subject to the provisions of article 17 (Director's fees), 18 (Income earned by Entertainers and Athletes), 19 (Remuneration and Pensions in respect of Government Service), 20 (Private Pensions, Annuities, Alimony and Child Support), 21 (Payments received by students and apprentices) and 22 (payments received by Professors, teachers and Research Scholars), salaries, wages and other similar remuneration; derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficial provisions if available in DTAA can be used. Hence, the decision of Patni Computers is not relevant in the facts of the case. Hence, it is held that if the assessee is a resident of India, then his income in USA is taxable and the assessee will be entitled to the relief under Article 25 of the DTAA. But in the instant case, we had already held that the assessee is not a resident of India and, therefore, accordingly, the salary income is not taxable. However, in case it is finally held that the assessee is a resident of India, then salary received in US will be taxable and the appellant will be entitled to credit of tax paid in US as per Article 25 of the DTAA. 6. The 7th ground of appeal is that the learned authorities below have erred in law in holding that interest under section 234B of the Act should be computed before giving credit for relief under section 90(2) of the Act. 6.1 The abovereferred issue has not been discussed by the Assessing Officer in his order. 6.2 Before the learned CIT(A), the assessee relied on the decision of the Bangalore Bench in the case of IBM India Ltd. v. CIT [2007] 105 ITD 1. The learned CIT(A) observed that the case was in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to offset the loss or prejudice which the revenue suffers on account of the non-payment of the said amount. The period for which this additional liability is imposed is an important feature which very clearly shows the true Legislature intent behind the levy. The periods as laid down in all the three sections show that they are compensatory provisions." 6.4 The Hon'ble Delhi High Court in the case of CIT v. Anand Prakash [2009] 179 Taxman 44 also held that interest is compensatory. In that case, the assessee received the higher compensation and the provisions of section 148 were invoked. The Hon'ble Delhi High Court deleted the interest on the ground that the assessee was not aware of enhanced compensation at the time of filing of return and the income was not available for payment of advance tax. It is also being consistently held by this Bench that in respect of MAT credit, the credit should be given first for the purpose of charging interest under section 234B. The assessee is not supposed to pay the tax for which he is going to get the credit and, therefore, interest under section 234B cannot be charged in respect of the amount for which he is going to get credit. Hence, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant assessment year, the jurisdiction over the appellant does not cease to exist. Hence, the contention of the appellant was rejected by the learned CIT(A). 7.2 The learned AR in the written submission has submitted as under:-- "2.6 It is submitted that the appellant can raise the question of jurisdiction at any point of time since section 124(3) is not applicable to the facts of the case. Section 124(3) applies only to territorial jurisdiction of Assessing Officer and not to class of assessee jurisdiction like resident/non-resident. 2.7 It is submitted that the appellant did not raise the jurisdiction issue before the Assessing Officer as the appellant claimed the status of non-resident. Only when the assessment order was received holding that the appellant is a resident, the appellant became aware of the fact that the Assessing Officer has made up his mind to treat the appellant as resident. By that time, the time-limit specified under section 124(3) had expired. The appellant had questioned the jurisdiction at the first available opportunity thereafter, i.e., by taking a ground before Commissioner of Income-tax (Appeal)." 7.3 On the other hand, the learned DR stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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