TMI Blog2009 (4) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... hich deals with taxation of salary income - AO adopted the status of the assessee as resident and included the salary income earned from rendering services in USA as taxable in India - 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 AY 2005-06, therefore, Explanation (a) will not be applicable. CIT(A) further held that Explanation (b) is not available to the assessee to claim relief. HELD THAT:- 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 ) of Explanation to section 6(1), it is clear that clause (a) of the new Explanation is, in substance, the same as clause (a) of earlier Explanation. Hence, it is clear that clause ( a ) of Explanation to section 6( 1 ) will be applicable for the previous year in which the assessee leaves India for the purpose of his employment. Hence, we hold that Explanation (a) is not applicable in the instant case. Contention of the ld AR before us is that in case a person has made a visit to India in any previous year, then th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of a day. However, we can look at the issue from a different angle. When one has to compute the period for which an assessee is in India, one has to start the counting from a particular day and to end the same with specific day. The period is to be counted from the date of arrival of the assessee in India to the date he leaves India. Thus, the words from and to are to be inevitably used for ascertaining the period though these words are not mentioned in the statute. 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 alternate contention of the appellant and hold that the status of the assessee will be non-resident. Grounds of appeal Nos. 3 to 5 are against the finding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atus of resident. However, when a letter was sent by the assessee that status was of non-resident instead of resident and the status was wrongly mentioned. Once the status is being claimed by the assessee as non-resident, then we understand that the jurisdiction was with AO (International Taxation). The AO (International Taxation) while completing the assessment can make the assessment on a correct status. The AO is authorized to take the correct status while making the assessment. It is not the case of the assessee that he claimed the status of resident after filing letter with the AO. Hence, we hold that AO was having jurisdiction. In the result, the appeal is partly allowed. - K.P. THANGAL AND N.L. KALRA, JJ. Ramasubramaniyan for the Appellant. Smt. Jacinta Zimik Vashai for the Respondent. ORDER N.L. Kalra, Accountant Member. - The assessee has filed an appeal against the order of learned CIT(A)-IV, Bangalore dated 17-6-2008. 2. The first ground of appeal is general and will stand dispose off as per the findings on the other grounds of appeal. 3. The second grievance of the appellant is that the learned authorities below have erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays" 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 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." 3.2 There is no dispute amongst the parties that the assessee was in India for a period amounting to 365 days and more during the four years preceding the previous year 2004-05. The words sixty days occurring in section 6( 1 )( c ) are to be substituted with the words 182 days in case the assessee satisfies the following conditions : He must be a citizen of India. He must leave India for the purpose of employment outside India. He must leave India during the previous year. During the previous year relevant to the assessment year under consid-eration, the assessee was in the employment of an Indian Company though he performed the work outside India. According to the Assessing Officer, the assessee has left India on 1-2-2004, i.e., during the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd USA which deals with taxation of salary income. As per this article, salary derived by a resident of India in respect of an employment shall be taxable only in India. It can also be taxed in the other State subject to certain conditions. If so taxed in USA, the assessee is entitled to relief from double taxation in terms of article 25 of the DTAA to the extent of tax paid in USA. Therefore, the Assessing Officer adopted the status of the assessee as resident and included the salary income earned from rendering services in USA as taxable in India. 3.5 Before the learned CIT(A), it was contended that clause ( b ) of Explanation to section 6( 1 ) is applicable in case the assessee comes on a visit to India. The fact that the assessee came to India permanently, thereafter is not relevant for substituting 182 days in section 6( 1 )( c ). In the instant case, the assessee has come on a visit to India for less than 182 days and, therefore, as per section 6(1)( c ) read with Explanation ( b ), the status of the assessee should have been taken as non-resident. Before the learned CIT(A), the assessee placed reliance on the decision of the Hon ble Authority for Advance Ruling in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 182 days. The fact that on 31-1-2005, the appellant came back permanently to India does not alter this position. The learned AR further submitted that the finding of the learned CIT(A) that the passport does not mention the purpose of visit is irrelevant, as the immigration authorities do not mention the purpose of visit in the passport. 3.8 On the other hand, the learned DR supported the orders of the authorities below. The learned DR submitted that Explanation ( a ) to section 6(1) is not applicable because the assessee has not left India during the previous year. It was submitted that Explanation ( b ) is not applicable because the assessee is not a person of Indian Origin within the meaning of Explanation to clause ( e ) of section 115C. It was, therefore, argued that the authorities below have rightly held the status of assessee as resident. 3.9 We have heard both the parties. Explanation ( a ) to section 6( 1 ) is as under : " Explanation. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia in any previous year, then the words 60 days as appearing in section 6(1)( c ) should be read at 182 days irrespective of the fact that the assessee subsequently came to India permanently during the same previous year. Explanation ( b ) is as under : "( 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 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." 3.13 Explanations ( a ) and ( b ) were introduced by Direct Tax Laws (Second Amendment Bill, 1989). By the Amendment effected by 1989 Bill, it was provided that the words 60 days occurring in section 6( 1 )( c ) will be read as 150 days in case a citizen of India comes on a visit to India in the previous year. In the statement of objects and reasons, it was mentioned as under: "One of the prime needs of the country is to ensure proper balance of payment and encourage inflow of foreign exchange into the country. With a view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dred and fifty days should be increased to one hundred and eighty-two days. This is because the non-resident Indians who have made investments in India, find it necessary to visit India frequently and stay here for the proper supervision and control of their investments. The Bill, therefore, seeks to amend clause ( b ) of the Explanation to section 6( 1 )( c ) of the Income-tax Act, in order to extend the period of stay in India in the case of the aforesaid individuals from one hundred and fifty days to one hundred and eighty-two days, for being treated as resident in India, in the previous year in which they visit India. Thus, such non-resident Indians would not lose their non-resident status if their stay in India, during their visits, is up to one hundred and eighty-one days in a previous year. The proposed amendment will take effect from 1-4-1995 and will, accordingly, apply in relation to the assessment year 1995-96 and subsequent years, i.e., each previous year commencing on or after 1-4-1994." 3.14 It is true that the word a visit is available in Explanation ( b ) to section 6( 1 ). According to the learned AR, if there is a visit then the period should be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a person is in India for a period exceeding 60 days, then he falls in the category of resident . The learned AR tried to distinguish the case on the ground that in that case, the assessee has not come on a visit to India during that previous year. We had already pointed out that a visit to India does not mean that if he comes for one visit then Explanation ( b ) to section 6( 1 ) will be applicable irrespective of the fact that he came permanently to India during that previous year. Looking to the legislative intention, we hold that the status of the assessee cannot be taken as resident on the ground that he came on a visit to India and, therefore, the period of 60 days as mentioned in 6( 1 )( c ) should be extended to 182 days by ignoring his subsequent visit to India after completing the deputation outside India. 3.17 During the course of proceedings before us, the learned AR has raised an alternative contention regarding status given as resident. The learned AR submitted that 60 days referred to in section 6( 1 ) should exclude the period of stay in India on visit. If this is not accepted, then it will lead to absurd result as stated in para 2.1 of rejoinder to remand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assignment. It is mentioned in the deputation letter that the assessee will not be paid in Indian rupees while he is on assignment in USA. The Assessing Officer in his order has mentioned that the assessee has received salary for assignment in USA from April, 2004 to January, 2005. Page 86 of the paper book is copy of certificate from Warton Residential. The certificate is dated 18-1-2008. It is mentioned in that certificate that the assessee was a resident at River North Park Apartments from 20-3-2004 until 9-4-2005. During this period, he resided at 320 W Illinois St. 801, Chicago. Thus, it is a fact that the assessee was on deputation from April, 2004 to January, 2005. Hence, the stay in India from 18-8-2004 to 6-9-2004 was in respect of a visit to India. Hence, this period is to be excluded while considering the applicability of section 6( 1 )( c ). Hence, we accept the alternate contention of the learned AR that for the purpose of computing the period of 60 days as mentioned in section 6( 1 )( c ), the period of visit to India is to be excluded. 3.20 The second alternate contention of the learned AR is that the assessee arrived in India on 31-1-2005 at 4 A.M. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 955) unless the contrary appears from the context. ( Hare v. Gocher [1962] 2 Q.B. 641). The ordinary rule is that where a certain number of days are specified they are to be reckoned exclusive of one of the days and inclusive of the other (R.V. Turner, supra p. 359)." 3.23 The word day has been defined as under in the Law Lexicon by Venkatramaiah s 1983 Edition : "Day, generally speaking, is the period from midnight to midnight; the law admits not of fractions in time but, in case of necessity. [ Louis Dreyfus Co. v. Mehrchand Fattechand 6 I.C. 886]. In Chick v. Smith [1840] bowl. 340 : 8 D.P.C. 337: 4 Jur. 86, Patterson, J., said: The good sense of the matter is that, where it is necessary to show which was the first of two acts, the Court is at liberty to consider fractions of a day. The rule of law would be otherwise absurd". The day on which a legal instrument is dated begins and ends at midnight. It is not necessary to consult the calendar to ascertain when it commences and ends. [Anderson: Law Dictionary ]. The proviso in a will required the devisee to be personally present in the house devised for 168 days in each year; if the owner be personally pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n individual who is resident of both Contracting States. In the instant case, the assessee is a resident of both Contracting States, therefore, status of the assessee is to be determined on the basis of the Article 4(2). Article 4(2) of the DTAA is as under : "( 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 personal and economic relations are closer (center of vital interests); ( b )if the State in which he has his center of vital interests cannot be determined, or if he does not have a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode; ( c )if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national; ( d )if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement." 4.2 The learned CIT(A) observed that the assessee stayed in leased or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g available to him at all times continuously, and not occasionally for the purpose of a stay which, owing to the reasons for it, is necessarily of short duration (travel for pleasure, business travel, educational travel, attending a course at a school, etc.)." 4.6 The learned AR is heavily relying in respect of home only for the purpose of the assessee. The assessee is an individual having his family. Hence, the concept of home cannot be restricted only for the purpose of the assessee. His family is an integral part and if the home is available to the family then that home is also to be considered. If the home taken on rent in USA is to be treated as a permanent home, then the home in India where the family of the assessee was living is also to be considered as a permanent home. Article 4.2 has already been reproduced. The assessee was an employee of an Indian Company and went to abroad on deputation. Hence, his personal and economic relations with India were closer. Hence, as per Article 4(2)( a ), the assessee is to be considered as resident of India. The assessee was having a habitual abode in India. The abode in States was for the purpose of services and house was taken on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant for services rendered in USA is taxable in India since he is a Resident of India. When a specific Article exists in the DTAA between the two countries concerned, namely India USA, providing relief from double taxation in the current scenario, taking recourse to the provisions of a DTAA existing between India and another country, viz., Malaysia, in order to interpret the provisions of this DTAA is totally uncalled for and a mere exercise in futility." 5.2 Before us, the learned AR submitted that even if the appellant is to be considered as resident of India, the salary can be taxed only in USA under the Article 16 because the employment was exercised in US. For this proposition, the learned AR relied on the following decisions : CIT v. P.V.A.L. Kulangadan Chettiar [2004] 267 ITR 654 (SC); Dy. CIT v. Patni Computer Systems Ltd. [2008] 114 ITD 159 (Pune). 5.3 On the other hand, the learned DR supported the orders of the authorities below. 5.4 We have heard both the parties. Article 16/18 is relevant in this case. The same are reproduced as under for ready reference : "16. Dependent personal services. (1) Subject to the provisions of article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such property is situated. The other issue before the Hon ble Apex Court was in respect of business income and that is not relevant for the issue under reference. Since there is no such Article in DTAA where it is provided that it is to be taxed only in one State. Similarly, the Pune Bench in the case of Patni Computers Ltd. ( supra ) has referred to Article 7 of the India Japan Treaty vide which a right was provided to tax profits attributable to the permanent establishment in the source country. In the case of Patni Computers, the appellant was having loss in branch in Japan and, therefore, the assessee availed the benefit of Income-tax Act. It is now settled law that beneficial provisions if available in DTAA can be used. Hence, the decision of Patni Computers is not relevant in the facts of the case. Hence, it is held that if the assessee is a resident of India, then his income in USA is taxable and the assessee will be entitled to the relief under Article 25 of the DTAA. But in the instant case, we had already held that the assessee is not a resident of India and, therefore, accordingly, the salary income is not taxable. However, in case it is finally held that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cent per annum simple in case an assessee liable to pay advance tax under section 208 of the Act, either fails to pay such tax or pays the same so as to be less than 30 per cent by the 15th September or 60 per cent by the 15th December of the tax due on the returned income. The amount and the period for which such interest is made payable by this provision has also been set out in the section itself. The amounts on which the interest is levied, are the amounts which can legitimately be said to be public revenue though payable by the assessee, but not paid by him. Levy of interest on such amounts which an assessee withholds and makes use of, cannot be said to be anything but a compensatory measure, meant to offset the loss or prejudice which the revenue suffers on account of the non-payment of the said amount. The period for which this additional liability is imposed is an important feature which very clearly shows the true Legislature intent behind the levy. The periods as laid down in all the three sections show that they are compensatory provisions." 6.4 The Hon ble Delhi High Court in the case of CIT v. Anand Prakash [2009] 179 Taxman 44 also held that interest is comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny case from one Assessing Officer to another Assessing Officer within his charge. If the assessee calls in question the jurisdiction of the Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (2) to the Chief Commissioner or Commissioner before the assessment is made. In this case, the returns of income were filed with ITO, Ward-14(3) and notices were issued to the appellant. Subsequently, at the appellant s request, vide letter dated 10-12-2007 that the appellant s residential status was non-resident, the case was transferred to ITO, International Taxation. Merely because the appellant was proved to be resident during the relevant assessment year, the jurisdiction over the appellant does not cease to exist. Hence, the contention of the appellant was rejected by the learned CIT(A). 7.2 The learned AR in the written submission has submitted as under: "2.6 It is submitted that the appellant can raise the question of jurisdiction at any point of time since section 124(3) is not applicable to the facts of the case. Section 124(3) applies only to territorial jurisdiction o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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