By Geeta Jani, Dhishat B. Mehta
Chartered Accountants
Part C — Tribunal & International Tax Decisions
Shri Manoj Kumar Reddy v. ITO
ITA No. 1020/Bang./2008
S. 6(1)(c) [Explanation (b)], Income-tax Act;
Article 4, India-USA DTAA
A.Y. : 2005-2006. Dated : 3-4-2009
Explanation (b) to S. 6(1)(c) : (i) Not applicable in case of permanent return (ii) period of visit to India to be excluded (iii) fraction of a day to be excluded.
Facts :
The assessment pertains to previous year 2004-05 (A.Y. 2005-06). The appellant was an employee of an Indian company. On 23rd January 2004, the employer issued a deputation letter to the appellant relocating him to the USA and directed him to work on specified projects of the customers of its US parent company. However, the appellant continued to be an employee of the Indian company.
The appellant left India on 1st February 2004. He returned to India on 31st January 2005 at 4.00 a.m. The number of days of stay in India by the appellant during the preceding previous years 2000-01 to 2006-07 were as follows :
As the appellant was in India for more than 365 days or more during the four preceding previous years and during the previous year 2004-05 and he was in India for more than 60 days, the AO concluded that in terms of S. 6(1)(c) of the Act, the appellant was resident in India. The AO also referred to Article 4(1) of India-USA DTAA which defines ‘resident of a contracting state’ and held that the residential status of the appellant is to be decided in terms of the domestic law. As appellant is resident under the Act, he would also be resident in terms of DTAA.
The AO referred to Article 16 of India-USA DTAA which states that the salary derived by an Indian resident in respect of an employment shall be taxable only in India unless certain conditions are fulfilled. As AO held that the salary from rendering services in the USA was taxable in India as the appellant was resident in India.
Before CIT(A), the appellant contended that Clause (b)1 of Explanation to S. 6(1)(c) applies in case the appellant comes on a visit to India and the fact that appellant had come to India permanently was not relevant. Hence, the appellant should be considered as non-resident. In support of its contention, the appellant relied on the decision of AAR in British Gas India P. Ltd., (2006) 285 ITR 218, wherein the AAR held that the term ‘for the purposes of employment outside India’ would also cover a case where an assessee is deputed outside India by an Indian employer.
Before the Tribunal the appellant raised the following contentions :
(i) Clause (b) of Explanation to S. 6(1)(c) applies in case the appellant comes on a visit to India and the fact that the appellant had come to India permanently was not relevant. Hence, the appellant’s status should be taken as non-resident.
(ii) As he had arrived on 31st January 2005 at 4.00 a.m., the fraction of the day should not be counted while determining the period. He further contended that if 31st January 2005 is excluded, his stay in India was only 59 days. Hence, he would be non-resident. The appellant relied on Delhi High Court’s decision in Praveen Kumar and Another v. Sunder Singh Makkar.
Held :
(i) The Tribunal referred to the legislative history and the purpose of the amendment and relying on the Punjab & Haryana High Court’s decision in V. K. Ratti v. CIT, (2008) 299 ITR 295 (P& H), held that if the appellant has come to India permanently after leaving his employment outside India, Explanation (b) will not be applicable.
(ii) For computing the period of 60 days mentioned in S. 6(1)(c), the period of visit to India should be excluded.
(iii) Referring to the Delhi High Court’s decision in Praveen Kumar and Another v. Sunder Singh Makkar, Law Lexicon and S. 9 of the General Clauses Act, the Tribunal held that as per the General Clauses Act, the first 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’, the first day should be excluded.
Clause (b) relaxes the rigour of S. 6(1)(c) by substituting 182 days in place of 60 days
Held:
i) The Tribunal referred to the legislative history and the purpose of the amendment and relying on the Punjab & Haryana High Court’s decision in V. K. Ratti v. CIT, (2008) 299 ITR 295 (P& H), held that if the appellant has come to India permanently after leaving his employment outside India, Explanation (b) will not be applicable.
ii) For computing the period of 60 days mentioned in S. 6(1)(c), the period of visit to India should be excluded.
iii) Referring to the Delhi High Court’s decision in Praveen Kumar and Another v. Sunder Singh Makkar, Law Lexicon and S. 9 of the General Clauses Act, the Tribunal held that as per the General Clauses Act, the first 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’, the first day should be excluded.
