Non Resident Status can be given to Taxpayer who stayed in India for 176 days under Explanation 1(a) to Section 6(1) of Income Tax Act: ITAT [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) observed that Non Resident status can be given to taxpayer who stayed in India for 176 days under Explanation 1(a) to Section 6(1) of Income Tax Act, 1961.

On the basis of documents seized during the course of search action, it was observed that the assessee stayed in India for 176 days and went to Mauritius during the year. However, from the work permit issued by the Government of Mauritius, seized during the course of search action, it was observed that the assessee went to Mauritius on an occupation permit to stay and work in Mauritius as an investor with Firstland Holdings Ltd. and not as an employee.

The A.O., vide order dated 29/09/2021, passed under section 153A of the Income Tax Act did not agree with the submissions of the assessee and held that the assessee left India in the relevant financial year as an Investor on a business visa which is usually taken by an investor and not by an employee who leaves India for employment.

Accordingly, the A.O. held that the residential status of the assessee for the year under consideration is Resident and the assessee is not entitled to take benefit of Explanation–1(a) to section 6(1) of the Income Tax Act.

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 Income Tax Act.

On the contrary, as per the Revenue, the assessee left India not for the purpose of employment but he left India as an Investor on a business visa to Mauritius, therefore Explanation–1(a) of section 6(1) of the Income Tax Act is not applicable in the present case. Accordingly, it is the claim of the Revenue that since the assessee has stayed in India for 176 days which is more than 60 days, therefore, as per the provisions of section 6(1)(c) of the Income Tax Act the assessee is “Resident” in India for the purpose of the Income Tax Act and accordingly, the income earned by the assessee from outside India is taxable under the Income Tax Act.

A Two-Member Bench comprising Prashant Maharishi, Accountant Member and Sandeep Singh Karhail, Judicial Member observed that “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 Income Tax 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 Income Tax Act, the assessee has rightly claimed to be a “Non-Resident” during the year for the purpose of the Income Tax Act.”

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