Page 57 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes tax residential status for a particular tax year — if not, he/she could end up paying tax on
their worldwide income in India; or, their foreign income, which is liable to tax in India,
could escape the tax net.
One is, therefore, faced with the task of keeping track of the days a person is in India
during a tax year. The challenge is: how do you count the number of days in India?
Does one consider calendar days, or is every 24 hours spent on Indian soil counted as one
day? Is only a full day spent in India counted as a day, or is a fraction of the day also
counted? If a fraction of the day is to be counted as a whole day, are the days of arrival and
departure both counted as days in India? What happens if one spends less than 24 hours in
India during a trip?
The Income Tax Act and Rules do not offer any answers. However, this issue has previously
been a subject of litigation, and one can draw guidance from the judicial authorities’
interpretation of the term ‘days in India’.

In the case of Manoj Kumar Reddy, the Bangalore Tribunal noted that while computing
the period for which an assessee is in India, the count should begin from the date of arrival
of the assessee in India to the date he leaves the country. The Tribunal drew guidance from
the provisions of the General Clauses, Act and concluded that in counting days in this
manner, the first day should be excluded. Hence, when counting the ‘days’, the day of
arrival should be ignored.
The Bangalore Tribunal’s view was followed by the Mumbai Tribunal in the case of Fausta
C. Cordeiro, wherein it held that the arrival date is to be excluded from the count,
particularly when the assessee arrived late in the day.
Based on the Tribunals’ views, one may consider counting on the basis of calendar days,
excluding the day of arrival but including the day of departure, even if it is a fraction of a
day. Thus, if an individual arrives in the evening and leaves the next morning, he would
have been in India (for tax purposes) for one day.
A word of caution: tax officials tend to count both the day of arrival and day of departure
as ‘days in India’, irrespective of whether it is a full day or a few hours. Hence, the ‘days in
India’ in the example above would be two days, not one.
So, when you zoom in and out of India on business or for pleasure, don’t forget to keep a
tab on your ‘days in India’, lest you are entangled in the tax net.

Questions
1. Study and analyse the case.
2. Write down the case facts.
3. What do you infer from it?
Source: http http://www.thehindubusinessline.com/industry-and-economy/taxation-and-accounts/
make-it-count-residential-status-key-to-taxation/article4085396.ece

2.7 Summary

Tax incidence on an assessee depends on his residential status. Whether an income earned
by a foreign national in India or outside India taxable in India depends on the residential
status of the individual, rather than on his citizenship. Therefore, the determination of the
residential status of a person is very significant in order to find out his tax liability.
There are three residential statuses that we will study in detail this unit namely the
Residents also referred to as Resident & Ordinarily Residents, the Resident but not
Ordinarily Residents and the Non-residents.

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