Case Law Details
Case Name : Shri Anurag Chaudhary
Appeal Number : (AAR No. 839 of 2009)
Date of Judgement/Order :
Related Assessment Year :
The Authority for Advance Ruling (“AAR”) in the case of Shri Anurag Chaudhary has held that a returning individual should stay for 182 days (and not 60 days) or more to qualify as a resident in India.
- NIIT technologies Limited, an Indian Company posted Anurag Chaudhary (“the applicant”) to work in its group company in the USA, NIIT Technologies Inc. as a software engineer.
- He left India for the purpose of employment on 31 March 2008 (i.e. tax year 2007-081) and came back on 29 November 2008 (tax year 2008-09).
- During the tax year 2008-09, he was in India for 122 days and spent 243 days in USA.
- The applicant sought an advance ruling as to whether the salary income earned in USA in the tax year 2008- 09 is liable to be taxed in India based on his residential status in India.
Residency rules under the Indian tax laws
A person will qualify as resident if he stays in India
- for a period of 182 days or more in a tax year or
- for 60 days or more in a tax year and 365 or more days in the preceding four tax years.
However, an exception has been given to the above rule for Indian citizens leaving India for the purpose of employment whereby 60 days will be replaced by 182 days in the said tax year.
The AAR has summarised the provisions of the Act dealing with residential status stating that if an individual has spent less than 182 days in India during a tax year and was outside India for the purpose of employment, then regardless of his being in India for 365 days or more during 4 preceding tax years, he can be treated as a nonresident in India.
- Further, the Revenue authorities in its comments provided to the AAR has also clarified that the applicant may be treated as a Non Resident Indian as he remained in India for 123 days during the tax year 2008- 09.
- In view of the above, the AAR determined applicant’s residential status as a non resident for the tax year 2008-09 and consequently held that income accruing to him outside India by reason of his employment in USA cannot form part of the total income taxable in India.
- The plain reading of the income tax provisions dealing with determination of residential status of an individual indicates that beneficial provisions relaxing the tax residency will apply to an Indian citizen leaving India for the purpose of employment and not otherwise. In the above case, the AAR has applied the above beneficial provisions even in the year when the individual returns back to India.
- Based on this ruling, the residential status of outbound assignees may change from resident to non-resident in the year of return to India, thereby resulting in tax benefits.
- Although the ruling pronounced by the AAR is binding only on the applicant and the concerned Revenue authorities, it does have persuasive value.
- Keeping in mind that this advance ruling does not appear to be in line with the plain reading of the provisions determining residential status and earlier pronouncements on a similar issue, adequate caution needs to be applied before relying on the above ruling for determining residential status in India.
Source :Shri Anurag Chaudhary (AAR No. 839 of 2009)