The ITAT, in the initial part of the impugned order, noted that the assessee has been treated as non-resident during the period 1985-2006. It is admitted that his presence in India in the said earlier period has been less than 182 days per assessment year. The assessee’s claims that for most of the periods he was away from India, he had been living and working for gain from United Arab Emirates (UAE).
It has been an admitted case of the assessee that he had come to India on 28.09.2006. It is undisputed that it was during the visit to India beginning 28.09.2006 that his passport was impounded by CBI (on 10.10.2006). Further, the passport was released pursuant to Court orders, only on 21.09.2011. Thus, the assessee was in India continuously and uninterruptedly from 28.09.2006 to 21.09.2011. This would mean that he was on Indian soil for 185 days during the financial year 2006-07 (corresponding to AY 2007-08) and throughout during financial year 2007- 08 (corresponding to AY 2008-09).
By above account, a strict interpretation and enforcement of the rule contained in Section 6(1)(a) of the Income Tax Act would render the assessee a resident. The plea raised, however, is that this would not be just or fair nor in consonance with the intention of the legislature.
It is trite that plain or literal interpretation of a statutory provision is not to be adopted if it produces manifestly unjust results or absurdly unreasonable consequences which could never have been intended. To obviate injustice flowing from mechanical interpretation and to bring about rationality, it is permissible, even in the field of taxation, to prefer such construction as results in equity over such literal meaning as is unjust. In taking this view, we draw strength from law laid down by the Supreme Court, inter alia, in the cases reported as CIT v. JH Gotla (1985) 156 ITR 323 and CWS (India) Ltd. CIT (1994) 208 ITR 649 (SC).
As is clear from the factual matrix, it has been a conscious decision taken, and choice made, by the assessee to be a non-resident consistently since 1985. It appears that he has been visiting India routinely but was never present in India (till the financial year 2005-06) for more than 182 days. Thus, he consciously did not intend treatment as resident Indian for purposes of Income Tax law. It appears that he has business interests abroad. His choice to be non-resident cannot be faulted. Given the narrative of events wherein he was constrained to continue in India in the course of his visit beginning 28.09.2006, it cannot be contended by the Revenue that he intended to be in India by choice beyond 10.10.2006, the day his passport came to be impounded by CBI.
As noted at length by ITAT, the assessee made repeated pleas not only for removal of all restraints against his movement, but more importantly, for release of his passport so that he could go abroad and retain
the NRI status he had been enjoying all along. In such fact situation, there can be no doubt whatsoever that his presence in India from 10.10.2006 onwards was not by his own choice or volition till the day (21.09.2011) shackles on his movement were removed upon the passport being restored to him.
It must also be noted here that ITAT, the final fact-finding forum for purposes of Income Tax law, has also concluded that the action of the concerned governmental agencies in impounding of passport was unjustified, illegal and untenable and, therefore, in the nature of illegal restraint. The Revenue does not even remotely challenge the correctness of the said conclusions in these appeals.
As observed earlier, the Income Tax Act leaves the choice to the citizen to be in India and be treated as a resident for purposes of taxation or be not in India so as to avail the status of a non-resident. The simple test the muster of which is to be passed is the minimum prescribed period of presence in India in a particular financial year. It naturally follows that the option to be in India, or the period for which an Indian citizen desires to be here is a matter of his discretion. Conversely put, presence in India against the will or without the consent of the citizen, should not ordinarily be counted adverse to his chosen course or interest, particularly if it is brought about under compulsion or, to put it simply, involuntarily. There has to be, in the opinion of this Court, something to show that an individual intended or had the animus of residing in India for the minimum prescribed duration. If the record indicates that – such as for instance omission to take steps to go abroad, the stay can well be treated as disclosing an intention to be a resident Indian. Equally, if the record discloses materials that the stay (to qualify as resident Indian) lacked volition and was compelled by external circumstances beyond the individual’s control, she or he cannot be treated as a resident Indian.
We do not agree with the contention of the Revenue that Section 6(1)(a) of the Income Tax Act shall be a strictly constructed or that it does not permit exceptions. The case at hand itself is a good example why a literal interpretation of the relevant statutory clause is not commended for such course might not only lead to unjust, unfair or absurd consequences but also be prone to abuse.
While executive action resulted in his passport being unjustifiably impounded, this rendered if impossible for the assessee to leave India. He virtually became an unwilling resident on Indian soil without his consent and against his will. His involuntary stay during the period that followed till the passport was restored under Court’s directive, thus, must be excluded for calculating the period under Section 6(1)(a) of Income Tax Act.
For the foregoing reasons, we answer the question of law in the affirmative against the Revenue.
We must, however, add a caveat here. The conclusion reached by us on the facts and in the circumstances of the case at hand cannot be treated as a thumb rule to the effect that each period of involuntary stay must invariably be excluded from computation for purposes of Section 6(1)(a) of Income Tax Act. The view taken by us in the case of assessee here is in the peculiar facts and circumstances wherein he was inhibited from travelling out of India on account of such action of the law enforcement agencies as was found to be wholly unjustified. Here, it is important to notice that the passport impounding order was invalidated as without authority of law. The finding on whether in a given case an assessee’s claim to extended stay being involuntary, has to be fact dependent. For purposes of Section 6(1) (a), each case will have to be examined on its own merits in the light of facts and circumstances leading to “involuntary” stay, if any, in India.