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Judgement Last Updated on: 31 Jul 2006 LexDoc Id: 298769

Category - Direct Tax
Issuing Authority/Forum: AAR 

British Gas (I) (P) Ltd. vs CIT

Citation 195 Taxation 230
  155 Taxman 326
  204 CTR 177
  285 ITR 218
  LexReported

  Topic Non-resident: Deputation abroad

  Sub Topic Stay in India
Summary The applicant company’s employee, who was appointed in 2002 and was deputed abroad for two
years with effect from 01 July 2005, was a non-resident for the purpose of Explanation (a) to s.6(1)
of the Income Tax Act 1961, since his stay in India during the FY 2005-06 was merely for a period
  of 88 days as against the period of 182 days required by the Act.

Explanation (a) to s.6(1) of the Income Tax Act 1961

Authority for Advance Rulings, New Delhi

British Gas (I) (P) Ltd. vs CIT

AAR No. 725 of 2006

Syed Shah Mohammed Quadri (Chairman) and A.S. Narang (Member)

31 July 2006

None for the Department

M S Syali, Adv. for the Applicant

ORDER

Justice Syed Shah Mohammed Quadri :

In this application under section 245Q(1) of the Income-tax Act, 1961 (for short the "Act") the applicant, British
Gas India Pvt. Ltd., an Indian company seeks advance ruling of the Authority on the following questions:

1. Whether in the facts and circumstances of the case and in law, salary income received in India by Mr. Manish
Gupta from British Gas India Private Ltd for rendering services outside India is taxable in India?

2. Whether in the facts and circumstances of the case and in law, British Gas India Private Limited is required to
withhold taxes on salary paid in India to Mr. Nipun Pradhan and Mr. Manish Gupta for rendering services outside
India.

2. The applicant is a part of a BG Group, leading international energy company that has expertise across
spectrum of the natural gas chain. The applicant has assigned certain individuals, including Mr. Manish Gupta to
BG Group entities outside India. It is stated that Mr. Manish Gupta commenced employment with the Indian
company in February/March, 2002 and that with effect from July 1, 2005 he was deputed to BG U.K. vide
assignment letter dated 25.5.2005 for two years and has since been working in U.K. It is asserted that he would
be spending less than 182 days in India in financial year 2005-06, therefore, he is a non-resident under
explanation (a) to section 6 (1) of the Act.

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3. The Commissioner in his remarks stated that in view of the stay of 88 days in India in the financial year 2005-
06, the status of Mr. Gupta is that of resident in India.

4. In view of the comments of the Commissioner, the applicant was given a notice to show cause to explain as to
how Mr Gupta could be considered a non-resident in the light of Explanation (a) to section 6(1) of the Act; the
case was directed to be listed for hearing. The applicant submitted his explanation stating that since Mr. Gupta is
a citizen of India and left India for the purpose of employment outside the State, he would be a non-resident if his
stay is less than 182 days in that year and as Mr. Gupta's residence in the year in question was only 88 days, he
would be a non-resident.

5. Mr Syali, learned counsel appearing for the applicant, in response to the show cause notice submitted that the
stay of Mr. Gupta in the financial year 2006-06 is 88 days and as by explanation (a) to section 6(1) of the Act, the
period of 60 days in clause (c) has been substituted by 182 days, he would be a non-resident.

It would be useful to refer to section 6(1) and Explanation(a) thereto in so far as they are relevant for our purpose.

Residence in India

6. For the purposes of this Act-

(1) An individual is said to be resident in India in any previous year, if he-

(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or

(b) -

(c) 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.

[Explanation - In the case of an individual-

(a) being a citizen of India, who leaves India in any previous year [as a member of the crew of an Indian ship as
defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or] for the purposes of
employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words
"sixty days" occurring therein, the words "one hundred and eighty-two days" had been substituted.

The word "non-resident" has not been defined in the Act. There are two requirements of section 6(1) which
defines residence of an individual in India.

(i) If an individual is in India in any previous year for a period or periods amounting in all to one hundred and
eighty-two days or more; or

(ii) if the individual, 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.

Now explanation (a) says, inter alia, in the case of an individual being a citizen of India, who leaves India in any
previous year for the purpose of employment outside India, then in relation to that year he will be resident in India
if he is in India for a period or periods amounting in all to 182 days or more.

7. The contention of the Commissioner that he has been in India for more than 60 days is supported by clause (c)
of Section 6(1) of the Act but this ignores explanation (a) thereof. For the words "sixty days", occurring in sub-
clause (c), the word "one hundred and eighty-two days" had been substituted by the explanation. If clause (c ) is
read in the light of the Explanation (a), it is apparent that the stay of Mr. Gupta is less than 182 days (his stay is
88 days in India), therefore, he becomes a non-resident and thus the requirement of the tax liability of non-
resident for the purpose of definition of "advance ruling" in Section 245N(a) of the Act is satisfied. We are unable
to endorse the contention that since he is already in employment and is leaving India on deputation, he cannot be
said to leave India for employment. A careful reading of explanation (a) would show that the requirement of the
explanation is not leaving India for employment but it is leaving India for the purposes of employment outside
India. For the purpose of the explanation an individual need not be an unemployed person who leaves India for

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employment outside India. Therefore, the fact that Mr. Gupta was already an employee at the time of leaving India
is hardly material or relevant. For all these reasons, we hold that Mr. Manish Gupta is not a resident in India in the
financial year 2005-2006.

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