Simply stating in the return that you are a resident makes non-resident income exempt from taxation
fact and issue of the case
The brief facts qua the limited issue is that, assessee is an individual and in the AY 2008-09, he had gone to USA for his studies. A search and seizure actions was carried out in the case of assessee’s father, Shri Ajay Mittal and during the course of search action, certain documents were found which contained detail of foreign bank account of Shri Ananya Mittal, USA. The relevant facts as noted by the AO reads as under:-
During the course of search, pages 12 to 15 marked as Annexure A-2 were found and seized from Mittjal Bhawan II 62A Peddar Road, Mumbai, which contained details of foreign bank account of Shri Ananya Mittal in United States of America. It was also seen that the foreign bank account was not declared in the Income Tax Return filed by the assessee for the said assessment year.
During the post search proceedings it was stated by the Authorized Representative of the assessee, that the assessee for his post graduation for four years was required to stay in USA. It was also submitted that it was mandatory for a student pursuing studies in USA to open an account in USA. Further it was submitted that all the expenses of Shri Ananya Mittal in USA were exclusively borne by a family friend of Mittal family, Dr. Prakash Sampath based in USA.
Further it was also stated by the AR of the assessee, that the assessee was an ordinary resident Indian throughout his stay in USA for his post graduation and that the records of the foreign bank account were not maintained by him.
The submission of the assessee has been carefully perused but the same is not acceptable on account of the following :
The contention of the assessee that he is Non resident for the relevant A. Y, is an afterthought because in the original return of income the assessee has claimed the status of a resident and it is only after the search proceedings when the undisclosed foreign bank account of Sh. Ananya Mittal came to notice (that the assessee while filing of the revised return in response to notice u/s 153A filed his status as a non resident.
Further the assessee in his submission dated 20.12.2016 has stated that any credit to his bank account along with the expenses were borne by Sh. Prakash Sampath on his behalf and they do not form part of the income which is taxable in India as he was a non resident for the said period. This contention of the! assessee is not acceptable as the assessee Sh. Ananya Mittal has no independent source of income in U.S.A and had gone there to pursue higher studies. The source of his credits have arisen in India as employment is prohibited in U.S.A for students coming on student visas. Therefore the contention of the assessee cannot be accepted that the credits and its source are beyond the taxability of his income in India
Observation by the tribunal
The tribunal has heard the rival submissions and perused the relevant findings given in the impugned order as well as material placed on record. We find that section 6 provides that an individual is said to be resident in India in the 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 b. 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.
Thus, if the person who has stayed 182 days or more shall be treated as non-resident and admittedly in the case of assessee it was more than 182 days as noted in the assessment order itself.
Before us, Ld. CIT-DR submitted that assessee is an Indian origin and is a citizen of India, therefore Clause (c) of sub-section 1 of section 6 will apply, i.e., if the individual having within 4 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 amount in all 60 days or more in that year, shall be treated as resident in Thus, assessee who has been outside India since AY 2008-09 had stayed more than 60 days in this year shall be treated as resident. Moreover, assessee in the original return of income filed u/s 139(1) has declared his status as resident and even in the AY 2008-09 also shown has as Resident. Thus, assessee cannot say that he was non-resident simply in the return filed notice u/s 1 53A he has made this claim.
On the other hand, Ld. Counsel for the assessee submitted that by mistake in the original return of income, assessee might have given his status as resident. However, in the notice u/s 153A, the assessee has filed the return of income showing that the status as non-resident and even in the assessment order is passed in the status of non-resident and once that is to so, then no income of the assessee of a foreign bank account can be taxed here in India. He further submitted that Clause-(c) is to be read with Clause-(b) of Explanation 1 to section 6 as the assessee was staying outside India since 1st April 2008 and was non-resident from 2008-09.
Here the controversy is that whether assessee was resident or non-resident in terms of section 6 of the Act, the relevant portion of section 6 is read 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 (b) (**] (a) 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. (a) xxx (b) being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 11 5C, who, being outside India, comes on a 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.]
Here it is not a dispute that assessee was staying outside from 04.2008 and for the relevant previous year i.e. for AY 2009-10, he was outside India for more than 182 days (in fact 290 days), then in terms of Clause-(a), assessee was not a resident in India. The Clause-(c) is applicable on citizen of India, if he has been outside India for more than 4 years and visited in India in all 365 days and in the relevant previous year, he had stayed for more than 60 days, this is applicable to citizen of India who has been outside in India. This Clause is not applicable in the case of the assessee if it is read with Clause (b) of Explanation-1.
Thus, clearly the assessee was a non-resident which fact has not been disputed by the AO and Ld. CIT (A) and the only contention of the AO was that assessee has mentioned his status as resident in the original return of income. The assessee is resident or non-resident has to been from the records whether he was outside India for more than 182 days or not and this fact has not been controverted and is also borne out from the records. Thus, merely mentioning the status as resident in the original return of income does not make the assessee as resident in India. Here in this case, assessment has been made u/s 153A and the assessee has declared the status as non-resident in return of income filed in response to the notice u/s 153A and the assessment has been completed in the status of non-resident. Therefore, this cannot be the ground for treating the assessee as resident. Once the assessee is non-resident, then income or deposit in the foreign bank account of the assessee who is not resident in India cannot be taxed in India. Therefore, on this ground the entire additions cannot be sustained.
Similar situation is permeating in AY 20 12-13 and 20 13-14 wherein the assessee was admittedly outside India for more than 182 days which is evident from the respective orders. Therefore, for the AY 20 12-13 and 20 13-14 also, no additions can be made on account of any deposit in the foreign bank account. Accordingly, the addition has been deleted.
In the net result, all the appeals filed by the assessee are allowed.
Orders pronounced in the open court on 29th December, 2022.
Read the full order from hereAnanya-Ajay-Mittal-Vs-DCIT-ITAT-Mumbai
The tribunal has ruled in favour of the assessee and dismiss the appeal.
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