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 Limited 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 2005-2006, therefore, he is a non-resident under explanation (a) to section 6(1) of the Act.
3. The Commissioner in his remarks stated that in view of the stay of 88 days in India in the financial year 2005-2006, 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 2006-2006 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
(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 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 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.