2014 (2) TMI 895 - AT - Income Tax

Tribunal clarifies 'employment' for residency status under Income Tax Act, upholds deduction under section 80RRA

The Tribunal directed the Assessing Officer to re-examine the number of days the assessee was outside India to determine the correct residential status ... Status of the Assessee – Whether the assesseee is a resident or non-resident under section 6 of the Act – A.O. found that assessee was not regularly employed abroad, but worked as a consultant for a foreign company - Held that:- The argument of the CIT(A) that assessee did not leave India and stationed outside the country is not material, as nowhere the section specifies that assessee should leave India permanently so as to reside outside the country - Even visit outside India for a period of or periods accounting in all to 60 days/181 days (as the case may be) will satisfy the condition specified in section 6(1) - Since the plain meaning is very clear, the argument of the CIT(A) that assessee has not left India permanently has no meaning - as working out the period of stay in India, Assessing Officer worked in one way and the learned CIT(A) analyzed the period in a different way - Relying upon CBDT v. Aditya Birla [1987 (11) TMI 5 - SUPREME Court] employment does not mean salaried employment but also includes self-employed/professional work - assessee's earning for consultancy fees from foreign enterprise and visit abroad for rendering consultation can be considered for the purpose of examining whether assessee's is resident or not. The Assessing Officer has calculated the period of stay in one particular manner which the learned CIT(A) examined and determined in another manner by excluding the travel to two places which are not supported by evidence to consider for the purposes of employment - going abroad for the purpose of employment only means that the visit and stay abroad should not be for other purposes such as a tourist or for medical treatment or for studies or the like - assessee has visited number of places but in some of the stampings, the visa was granted as 'tourist visa' and some of them are 'pass through visa's. Unless assessee travels on business visa or for the purpose of business/consultation, the entire period of travel abroad cannot be considered as 'going abroad for the purpose of employment' - Since these details have not been examined by the Assessing Officer on the basis of the visas obtained - this aspect requires examination by the Assessing Officer, to verify whether the visits are for the purpose of employment or for the purpose of tour or for any other reason and only to the extent of visits for the purpose of employment can be considered, while determining status of assessee as per the provisions of law - thus, the matter should be re-examined by the Assessing Officer to establish the number of days assessee was outside the Country so as to consider whether he is the resident or non-resident as per the provisions of the Act – thus, the matter remitted back to the AO for fresh examination – Decided in favour of Assesse. Issues Involved:1. Status of the assessee as a resident or non-resident under section 6 of the Income Tax Act, 1961.2. Applicability of deductions under section 80RRA of the Income Tax Act.Detailed Analysis:1. Status of the Assessee as a Resident or Non-Resident:The primary issue in this case is whether the assessee qualifies as a resident or non-resident under section 6 of the Income Tax Act, 1961. The assessee claimed non-resident status, arguing that he was away from India for more than 182 days during the relevant year, rendering consultancy services abroad. However, the Assessing Officer (A.O.) determined that the assessee did not establish a nexus between his travels abroad and the consultancy services rendered. The A.O. interpreted the term 'for the purposes of employment' restrictively, concluding that the assessee did not have an employer-employee relationship with the foreign company and thus was a resident under section 6.The CIT(A) upheld the A.O.'s decision, stating that the assessee did not leave India for employment abroad, as he continued to reside in India and earned income from consultancy work carried out in India. The CIT(A) further analyzed the number of days the assessee traveled abroad and found that excluding unsupported trips to Germany and Sudan, the period abroad was less than 181 days, failing to meet the non-resident criteria.The Tribunal, however, noted that the term 'employment' in section 6(1) includes self-employment or professional work as per the Supreme Court's decision in CBDT v. Aditya Birla and the Kerala High Court's decision in CIT v. Abdul Razak. The Tribunal emphasized that the plain meaning of the section does not require permanent relocation outside India. The Tribunal found that the A.O. and CIT(A) used different methods to calculate the period of stay in India, and the assessee's passport records needed further examination to verify the purpose of his travels.The Tribunal directed the A.O. to re-examine the number of days the assessee was outside India, considering the nature of visas and the purpose of visits, to determine the correct residential status under the Act.2. Applicability of Deductions under Section 80RRA:The assessee also claimed deductions under section 80RRA, which the A.O. initially did not consider, citing the absence of a claim in the return and lack of a certificate. However, the CIT(A) allowed the deduction, noting that the CBDT had permitted the terms of the agreement and that not filing the requisite certificate was not fatal to the claim.The Tribunal upheld the CIT(A)'s decision to grant the deduction under section 80RRA, recognizing that the assessee's consultancy agreement with the foreign company and the approval under section 80RRA indicated an employment relationship as interpreted by the Supreme Court in CBDT v. Aditya Birla.Conclusion:The Tribunal concluded that the matter required further examination by the A.O. to establish the number of days the assessee was outside India and the purpose of his travels. The Tribunal restored the issue to the A.O. for fresh consideration, directing the assessee to provide necessary details and evidence to support his claim of non-resident status. The appeal was allowed for statistical purposes, with directions for a thorough re-evaluation of the facts and circumstances.