2025 (3) TMI 919 - AT - Income Tax

Assessee staying abroad 210 days for employment qualifies as non-resident under section 6 Income Tax Act

Mr. Mitesh Vijay Gulati Versus Income Tax Officer, Int. Tax Ward-2 (3) (1), Mumbai

ITAT Mumbai held that an assessee who stayed outside India for 210 days (182 days for employment and 28 days searching for employment) and remained in ... Residential status - Period of stay outside India - 28 days stay in the USA, which the Assessee has claimed that he went to the USA for seeking the employment and tried to get the employment but could not get succeeded - Assessee has claimed that going outside India for the purpose of employment, does not mean that the actual services have to be rendered for employment, but if someone goes outside India for the purposes of searching employment, then also the purpose can be construed as 'purpose of employment outside India' HELD THAT:- Assessee who went to a foreign country partially for employment and partially for in search of employment and stayed in India for a period less than 182 days in the preceding year, is entitled to claim the exemption qua income earned out of India being non-resident of India during that year, as per explanation 1 to section 6 of the Act. Thus, the question posed is answered accordingly. Admittedly the Assessee in the instant case during the AY under consideration, was out of India for a period of 210 days in total, for the purposes of employment (182 days) and in search of employment (28 days) and remained in India for a period of less than 182 days. As in Suresh Nanda [2012 (7) TMI 772 - ITAT DELHI] case Coordinate Bench has categorically held, as approved by Suresh Nanda case [2013 (3) TMI 77 - DELHI HIGH COURT] “that residential status of the person for the purpose of section is to be determined only on the basis of number of days stay in India and there is no restriction for number of days spent abroad and if the period of stay in India is less than 182 days then the status to be applied, would be of non-resident and his global income cannot be taxed in India in such case”. And therefore, the Assessee in this case is entitled to get the status of non-resident for the claiming the income earned from outside India, as exempt from taxation in India. Even it is not the case of the Department that the Assessee had visited foreign countries exclusively for other purposes such as tourists, medical treatment, studies, or the like as outlined in the case of CIT V/s O. Abdul Razak [2010 (12) TMI 940 - KERALA HIGH COURT]. Thus, in the absence of relevant contrary material, the certificates issued by the concerns at USA {Texas and Miami} cannot be sidelined and cannot be construed that the Assessee visited foreign countries for the specific and exclusive purposes other than the employment. Therefore, for the just decision of the case and substantial justice, we are inclined to allow the claim of the Assessee to the effect that he visited outside India for a period of 210 days in total for the purposes of employment and remained in India for a period of less than 182 days in total during the AY under consideration and therefore entitled to claim the exemption sought for, being non-resident of India during the AY under consideration and thus such claim is allowed. Resultantly the addition is deleted. Appeal of the Assessee is allowed. ISSUES PRESENTED and CONSIDEREDThe core legal issue in this case revolves around the determination of the Assessee's residential status for the Assessment Year (AY) 2016-17 under the Income Tax Act, 1961. Specifically, the question is whether the Assessee qualifies as a 'non-resident' in India based on the number of days spent outside India for employment purposes, thereby affecting the taxability of his global income in India.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe relevant legal provision is Section 6(1) of the Income Tax Act, 1961, which outlines the criteria for determining an individual's residential status in India. According to Section 6(1)(a), an individual is considered a resident in India if they are present in India for 182 days or more during the previous year. Explanation 1 to Section 6(1)(c) provides that for Indian citizens leaving India for employment, the 60-day requirement is extended to 182 days.Precedents considered include the Kerala High Court's decision in CIT v/s O. Abdul Razak, which interprets 'employment' broadly to include self-employment or business, and the Delhi High Court's ruling in CIT Vs. Suresh Nanda, which emphasizes the importance of the number of days spent in India for determining residential status.Court's Interpretation and ReasoningThe Tribunal interpreted the term 'employment' in a broad sense, consistent with the Kerala High Court's decision, to include the Assessee's search for employment abroad. It emphasized that the key factor for determining residential status is the number of days the Assessee stayed in India, not the nature of activities abroad.Key Evidence and FindingsThe Assessee provided evidence of staying outside India for 210 days, including 28 days in the USA for seeking employment. The Tribunal accepted certificates from entities in Texas and Miami confirming the Assessee's visits for employment purposes. The Tribunal found no evidence suggesting the Assessee's stay in the USA was for purposes other than employment.Application of Law to FactsThe Tribunal applied Section 6(1) and its Explanation to conclude that the Assessee's stay in India was less than 182 days, qualifying him as a non-resident. It emphasized that the Assessee's global income could not be taxed in India as he was not a resident during the relevant AY.Treatment of Competing ArgumentsThe Revenue argued that the Assessee's 28-day stay in the USA should not count towards employment-related absence. However, the Tribunal rejected this, citing the broad interpretation of 'employment' and lack of evidence for alternative purposes. The Tribunal also referenced precedents supporting the Assessee's position.ConclusionsThe Tribunal concluded that the Assessee was a non-resident for AY 2016-17, and his global income, including salary and NRE interest, was not taxable in India. The addition of Rs. 88,99,189/- to the Assessee's income was deleted.SIGNIFICANT HOLDINGSVerbatim Quotes of Crucial Legal Reasoning'The Assessee who went to a foreign country partially for employment and partially for in search of employment and stayed in India for a period less than 182 days in the preceding year, is entitled to claim the exemption qua income earned out of India being non-resident of India during that year, as per explanation 1 to section 6 of the Act.'Core Principles EstablishedThe Tribunal reaffirmed that the determination of residential status under Section 6(1) hinges on the number of days spent in India, not the specifics of activities abroad. The interpretation of 'employment' includes efforts to seek employment abroad.Final Determinations on Each IssueThe Tribunal allowed the Assessee's appeal, recognizing him as a non-resident for AY 2016-17. Consequently, the Assessee's global income was exempt from taxation in India for that year, and the addition made by the Assessing Officer was deleted.