TaxTMI 
TaxTMI 
2009 (4) TMI 551
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.... to be an employee of IBM Global Services India (P.) Ltd. For this proposition, the learned Assessing Officer relied on para 3 of the deputation order. Before the Assessing Officer, the assessee filed the details of his stay in India for the previous years 2000-01 to 2006-07. The number of days of stay in India by the assessee for the previous years 2000-01 to 2006-07 were 365 days except for previous years 2003-04 and 2004-05. In the previous year 2003-04, number of days in India was 306 while for previous year 2004-05, number of days in India was 78. The residential status is to be determined as per the provisions of section 6(1) of the Act. The Assessing Officer has mentioned that section 6(1)( a) is not applicable and, therefore, the status is to be determined as per provisions of section 6(1)(c ) of the Income-tax Act. Section 6(1)( c) along with Explanation is reproduced below for ready reference so as to enable us to understand as to how the Assessing Officer has taken the status :- "(1) An individual is said to be resident in India in any previous year, if he- (a )is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more;....
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.... order as under :- "Article-4 RESIDENCE 1. For the purposes of this Convention, the term 'resident of a Contracting State' means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, citizenship, place of management, place of incorporation, or any other criterion of a similar nature, provided however, that (a )this term does not include any person who is liable to tax in that State in respect only of income from sources in that State; and (b )in the case of income derived or paid by a partnership, estate, or trust, this term applies only to the extent that the income derived by such partnership, estate or trust is subject to tax in that State as the income of a resident, either in its hands or in the hands of its partners or beneficiaries. 2. Where by reason of the provisions of paragraph 1, an individual is a resident of both Contracting States, then his status shall be determined as follows : (a )he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his pe....
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....he case of British Gas India (P.) Ltd. (supra) is not applicable because Explanation (a ) to section 6(1)( c) has not been invoked in the assessment order. According to the Assessing Officer, Explanation (a) applies only to an individual in relation to the previous year in which he leaves India. In the instant case, the assessee has left India on 1-2-2004, i.e., previous year relevant to the assessment year 2004-05. The appellant continued to be an employee of IBM Global Services and work was performed outside India. While on deputation, there has been an employment remained in India. It was further submitted that the decision of the AAR is binding only on the two parties concerned and its applicability to other cases is at best persuasive in nature. The learned CIT(A) was of the view that since the assessee has left India in an earlier previous year and not the previous year relevant for assessment year 2005-06, therefore, Explanation (a) will not be applicable. The learned CIT(A) further held that Explanation (b) is not available to the assessee to claim relief. 3.7 During the course of proceedings before us, the learned AR has filed two paper books. The first paper book contain....
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....ied]. The word "that year" refers to the previous year in which the assessee has left India for the purpose of employment outside India. Hence, clause (a) of Explanation to section 6(1)(c) will not be applicable in the case of the assessee because the assessee has left India in the previous year relevant to the assessment year 2004-05. The above interpretation is evident if we go through the legislative history of amendments. Vide section 3 of the Finance Act, 1982, following modification in the text of residence in India were made as is evident from Departmental Circular No. 346, dated 30-6-1982:- "7.3 (i)****** (ii)****** (iii) where an individual who is a citizen of India leaves India in any year for the purposes of employment outside India, he will not be treated as resident in India in that year unless he has been in India in that year for 182 days or more. The effect of this amendment will be that the test of residence in (c) above will stand modified to that extent in such cases." 3.11 Section 6 was subsequently amended by Direct Tax Laws (Second Amendment Act, 1989). On comparison of the above-referred Explanation as was introduced by the Finance Act, 1982 and clause (a....
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....tments without losing their 'non-resident' status. Besides, section 195 of the Act is also proposed to be amended to provide for deduction of tax at source on payment of interest to non-residents by the Government, public sector banks and public financial institutions only at the time of payment instead of at the time of credit of such income." Period of 150 days or more as occurring in Explanation (b) to section 6(1) was further increased to the period of 182 days by the Finance Act, 1994. In the Memo explaining the Provisions of Finance Bill, 1994, it was mentioned as under as to why the period of stay is being increased from 150 days to 182 days :- "Extending the period of stay in India in the case of the non-resident : Indians without their losing the non-resident status. Under the provisions of clause (1 ) of section 6 of the Income-tax Act, an individual is said to be resident in India in any previous year, if he has been in India during that year, - (i )for a period or periods amounting to one hundred and eighty two days or more, or (ii )for a period or periods amounting to sixty days or more and has also been in India within the preceding four years for a period or per....
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....iscloses that, a non residential building can be sold, the capital gain of which can be invested in a residential building to seek exemption of capital gain tax. However, the proviso to section 54 of the Income-tax Act, lays down that if the assessee has already one residential building, he is not entitled to exemption of capital gains tax, when he invests the capital gain in purchase of additional residential building." 3.15 Considering the legislative history of amendments and the purpose for which the amendments have been introduced, one has to consider the entry of the person in India during the previous year. If all the entries are in India for the purpose of a visit then the period of 60 days as mentioned in section 6(1)( c) will be substituted to 182 days. However, if in the previous year, the assessee has come to India permanently after leaving his employment outside India, then the Explanation (b) will not be applicable. 3.16 The Hon'ble Punjab and Haryana High Court in the case of V.K. Ratti v. CIT [2008] 299 ITR 295 had an occasion to consider the status, wherein the assessee was employed at Hong Kong from 24-10-1978 to 15-7-1979 under a service agreement for nine mont....
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....DR submitted that clause (c) does not distinguish the period of stay in respect of the purpose of visit. In case, the entire period of stay is not for a visit to this country, then the period of stay is to be considered. Such period of stay may include the period of stay spent for the purpose of visit while part of the stay may be relating to permanent shifting to India. 3.19 We have heard both the parties. Under 1922 Act, residents in taxable territories as per section 4A(iii) prescribed that a person will be treated as 'resident' if he is in the taxable territories for a period of or for period amounting in all 365 days or more within the four years preceding that year otherwise than on an occasional or casual visit. It means that the period of stay for occasional or casual visit was not to be considered for the purpose of ascertaining the resident status. Under the 1961 Act, section 6(1)(c ) provided a period of 60 days or more. This means that the period of 60 days or more should be a period, which is otherwise than on occasional or casual visit. Explanation was provided and a limit was put that the person should not be in India for more than 182 days if he comes on a visit to....
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....n of day, i.e., day of arrival and day of departure will have to be excluded. This is not the case and the intention of the Legislature when it has provided the period or periods amounting in all to 60 days or more. 3.22 We have heard both the parties. The Hon'ble Delhi High Court in the case of Praveen Kumar ( supra) had an occasion to consider as to whether the suit was filed in time. In that case, deed of performance was stipulated as 30-7-2002. In case the deed of performance was to be excluded then the limitation will commence from the next date, i.e., 31-7-2005. The Hon'ble Delhi High Court referred to section 9 of the General Clauses Act. If the word 'from' is used then the first day in a series of days will stand excluded and if the word 'to' is used, then it will include the last day in a series of days or any other period of time. The Hon'ble Delhi High Court at para 28 observed as under :- "It is well-known maxim that the law disregards fractions. By the Calender the day commenced at midnight and most nations reckon in the same manner. The English do it in this manner. We too have adopted the same. In the space of a day all the twenty four hours are usually reckoned, t....
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....od of time to use the word "from", and, for the purpose of including the last in a series of days or any other period of time, to use the word "to". (2) This section applies also to all (Central Acts) made after the third day of January, 1868, and to all Regulations made on or after the fourteenth day of January, 1887." 3.25 As per the General Clauses Act, the first day in a series of a day is to be excluded if the word 'from' is used. Since for computation of the period, one has to necessarily import the word 'from' and, therefore, accordingly, the first day is to be excluded. In the instant case, if the first day, i.e., 31-1-2005 is excluded then the period of stay will be 59 days. Since the period of stay will be less than 60 days, therefore, section 6(1)( c) will not be applicable and the status of the assessee will be non-resident. We, therefore, accept the second alternate contention of the appellant and hold that the status of the assessee will be non-resident. 4. Grounds of appeal Nos. 3 to 5 are against the finding of the learned CIT(A) that the assessee cannot be considered as a resident of US under Article 4(2) of Indo-US DTAA. 4.1 The learned Assessing Officer held ....
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.... the assessee is to be deemed to be resident of the State of which he is a national. The habitual abode of the assessee was certainly in India since his family was living in India. The learned CIT(A), therefore, held that the assessee was a resident of India. 4.3 Before us, the learned AR drew our attention to the commentary of Article 4 of OECD Model Convention. Para 13 of the commentary says that any dwelling available to an individual at all times continuously will be considered as a permanent home. One has to see the availability of permanent home with reference to previous year. Looking to these facts, the assessee was having a permanent home in US and, therefore, he was to be treated as a resident of US and not that of India. The learned CIT(A) has wrongly held that residence of appellant's aunt in Bangalore is to be considered as permanent home. 4.4 On the other hand, the learned DR supported the orders of the authorities below. 4.5 We have heard both the parties. Before us, the learned AR has heavily relied on para 13 of the commentary of OECD on Model Tax Convention. Para 13 is reproduced as under for ready reference :- "As regards the concept of home, it should be obs....
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....ee can claim credit for taxes paid in USA under Article 25(2)(c). 5.1 The learned Assessing Officer relied on Article 16(1) of the DTAA between India and USA and stated that salary received in USA is taxable in India though it might have been taxed in other States. The learned CIT(A) has confirmed the finding of the Assessing Officer after observing as under :- "However, as rightly interpreted by the Assessing Officer, in terms of this Article, salaries derived by a Resident of India in respect of an employment shall be taxable only in India though it may also be taxed in the other State subject to certain conditions. If so taxed in USA, the appellant is obviously entitled for relief from double taxation in terms of Article 25(2) of the DTAA to the extent of tax paid in USA, the relevant extract of which is reproduced as under :- "(a)Where a resident of India derives income which, in accordance with the provisions of this Convention, may be taxed in the United States, India shall allow as a deduction from the tax on the income of that resident an amount equal to the Income-tax paid in the United States, whether directly or by deduction. Such deduction shall not, however, exceed ....
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....183 days in the relevant taxable year; (b )the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and (c )the remuneration is not borne by a permanent establishment or a fixed base or a trade or business which the employer has in the other State. 3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised abroad a ship or aircraft operating in international traffic by an enterprise of a Contracting State may be taxed in that State." 5.5 From the above, it is clear that salary, wages and similar remuneration is taxable in the country in which the assessee is a resident in case the services are rendered in that country. If the employment is exercised in other country, then one has to see Article 16(2). The remuneration paid by an employer who is not a resident of USA will be taxable in India if the employee is a resident of India. The word 'and' is appearing between sub-clauses (b) and ( c) of Article 16(2). Thus, the DTAA does not provide exclusively that the salary or remuneration will be taxable only in USA. In case of PVAL Kulandagan Chettiar (supra), the Hon'ble Supreme C....
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....h the parties. Explanation 1 to section 234B has been inserted by the Finance Bill, 2006 and, according to which, the relief of tax allowed under section 90 is to be reduced for the purposes of computing interest under section 234B. The Hon'ble jurisdictional High Court in the case of Union Home Products Ltd. v. Union of India [1995] 215 ITR 7581 held that interest under section 234B is compensatory. The Hon'ble High Court held as under :- "Sections 234A, 234B and 234C of the Income-tax Act, 1961 were inserted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989. Section 234A makes a provision for the payment of simple interest calculated at the rate of 24 per cent per annum by an assessee, who commits default in furnishing a return of income under section 139(1) or 139(4) or in response to a notice sent to him under section 142(1) of the Act. Section 234B provides for payment of interest by an assessee, who even though liable to pay advance tax under section 208 of the Act, has either failed to pay such tax or the advance tax paid under section 210 of the Act is less than 90 per cent of the tax assessed against him. The rate of interest prescribed is 24 per cent....
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....96 while the tax was paid on 25-9-1995. The Hon'ble Delhi High Court held that tax paid on 25-9-1995 is to be given credit for computing interest under section 234A. This was on the basis of the finding that interest is compensatory. Therefore, the 7th ground of appeal filed by the assessee is allowed. 7. The 8th and 9th grounds of appeal are against the jurisdiction of the Assessing Officer who has passed the assessment order. 7.1 Before the learned CIT(A), it was submitted that the status of the assessee was determined as resident, therefore, the Assessing Officer (International Taxation) should have transferred the file to jurisdictional Assessing Officer, i.e., ITO, Ward O-14(3). A letter was filed before the Assessing Officer stating that his residential status for the period in question is non-resident and the same was mentioned as resident by oversight. The appellant himself requested that the jurisdiction over his case be transferred to International Taxation Ward. Accordingly, the case was transferred to the ITO, International Taxation. The learned CIT(A) observed that provisions of section 120 are to be read in harmony with section 127 of the Act in accordance with whic....