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Tuesday, August 28, 2012

Date of Arrival to be excluded while deciding No-Residential Status as held by Mumbai ITAT

Day of arrival shall be excluded while deciding Non-residential status as held by itat, mumbai

Income Tax Officer (IT)-1(1)
Fausta C. Cordeiro

IT APPEAL NOS. 4933 & 4934 (MUM.) OF 2011

JUNE 29, 2012


B. Ramakotaiah, Accountant Member - These are two Revenue appeals filed against the orders of the CIT (A) dated 3.3.2011 & 4.3.2011 under section 143(3) r.w.s. 147 and 271(1)(c) respectively.
ITA No.4933/Mum/2011.

2. Briefly stated assessee has claimed status of Non Resident and filed return of income declaring a total loss at Rs.70,854/-. AO noticed that he has received a salary of Rs.16,52,247/- in India having worked as employee of M/s Transocean Discoverer 534 LLC and worked on rig Discoverer 534 outside India, he initiated proceedings under section 147. Assessee's passport was examined to verify the number of day's assessee was in India and AO noticed that assessee arrived seven times to India on varying periods and listed out them in a table. According to him assessee has stayed in India for 187 days. Since it is more than 182 days in the financial year under consideration, he considered assessee as Resident and brought the salary to tax. Consequent to that he also initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars, levied a penalty of Rs. 5,52,390/-.

3. The learned CIT (A) after considering the submissions of assessee accepted assessee's contentions that assessee generally arrived late in the night after completing his work abroad and attends to the work next day and generally leaves early in the morning so as to attend the work again after arriving at the destination. Then he analyzed the General Clauses Act and the decision of the ITAT in the case of Manoj Kumar Reddy v. ITO (International Taxation) [2009] 34 SOT 180 (Bang.) and allowed assessee's contention that he staying was less than 180 days in India during the relevant period. The order of the CIT (A) is as under:

"1.3 I have considered the facts and perused the material on record. I find that there is mistake in counting number of days as per the method of AO. The No. of days stay in India comes to 26 days as per the entry at Sl.No.3 of the table as given above and not at 27 considered by AO. Therefore, the total number of days of stay in India as per AO's own method should be 186 days and not 187 days. On going through the above table, I find that AO has counted both days i.e. arrival date and also departure date. It is seen that the appellant is employed on rig outside India and comes always late night after attending duty on the day of arrival. It is seen that as per General Clauses Act, the day is counted from mid night to mid night. It is fact that the appellant comes late night i.e. after 10 PM on every visit to India, therefore, I inclined to agree with the AR that the appellant could not be said to be in India on the day of arrival and could not have done any useful work on that day. The AR relied in the case of Manoj Kumar Reddy v. ITO [2009] 34 SOT 180 (Bang.) wherein it held assessee visited India during the previous year and while computing the number of days of stay in India as per section 9 of General Clauses Act, the first day in series of days had to be excluded and hence his stay in India from 1-2-2005 to 31-3-2005 was only for 59 days i.e. less than 60 days and hence, his status was to be regarded as non-resident. Thus, the decision was rendered in favour of assessee. In the light of ratio laid down in his decision, the arrival day is not to be counted for stay in India. If the six time arrival days are excluded then the stay of the appellant in India comes to 180 days only. Therefore, I hold the appellant was in India for less than 182 days during the year, hence he was non-resident and consequently his salary income was not taxable in India. Similarly, the Hon'ble Jaipur Tribunal has in the case of ITO v. Dr. R.K. Sharma [1987] SOT 1, 127 (JP) has held in Para 7 of the order as follows: "After carefully considering the arguments of the parties as well as the facts and also the copy of the air ticket of Air India, which has been filed, which shows that assessee took the flight on 2nd of October, which left Tehran at 5.25 pm. According to assessee, according to the Indian Standard Time, the departure by him was 7.25p.m.and the flight landed at 10.30pm in the night. Normally, in these circumstances, it has to be calculated that the prime hours of work having expired, assessee could not have done any useful work for the one and a half hours of 2-10-1979 and it is also the normal practice to count a day to mean 24 hours and part of the day is usually excluded. This, to our, mind, is keeping in line with the provisions contained in section 6 of the General Clauses Act, which says that even as per section 66(1) of the Indian Income Tax Act, 1922 the date of receipt of an order by the party is treated as excluded. The view taken by the Bombay High Court in 68 (Bom.) LR 602, the wordings that are contained in section 66 of the Indian Income Tax Act and section 256 of the Income Tax Act, 1961 are on the same lines. Even for the purpose of the Limitation Act, the day on which the acknowledgement is made it is excluded for computing the period of limitation. We are of the view that this proposition is very clear and, therefore, we will have to grant to assessee that for counting the number of days of stay in India, the arrival date which is the night of 2nd October would have to be excluded and we hold accordingly. This decision also laid down same proposition that arrival date is to be excluded for counting particularly when the appellant always come late night in India after doing his duty on the rig. In the light of these facts owned relying on the aforesaid decision, I am of the considered opinion that either arrival day or departure date is to be excluded for counting No. of days for the stay of the appellant. If these date are excluded, then the appellant's stay was only for 180 days hence he was non-resident as per provisions of section 6(1) of the Act. That being so, his income is not taxable in India during the assessment year under consideration. Therefore, addition of Rs..16,52,247 is deleted. In view that matter, the appeal on ground No.1 and 2 of appeal is allowed in favour of the appellant".

4. It was the learned DR's contention that assessee has stayed more than 182 days in India and therefore, income from salary is taxable in India, whereas the learned Counsel relied on the orders of the CIT (A) to submit that the day of arrival is to be excluded. He placed on record the decision of the ITAT Jaipur Bench in the case of R.K. Sharma, Manoj Kumar Reddy's case (supra), ITO v. Gautam Banerjee(ITAT L Bench Mumbai) in ITA No.2374/Mum/2004 dated 18.6.2008. The learned Counsel also placed on record the decision of the Karnataka High Court in the case of DIT International Taxation v. Manoj Kumar Reddy Nare [2011] 201 Taxman 30/12 326 , wherein the ITAT order was upheld.

5. We have considered the rival contentions and examined the facts. As rightly pointed out by the CIT (A), there was a mistake of taking number of days at Item No.3. Therefore, according to AO's own method it should be 186 days. If we exclude the date of arrival as it is not a complete day, the stay of assessee is les than 182 days. Accordingly there is no merit in Revenue appeal. The case law relied is in support of the contention that day of arrival, particularly late in the day should be excluded. If that day was excluded the stay in India by assessee was less than 180 days. Therefore, the grounds raised by the Revenue are dismissed and accordingly the appeal is dismissed.
ITA No.4934/Mum/2011

6. This is an appeal by the Revenue against the cancellation of penalty under section 271(1)(c) on the amount brought to tax holding that assessee is a Resident. Since in ITA No.4933/Mum/2011 assessee status is confirmed as Non Resident, there is no question of addition of the amount. Therefore, penalty under section 271(1)(c) does not survive. Even otherwise the issue is one of the debatable nature, and there issue of furnishing inaccurate particulars does not arise. There is only a claim of status. Therefore, even otherwise also penalty under section 271(1)(c) was not called for. Therefore, the order of the CIT (A) is upheld. Revenue appeal is dismissed.

7. In the result both the appeals filed by the Revenue are dismissed.

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