|COURT:||Bombay High Court|
|CORAM:||Akil Kureshi J, Sarang V. Kotwal J|
|SECTION(S):||6, 68, 69|
|CATCH WORDS:||non-resident, Undisclosed Income|
|DATE:||April 22, 2019 (Date of pronouncement)|
|DATE:||June 26, 2019 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 6, 68, 69: Law explained on (i) when an Indian citizen or person of Indian origin can be said to have come on "visit to India" so as to qualify as a "Non Resident" u/s 6(6) r.w. CBDT Circular No. 7 of 2003 & (ii) whether amount found deposited in a foreign bank is taxable in India u/s 68 & 69 if the assessee is a "Not Ordinary Resident"|
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
INCOME TAX APPEAL NO. 107 OF 2017
INCOME TAX APPEAL NO. 108 OF 2017
INCOME TAX APPEAL NO. 110 OF 2017
INCOME TAX APPEAL NO. 121 OF 2017
INCOME TAX APPEAL NO. 122 OF 2017
INCOME TAX APPEAL NO. 150 OF 2017
INCOME TAX APPEAL NO. 218 OF 2017
Pr. Commissioner of Income Tax -15 .. Appellant
Binod Kumar Singh .. Respondent
Mr. Suresh Kumar for the Appellant
Mr. R. Murlidhar a/w Mr. B.G. Yewale i/by Rajesh Shah & Co for
CORAM : AKIL KURESHI &
SARANG V. KOTWAL, JJ.
DATE : APRIL 22, 2019.
1. These appeals involve the same assessee and involve identical issues. For convenience, we may refer facts from Income Tax Appeal No. 107 of 2017.
2. This appeal is filed by the Revenue to challenge the judgment of the Income Tax Appellate Tribunal, Mumbai (“the 1 of 8
10. os itxa 107-108-110-121-122-150-218-17.doc Tribunal” for short) dated 18.12.2015. Following questions are presented for our consideration:-
(a) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that the assessee was not an ordinary resident without appreciating that the amendment brought in Section 6(6) by the Finance Act, 2003 w.e.f. 1.4.2004 was clarificatory in nature and had to be given retrospective effect as communicated by the Circular No. 7 of 2003 issued by the CBDT?
(b) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in deleting the addition of Rs. 41,71,89,166/- made u/S. 68 on the ground that the assessee is a not an ordinary resident and the amount found deposited in the foreign bank is not taxable in India without appreciating that the provisions of Section 68 of the Income Tax Act, 1961 required the assessee to establish the source & nature of the funds transferred from the foreign bank accounts to the Indian Bank Accounts?
(c) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in upholding the order of the CIT(A) deleting the addition of Rs. 5,60,00,000/- made u/S. 69 on the ground that the assessee is not an ordinary resident and all money earned overseas are not taxable in India and the source of the investment is established?
3. It is undisputed position that only if the Revenue succeeds in Question No. (a), Question Nos. (b) and (c) shall become relevant. We have, therefore, concentrated our 2 of 8
10. os itxa 107-108-110-121-122-150-218-17.doc attention to the first question. The question arose in relation to the respondent – assessee who is an individual for the assessment year 2006-07. The question was whether the assessee, for the purpose of said assessment year a resident of India?. This question would have to be answered in the context of provisions contained in Section 6 of the Income Tax Act, 1961 (“the Act” for short) pertaining to residence in India. Sub-section (1) of Section 6 reads as under:-
“(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 ; or
(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. 1–In the case of an individual,–
(a) being a citizen of India, who leaves India in any previous year [as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or] for the purposes of employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words “sixty days”, occurring therein, the words “one hundred and eighty-two days” had been substituted ;
(b) being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of Section 115C, who, being outside India, comes on a 3 of 8
10. os itxa 107-108-110-121-122-150-218-17.doc visit to India in any previous year, the provisions of sub- clause (c) shall apply in relation to that year as if for the words “sixty days”, occurring therein, the words “one hundred and eighty-two days” had been substituted.] [Explanation 2.–For the purposes of this clause, in the case of an individual, being a citizen of India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India shall, in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed.]”
4. The Assessing Officer having held that the assessee was the resident of India, the CIT(A) and the Tribunal reversed the order of the Assessing Officer. The Commissioner in the appellate order carried out detail examination of the facts on record. He also discussed the concept of the visit of a person to India. The Tribunal, while confirming such view of the CIT(A), further examined the relevant facts. Before referring the said facts, we may take note of the provisions contained in Section 6(1) of the Act. As per this provision, an individual would be stated to be a resident in India in any previous years, if [by virtue of clause
(a)], he is in India in that year for a period or periods amounting in all to one hundred and eighty two days or more ; or [by virtue of clause (c)], he having within the four years preceding that year been in India for a period or periods, amounting in all to three hundred sixty five days or more and 4 of 8
10. os itxa 107-108-110-121-122-150-218-17.doc is in India for a period or periods amounting in all to sixty days or more in that year. Clause (b) of Explanation 1 below Section 6(1) of the Act, however, clarifies that in case of an individual being a citizen of India, or a person of Indian origin, who being outside India, comes on a visit to India in any previous year, the reference towards sixty days in sub- clause (c) would be substituted by one hundred eighty two days.
5. In plain terms, by virtue of Section 6(1) of the Act, an individual would be said to be a resident in India if he satisfies the requirement contained in clause (a) or clause
(c). Requirement of clause (a) is that the person should have been in India during the relevant previous year for a period not less than 182 days. Clause (c) would require that he was within the country for not less than 365 days in four preceding years and has been in India for 60 days or more in the current year. This requirement of 60 days would be substituted by 182 days if he is an Indian citizen or a person of Indian origin and has come on a visit to India.
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6. In the background of such provision, the Tribunal on material on record came to factual finding that the assessee was in India during the previous year relevant to the assessment year in question for 173 days. This factual finding is unassailable. In that view of the matter, clause (a) of Section 6(1) would not apply. It is true that in absence of clause (b) of Explanation 1 below Section 6(1) of the Act, the assessee would have fulfilled the requirements of clause (c) of Section 6(1). However, as per the explanation, if the assessee comes to a visit in India, the requirement of stay in India in the previous year would be 182 days and not 60 days as contained in clause (c). It is, in this respect, the Tribunal had taken a note of relevant facts more minutely. Such facts were that the assessee who was born in India in the year 1960, after completing his higher education went to Soviet Union for further education in engineering. From 1978 to 1984, he persuaded his Masters in Engineering in Radio Technology. He also did post graduation in Russian language. From 1984 to 1986, he had worked in trading pharma company in USSR. From the year 1986-1987, he did his business management from Sweden. He again worked in a 6 of 8
10. os itxa 107-108-110-121-122-150-218-17.doc trading pharma company. Between 1989 to 1995, he had worked in Ukraine after which he set up his own business in pharmaceutical sector primarily in Russia, Ukraine and CIS countries for which purpose he had set up a trading house at Ukraine. He had acquired immovable property in Ukraine in 1995 and 1997. The assessee had permanent resident status in Ukraine till 2002. After that along with his family, he shifted to England but continued his business interest in Ukraine, Russia and CSI Countries. The assessee had acquired properties in Ukraine but continued his business interest as earlier.
7. These facts would demonstrate that the assessee had migrated to a foreign country where he had set up his business interest. He pursued his higher education abroad, engaged himself in various business activities and continued to live there with his family. His whatever travels to India, would be in the nature of visits, unless contrary brought on record. We do not find that the Tribunal, therefore, committed any error.
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8. Learned counsel for the Revenue submitted that Section 6(6) of the Act has been amended by virtue of Finance Act of 2003 and this amendment is declaratory in nature. We need not go into this issue because in our opinion, Section 6(6) of the Act has no relevance. The question in the present case is not whether the assessee is “not ordinary resident” of India. The question is during the previous year relevant to the present assessment year, whether he was a resident in India which question must be answered with reference to sub-section (1) of Section 6 of the Act.
9. Before concluding, we may notice that in some of the appeals, Revenue has raised additional question as to the date of the travel outside India should be included as a day of resident in India or not. This question would be academic since even after inclusion of the said day, the assessee would not cross the minimum 182 days required for his residence in India.
10. In view of above, the appeals are dismissed. [ SARANG V. KOTWAL, J. ] [ AKIL KURESHI, J ]