The Mumbai Income Tax Appellate Tax Tribunal (ITAT) has ruled in favour of a person who claimed to be a ‘non-resident’ because he spent 210 days working abroad last year, according to media reports.
India does not tax income in the hands of a non-resident Indian (NRI). The person concerned, Mr. Gulati, did not reveal his income of Rs 1.2 crore for the financial year 2015-16. His logic was that he was an NRI since he had spent less than 182 days in India. The Income Tax Department (ITD), however, argued that out of 210 days he had spent 28 days looking for work, making him a resident of India. Based on that he would be a resident of India, so his income would be taxed in India.
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However, the ITAT rejected this argument, saying that the number of days he spent looking for work should also be considered when determining his resident status. They referred to explanation 1 to section 6(1) of the Income-tax Act, which states that if one leaves India for employment purposes, they will be considered residents only if they spend 182 days or more in India in that year.
Earlier, the tax officer calculated the number of days Gulati spent abroad, excluding the 28 days he spent in the job search. Since that meant Gulati had spent more than 182 days in India, he was a resident. Based on this logic, Gulati’s income of Rs 86.2 lakh and interest income of Rs 2.8 lakh were brought under India’s tax net. The appellate commissioner also supported this.
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However, these views were overturned because the time spent searching for a job qualifies as under the purpose of employment’ according to the income tax act. ITAT, thus made it clear that an individual’s tax status must be solely determined by how many days he has stayed in India.
