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PRACTICAL SESSION

PRACTICAL SESSION. GROUP DISCUSSION Case Study 2.2. Residential status and tax incidence Case Study.

isaac-jefferson
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PRACTICAL SESSION

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  1. PRACTICAL SESSION GROUP DISCUSSION Case Study 2.2

  2. Residential status and tax incidenceCase Study • X, a chief executive of a company had undertaken foreign tour on various occasions for company’s work and was out of India for a total number of 225 days during the previous year ending March 31, 2003. He submits his return of income for the assessment year 2003-04 in the status of non-resident. Is he justified? He visited a foreign country for the first time during May 2001. Case Study 2.2

  3. Residential status and tax incidenceSuggested Solution • By virtue of section 6(1)(c), an individual will be resident in India in any previous year if he has been in India for a period of at least 60 days during the previous year and at least 365 days during 4 years preceding the previous year. However, as per Explanation (a) where an Indian citizen leaves India for the purpose of employment outside India, the above period of 60 days has been extended to 182 days. • In the given problem, X had not left India for purposes of employment outside India. He was employed in India and he has gone abroad for company’s work. His stay outside India is, therefore, in connection with his employment in India. In other words, Explanation (a) will not be applicable. Accordingly, X will be treated as resident for the assessment year 2003-04. Hence, the submission of his return of income for the assessment year 2003-04 in the status of non-resident is not justified. Case Study 2.2

  4. Residential status and tax incidenceCase Study • During his 196 days’ stay in India in the previous year 2002-03 X, a citizen of U.K. is all the time moving from one place to another. He claims that he is non-resident in India for the assessment year 2003-04 on the following grounds : • 1. He had never visited India before April 1, 2000. • 2. During 2002-03, though he is in India for 196 days, he could not spend two consecutive nights at any one place. • 3. For the assessment year 2003-04, he is resident in U.K. according to the English Income-tax Act. He insists that he cannot be resident of two countries for the same assessment year. Do you agree with him ? Case Study 2.2

  5. Residential status and tax incidenceSuggested Solution • The claim of X is not tenable, as he is in India for 196 days during the previous year 2002-03. He satisfies one of the two basic conditions (namely, presence of 182 days or more during the previous year 2002-03) and none of the additional conditions. He is, therefore, resident but not ordinarily resident in India for the assessment year 2003-04. The fact that he could not spend two consecutive nights at any one place is immaterial. Moreover, a person who is resident in India, may become resident of any other country according to the tax laws of that country for the same or a different assessment year. Case Study 2.2

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