New Delhi Sept 7(ILNS): The Supreme Court today dismissed a petition as withdrawn filed by an NRI challenging the notification issued by the Central Board of Direct Taxes, alleging it had placed him in the pernicious position of losing his “non-resident status” for the purpose of the Indian Income Tax Act, 1961.
The petitioner who is a Non-Resident Indian had questioned and challenged the Office Memorandum dated March 3, 2021, issued by the Central Board of Direct Taxes.
The genesis of the matter lies in the involuntary extension of stay in India of NRI on account of the COVID-19 pandemic and the resultant lockdown and suspension of international air travel.
The bench comprising of Justice Uday Umesh Lalit, Justice S. Ravindra Bhat, and Justice Bela M. Trivedi state that there was a transport bubble system created for such passengers, for which the petitioner could’ve traveled. “We won’t entertain such petition unless and until if you are able to show that you are completely powerless and you are confined to the shores of this country, then only we will consider the matter from the standpoint of Article 32 but if this is the situation that the transport bubble was created from July 1 onwards and yet you chose not to avail, that is the matter to be gone into individual cases.”
Advocate Abhishek Singhvi along with Senior Advocate submitted that the bubble system created was only available after 91days of the start of the April 2020 financial year, now benefits of 91 days are not been given.
The Petitioner through the petition prayed for a direction from the Ministry of Finance to consider a representation of the Petitioner herein for treating as an NRI for FY 2020-21. The petitioner submitted that he arrived in India on March 6 and was compelled to extend his stay in India, later he was able to leave the country on 5 October, by that time his stay in India (The financial year 2020-21) had already crossed a period of 182days due to lockdown imposed in India. In the view of Section 6 of the Income Tax Act, the petitioner qualifies to be a resident in India and liable to be taxed on his global income in India.
The Petitioner herein is NRI presently based in Dubai, UAE (Tax neutral state) working as an Accounting Manager with Kuber Trading FZE.
One of the incentives offered by the UAE to attract migrants from high tax countries such as India is that it is a “Zero Income Tax” country. There are several other countries where no income tax is levied such as Bahrain, Brunei, Oman, Qatar, Kuwait. As per the data available by the Ministry of External Affairs itself, there are about 60 lakh Indians residing in these countries alone, out of which 34 lakhs (approx..) reside in UAE.
As per the Indian Law, residency status is principally determined in terms of Section 6 of the Income Tax Act which states that Indian citizens/persons of Indian Origin Abroad for employment, to be regarded as a resident in India, two of these conditions are required to be established. Firstly, if he is in India in that year for an aggregate period amounting to 182 days or more, secondly he has an aggregate stay of at least 365 days in India in the course of four years preceding the accounting year and presence in India in the accounting year for an aggregate period of at least 120 days in case. The person has domestic income exceeding 15lakhs or at least 182 days in cases outside India having income up to or less than 15lakhs./ILNS/RG/KR/SNG