The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the taxation of global income by confirming the assessee’s tax residency status as being in India.
Ashok Kumar Pandey,the appellant-assessee, filed his return of income for Assessment Year (AY) 2013-14, reporting ₹9,570. His return was selected for scrutiny, leading to notices under Sections 143(2) and 142(1) of the Act. The assessee earned income from capital gains, dividends, interest, and house property.
He claimed dual residency in India and the USA, asserting that his center of vital interest was in the USA due to his family’s US nationality, his Overseas Citizen of India ( OCI ) status, and significant investments in the USA.
The Assessing Officer ( AO ) examined the assessee’s claims and requested information on his stay, family domicile, investments, and US tax returns. The investigation revealed that the assessee had spent more than 183 days in India, residing with his wife and children in Mumbai, while one daughter was studying in New York. He owned over 50% of Revel Films Pvt. Ltd. and earned capital gains, dividend income, rental income from a property in the US, and bank interest from US deposits.
As a result, the AO issued a show-cause notice questioning the assessee’s residency status for tax purposes and the applicability of Section 5 of the Act, to his US income.
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On 18.02.2016, the assessee filed a reference under Section 144A. The Joint Commissioner determined that the assessee, a Managing Director, resided in India with his Indian spouse and rejected his claim of US residency for tax purposes, stating that his center of vital interest was in India.
The AO then calculated the total income, adding ₹40,39,358 for taxable dividend income of $32,489 and tax-free dividend income of $42,342, along with ₹3,07,431 for taxable interest income of $5,695. He recorded a net capital gain of $2,49,064, with a carried-forward loss of ₹41,99,839, and noted that rental income of $66,750 resulted in no taxable income. The assessment under Section 143(3) was completed on 09.03.2016, determining the total income at ₹43,56,363.
The assessee appealed to the Commissioner of Income Tax(Appeals)[CIT(A)], contesting his residential status and taxability. He provided a US tax residential certificate but did not submit written arguments. The CIT(A) ruled that, under Section 5 of the Act, residing in India for over 183 days classified him as a resident, making his global income taxable. Since the assessee had not paid any tax in the US, the AO’s computation was upheld, and all other income was deemed taxable in India. The appeal was dismissed.
The tribunal reviewed the lower authorities’ orders and noted that the assessee stayed in India for over 183 days, qualifying as a resident. He claimed residency in both the USA and India, which the revenue accepted, but disputed his assertion that his center of vital interest was in the USA.
Under Article 4(2)(a) of the Indo-US DTAA, the tribunal determined that an individual’s residency depends on where personal and economic relations are closer. The assessee’s immediate family resided in the USA, while he was actively involved in a private limited company in India, indicating stronger ties to India.
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Ultimately, the tribunal concluded that the assessee was a resident of India, making all income sourced from the USA chargeable to tax in India under Section 5 of the Act. As he had not paid any tax in the USA, no tax credit was available against his Indian tax liability.
The two member bench comprising Anikesh Banerjee(Judicial Member) and Prashant Maharishi(Accountant Member) upheld the lower authorities’ decision on taxing his dividend and capital gains income and dismissed the appeal.
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