RESIDENTIAL STATUSCASE 4

Group Members Bakshi Satpreet SinghK.Vignesh Vinod Choudhary

RESIDENCE INDIVIDUAL

The word ‘non-resident’ has not been defined in the Act. There are two requirements of section 6(1) which defines residence of an individual in India :

(i) If an individual is in India in any previous year for a period or periods amounting in all to 182 days or more ; or

(ii) If the individual, having within the four years preceding that year been in India for a period or periods amounting in all to 365 days or more, is in India for a period or periods amounting in all to 60 days or more in that year.

Exception to conditions Period 60 Days is extended to 182 days in the

following cases.i) An Indian citizen who leaves India during the

previous year for the purpose of employment outside India

ii) Indian citizen who leaves India during the previous year as a member of crew of Indian ship.

iii) Indian citizen or person of Indian origin who comes on a visit to India during the previous year.

POINT TO BE CLEARED

Residential ship status is not to do anything with citizenship status.

Resident ship is decided on the amount of days he had stayed in the previous year .

WHAT IS NOT IMPORTANT

•PLACE OF STAY •PURPOSE OF STAY•CONTINUITY OF STAY •STAY IS VOLUNTARY OR INVOLUNTARY

Non Resident is not liable to pay income tax on foreign income .

EXAMPLES• Chris Gayle, the West Indies cricketer comes to India for 100

days every year. Find out his residential status for the A.Y. 2009-10.

Solution :

For the purpose of his residential status in India for A.Y. 2009-10, the relevant previous year is 2008-09.

• The total stay of Chris Gayle in the last 4 years preceding the previous year is 400 days (i.e.100 × 4) and his stay in the previous year is 100 days. Therefore, since he has satisfied the second condition in section 6(1), he is a resident.

• Therefore, the residential status of Chris Gayle for the assessment year 2009-10 is he is a resident

ISSUES IN THE CASE

Individual not leaving India for employment but he is leaving India for purposes of employment outside India.An individual need not be an unemployed person who leaves India for employment outside India.

CASE 1

An Indian company deputed its employee ‘M’ to UK for two years from 1-7-2005 . In financial year 2005-06, ‘M’ stayed in India for less than 182 days .‘M’ would be considered as non-resident in India for financial year 2005-06 or not The salary received in India for rendering services in UK would not be taxable in India .

ARGUMENT (Favor)Commissioner said that as ‘M’s stayed only 88 days in India in the financial year 2005-06, the status of ‘M’ is that of resident in India. The applicant’s case is that since ‘M’ is a citizen of India and left India for the purpose of employment outside the State, he would be a non-resident if his stay is less than 182 days in that year ‘M’ stayed in the year in question for only 88 days, he would be a non-resident.

CONCLUSION

M is not leaving India for employment but it is leaving India for the purposes of employment outside India.An individual need not be an unemployed person who leaves India for employment outside India. The fact that ‘M’ was already an employee at the time of leaving India is hardly material or relevant.M is a Non Resident Salary income received in India by ‘M’ from Indian company for rendering services outside India is not taxable in India.

CASE 2

1. Whether salary income received in India by Mr. Manish and Gupta from British Gas India Private Limited for rendering services outside India is taxable in India ?2. Whether British Gas India Private Limited is required to withhold taxes on salary paid in India to Mr. Manish Gupta for rendering services outside India ?

CASE 2

Mr. Manish Gupta commenced employment with the Indian company in February/March, 2002 From July 1, 2005 he was deputed to BG, U.K since been working in U.K. It is asserted that he would be spending less than 182 days in India in financial year 2005-06, therefore, he is a non-resident.

ARGUMENT

The Commissioner stated that in view of the stay of 88 days in India in the financial year 2005-06, the status of Mr. Gupta is that of resident in India.

ARGUMENT (FAVOR)

Mr. Gupta is a citizen of India and left India for the purpose of employment outside the State, he would be a non-resident if his stay is less than 182 days in that year and as Mr. Gupta’s residence was only 88 days, he would be a non-resident.

ARGUMENT (FAVOR)

Mr. Syali, learned counsel appearing for the applicant, also showed a cause notice submitted that the stay of Mr. Gupta in the financial year 2005-06 is 88 days and according to section 6(1) of the Act, the period of 60 days in clause (c) has been substituted by 182 days as he left India for the purpose of employment, he would be a non-resident.

CONLUSIONAs Mr. Gupta stay is less than 182 days (his stay is 88 days in India), therefore, he becomes a non-residentHe is already in employment and is leaving India on deputation, he cannot be said to leave India for employment.He is not leaving India for employment but it is leaving India for the purpose of employment outside India.we came the conclusion that Mr. Manish Gupta is not a resident in India in the financial year 2005-06.