Query on Section 6 of IT Act - In view of Binny Bansal ITAT Bangalore Judgement

[Pankaj Singh]

Good afternoon,

My understanding has been that residential status under Section 6 of IT Act is to be determined independently for each FY, based only on the number of days of stay in that year & read with relaxation given in explanations which gives benefit of relaxed to 182 days to Citizen of India, or Person of Indian Origin who visits to India, without reference to residential status in earlier years.

However, in the Binny Bansal ITAT Bangalore held that while determining residential status, it is necessary to examine whether the person was a non-resident in preceding years, if yes, then only the benefit of relaxed 182 days from 60 days will be available.

Views requested on following -

1. How do generally read and apply Section 6 with explanation - is it treated as year-wise independent test, or has it commonly been applied by also considering the residential status in preceding years, as interpreted by the Tribunal in the Binny Bansal case?

2. In light of this judgment, do it is necessary to revisit and review residential status determinations of clients by examining their prior-year residential status, in line with the Tribunal’s interpretation?

Thanks & Regds

Pankaj Singh

[YAGAY andSUN]

Section 6 fundamentally operates on a year-specific basis. Residential status is ordinarily determined independently for each previous year by applying the physical stay tests prescribed under Section 6(1), i.e., 182 days test or 60 days + 365 days test, read with applicable Explanations.

The long-standing and generally accepted interpretation has been that the relaxation under Explanation 1 to Section 6 substituting 60 days with 182 days for a citizen of India or PIO visiting India, is available based on the factual character of the visit in the relevant year itself, without requiring the individual to establish non-resident status in earlier years.

In the Binny Bansal ruling, the Bangalore ITAT appears to have read the phrase “being outside India” and “comes on a visit to India” contextually to examine the continuity of non-resident status in preceding years. The Tribunal effectively held that the concessional 182-day threshold is intended for persons who are otherwise residing abroad and merely visiting India, and not for persons substantially residing in India in earlier years.

With respect, this interpretation is debatable. The statute does not expressly prescribe prior-year non-resident status as a condition precedent for availing Explanation 1 benefit. Historically, residential status has been assessed independently year-to-year, except where statute specifically imports earlier-year criteria (e.g., RNOR tests under Section 6(6)).

Accordingly:

1. The dominant professional and compliance approach continues to treat Section 6 determination as an independent yearly exercise, subject only to express statutory conditions.
2. Binny Bansal being an ITAT ruling has persuasive value but is not binding pan-India, particularly where contrary interpretations are possible from plain reading of statute.
3. Nevertheless, the ruling does create litigation risk in borderline “visit to India” cases where the assessee had substantial Indian presence or resident status in immediately preceding years.
4. As a matter of prudence, it is advisable to revisit high-value or sensitive cases involving Explanation 1 benefit and evaluate factual continuity of overseas residence/employment/business nexus.
5. Going forward, documentation evidencing genuine overseas residence, employment, tax residency abroad, and temporary nature of India visits should be robustly maintained.

AI Summary

Residential status under Section 6 is ordinarily a year-wise test, though prior-year residence may affect visit-to-India claims. Residential status under Section 6 of the Income-tax Act is ordinarily determined year by year on the basis of physical stay in the relevant previous year, applying the statutory day-count tests together with the applicable explanations. The commonly accepted view is that the concessional 182-day threshold for a citizen of India or person of Indian origin visiting India is linked to the facts of the relevant year and does not, on the statute's plain reading, require proof of non-resident status in earlier years unless the provision expressly says so. The Binny Bansal ITAT view is described as debatable, though it may increase litigation risk in borderline cases.