Power of the Central Board of Direct Taxes to prescribe the manner and procedure for computing period of stay in India

The provisions of sub-section (1) of section 6 provide the conditions under which an individual is held to be resident in India. The determination is based, inter alia, on the number of days during which such individual has been in India during a previous year.

In the case of foreign bound ships where the destination of the voyage is outside India, there is uncertainty with regard to the manner and basis of determination of the period of stay in India for crew members of such ships who are Indian citizens.

In view of the above, it is proposed to amend the Act to provide that in the case of an Individual, being a citizen of India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India shall, in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed.

This amendment will take effect retrospectively from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years.

NOTE ON RELEVANT CLAUSES  OF FINANCE BILL 2015

Clause 4 of the Bill seeks to amend section 6 of the Income-tax Act relating to residence in India.

The existing provisions contained in sub-clause (c) of clause (1) of the aforesaid section provide that an individual is said to be resident in India in any previous year if he, 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. Clause (a) of Explanation to clause (1) of the said section provides that in the case of an individual, being a citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship, the above mentioned condition of sixty days is extended to one hundred and eighty-two days.

It is proposed to amend the said clause by insertion of a new Explanation 2 so as to provide that in the case of an individual, being a citizen of India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India shall, in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed.

This amendment will take effect retrospectively from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years.

Under the existing provisions contained in clause (3) of the aforesaid section, a company is said to be resident in India in any previous year, if––

(i)       it is an Indian company; or

(ii)      during that year, the control and management of its affairs is situated wholly in India.

It is proposed to amend the said clause (3) to provide that a company shall be said to be resident in India, in any previous year, if––

(a)      it is an Indian company; or

(b)      its place of effective management, at any time in that year, is in India.

It is also proposed to insert an Explanation to clarify the expression “place of effective management” to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance made.

This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to assessment year 2016-17 and subsequent assessment years.

EXTRACT OF RELEVANT CLAUSES FROM FINANCE BILL 2015

Amendment of section 6.

4. In section 6 of the Income-tax Act,—(i)       in clause (1), the Explanation shall be numbered as Explanation 1 thereof and after Explanation 1 as so numbered, the following Explanation shall be inserted, namely:—

“Explanation 2.—For the purposes of this clause, in the case of an individual, being a citizen of   India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India shall, in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed.”;

(ii)      for clause (3), the following clause shall be substituted with effect from the 1st day of April, 2016, namely:—

‘(3) A company is said to be resident in India in any previous year, if,—

(i)       it is an Indian company; or

(ii)      its place of effective management, at any time in that year, is in India.

Explanation.—For the purposes of this clause “place of effective management” means a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance made.’.

( Compiled by Taxguru Team)

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