“Employment abroad” can also mean starting a business
ACIT v. Shri Nishant Kanodia [ITA no.2155/Mum/2023] (ITAT Mumbai)
The assessee, who is an individual, underwent a search and seizure operation under section 132/133A of the Act. Subsequently, a notice under section 153A of the Act was served to the taxpayer
In response to the aforesaid notice, the assessee filed an income tax return declaring a total income of INR 23,61,660. Thereafter, notice under section 143(2) as well as under section 142(1) of the Act was issued and served on the assessee.
During the assessment proceedings, on perusal of the income tax return filed by the assessee, it was observed by the AO that the assessee had claimed his resident status as “Non–Resident” and had not offered his global income to be taxed in India. Accordingly, the assessee was asked to furnish documents in support of his residential status.
Further, based on documents seized during search, it was observed that the assessee stayed in India for 176 days and went to Mauritius during the year. However, from the work permit issued by the Government of Mauritius, seized during search, it was observed that the assessee went to Mauritius on an occupation permit to stay and work as an investor with Firstland Holdings Ltd. and not as an employee.
In response to the query raised by the AO during the assessment proceedings, the assessee submitted a copy of his passport for the relevant period. Further, the assessee provided the year-wise details of his stay in India for the period. The assessee submitted that he was physically present in India only for a period of 176 days during the relevant financial year.
It was further submitted by the assessee that he went to Mauritius for the purpose of employment with Firstland Holdings Ltd., on the post of Strategist – Global Investment of the company for a period of three years. Therefore, it was claimed that the assessee was a non-resident as per the provisions of section 6(1)(c) r/w Explanation 1(a) to section 6(1) of the Act.
The learned CIT(A), vide impugned order, agreed with the submissions of the assessee and held that the assessee was away from India for the purpose of employment outside India and was accordingly entitled to take the benefit of Explanation–1(a) to section 6(1)(c) of the Act. Being aggrieved, the Revenue was in appeal before the Hon’ble Tribunal.
The Hon’ble Tribunal found from the copy of the appointment letter issued by Firstland Holdings Ltd., Mauritius, that the assessee was appointed as Strategist – Global Investment for a period of three years which can be extended as per mutual discussion in due course. As remuneration, the assessee was offered a salary of USD 1,00,000 per month subject to the deduction of applicable taxes. Further, the assessee was also provided various other benefits, perquisites, allowances, etc.
The Tribunal observed that the issue of whether the term “employment outside India” includes “doing Business” by the assessee, came up for consideration before the Hon’ble Kerala High Court in CIT v/s O. Abdul Razak, [2011] 337 ITR 350 (Ker.) wherein the Hon’ble Court while deciding the issue in favour of the assessee took into consideration the CBDT Circular no.346 dated 30/06/1982 and held that no technical meaning can be assigned to the word “employment” used in the Explanation and thus going abroad for the purpose of employment also means going abroad to take up self-employment like business or profession.
Therefore, even if the assessee had left India for the purpose of business or profession, in the aforesaid decisions, the same had been for the purpose of employment outside India under Explanation–1(a) to section 6(1) of the Act.
Accordingly, even if it was accepted that the assessee went to Mauritius as an Investor in Firstland Holdings Ltd., Mauritius, in which he holds 100% shareholding, the Tribunal were of the considered view that by applying the ratio of aforesaid decisions, the assessee was entitled to claim the benefit of the extended period of 182 days, as provided in Explanation-1(a) to section 6(1) of the Act, for the determination of residential status.
Since it was undisputed that the assessee had stayed in India only for a period of 176 days during the year, which was less than 182 days as provided in Explanation 1(a) to section 6(1) of the Act, the assessee had rightly claimed to be a “Non-Resident” during the year for the purpose of the Act.
Accordingly, the Hon’ble Tribunal found no infirmity in the findings of the learned CIT(A) on this issue. As a result, the grounds raised by the Revenue was dismissed.
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