Assessee staying over 183 days in India deemed resident under India-USA DTAA despite USA property and investments

The ITAT Mumbai held that an assessee who stayed in India for more than 183 days during the assessment year was a resident of India under the India-USA DTAA. Despite having property and investments in the USA, the tribunal found the assessee's personal and economic relationships tilted more towards India, where he actively participated in a film distribution company with his wife and maintained his primary residence with family. The assessee's USA income, including rental income, dividends, and capital gains, was therefore taxable in India under section 5 of the Income Tax Act. The appeal was decided against the assessee.

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Issues Involved:

1. Whether the order passed by the CIT (Appeal), National Faceless Appeal Center, is devoid of natural justice due to lack of proper opportunity for the assessee to be heard.
2. Whether the CIT (Appeal) erred in confirming the order of the ACIT without considering the detailed submissions and supporting documents submitted by the assessee.
3. Determination of the residential status of the assessee under the India-USA Double Tax Avoidance Agreement (DTAA) and its impact on tax liability.
4. Application of the "center of vital interest" test to ascertain the residential status of the assessee.
5. Taxability of the assessee's global income in India under Section 5 of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Natural Justice and Opportunity to be Heard

The assessee contended that the CIT (Appeal) erred in confirming the ACIT's order without providing a proper opportunity to be heard, thus rendering the order devoid of natural justice. The tribunal reviewed this claim but found that the assessee had the opportunity to present submissions and documents during the proceedings. However, the CIT (Appeal) held that the assessee did not upload any written submissions, which led to the conclusion that the assessee had not been denied a fair hearing. Therefore, the tribunal did not find merit in this ground of appeal.

Issue 2: Consideration of Submissions and Supporting Documents

The assessee argued that the CIT (Appeal) failed to consider the detailed submissions and supporting documents submitted on 05.04.2023. The tribunal noted that while the assessee claimed to have submitted documents, the CIT (Appeal) found that these were not uploaded or considered during the proceedings. Consequently, the tribunal upheld the CIT (Appeal)'s decision, emphasizing that the burden was on the assessee to ensure the submission of all relevant documents.

Issue 3: Residential Status under India-USA DTAA

The core issue revolved around determining the assessee's residential status under the India-USA DTAA. The assessee claimed dual residency in India and the USA, asserting that his "center of vital interest" was in the USA. The tribunal examined the provisions of Article 4(2)(a) of the DTAA, which determines residency based on the location of the permanent home and personal and economic relations. The assessee argued that his economic and personal ties were stronger in the USA, citing his family's US nationality and investments.

Issue 4: Application of the "Center of Vital Interest" Test

The tribunal conducted a detailed analysis of the "center of vital interest" test. It considered the assessee's personal and economic relationships, including family ties, investments, and business activities. The tribunal found that the assessee had significant personal and economic ties to India, including residing in India for more than 183 days, active involvement in a company in India, and family residing in India. While the assessee had investments and a home in the USA, these were deemed passive and not indicative of a closer economic interest. Consequently, the tribunal concluded that the assessee's center of vital interest was closer to India, making him a resident of India for tax purposes.

Issue 5: Taxability of Global Income in India

Given the determination of the assessee's residency status as being in India, the tribunal held that the assessee's global income, including income derived in the USA, was chargeable to tax in India under Section 5 of the Income Tax Act, 1961. The tribunal noted that the assessee did not pay any taxes in the USA, and therefore, no tax credit was available in India. The tribunal confirmed the lower authorities' decision to tax the dividend income, capital gains, and other income sourced by the assessee in the USA.

Conclusion:

The tribunal dismissed the appeal, upholding the CIT (Appeal)'s order. It concluded that the assessee was a resident of India for tax purposes under the DTAA, and his global income was taxable in India. The tribunal found no merit in the grounds of appeal concerning natural justice and the consideration of submissions. The order was pronounced in the open court on 3/10/2024.

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