Relevant Provisions of Section 6 of Income Tax Act, 1961-

"6. For purposes of this Act:-

(1) An individual is said to be resident in India in any previous year, if he... xxxx xxxxx xxxxx

(c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty-days or more in that year."

Explanation: In the case of an individual, being a citizen of India, who is rendering service outside India, and who is or has been in India on leave or vacation in the previous year, the provisions of sub clauses (b) and (c) shall apply in relation to that year as if for the words 'thirty days' and 'sixty days', respectively occurring in the said sub-clauses, the words 'ninety days' had been substituted."

Facts of the Case:

Assessee was employed at Hong Kong from 24.10.1978 to 15.7.1979 under service agreement dated 24.10.1978 for nine months. The contract was terminated on 15.7.1979 and the assessee came to India for 85 days from July 1979 to October 1979. He then joined service in Jordon from 1.11.1979 to 28.2.1980.

Issue:

In view of the explanation to the clause (c) of sub-section (1) of Section 6, whether the assessee would be treated as a not-ordinary resident.

Held:

No, the assessee stayed in India assessee for less than 90 days otherwise than due to leave or vacation. His services had been terminated. During the period the assessee was in India he was not in employment in any foreign country. Therefore, the status of not-ordinary resident can not be granted to the assessee.

(For full text of judgment - visit 2008 -TMI - 3712 - PUNJAB AND HARYANA HIGH COURT)

Residential status for individuals rendering services abroad denied not-ordinary resident treatment where domestic stay not qualifying as leave. The Explanation to clause (c) of Section 6 extends day-count thresholds for citizens rendering services abroad only where the return to India is on leave or vacation. If foreign employment has terminated and the resident's stay in India is not by reason of leave, the substituted threshold does not apply; in the reported facts the assessee's services had been terminated and his domestic stay was not leave, so not-ordinary resident status was not available.