Background of the Case

The present case relates to Sonmrug Co-operative Housing Society Ltd. vs. CIT(A) before the Income Tax Appellate Tribunal (ITAT), Mumbai, concerning Assessment Years 2012-13 to 2015-16. The Appellant, a registered co-operative housing society, had filed its return claiming deduction under Section 80P(2)(d) of the Income Tax Act. While processing the return under Section 143(1), the Central Processing Centre disallowed the deduction and made an addition of Rs.2,15,083. Aggrieved by the adjustment, the Appellant preferred an appeal before the Commissioner of Income Tax (Appeals). However, the appeal before the CIT(A) was filed with an extraordinary delay of 3615 days, far beyond the statutory limitation period. The CIT(A) dismissed the appeal solely on the ground of delay without examining the merits. Subsequently, the Appellant approached the ITAT challenging the dismissal order of the CIT(A).

Arguments by the Appellant (Assessee)

The Appellant contended that the CIT(A) erred in dismissing the appeal without considering the merits of the case. It was submitted that the society was eligible for deduction under Section 80P(2)(d) and that the adjustment made during processing under Section 143(1) was beyond the jurisdiction of the CPC. The Appellant further explained that the delay in filing the appeal occurred due to internal disputes between the former committee members and the existing management of the society, which created a hostile environment and lack of cooperation in accessing records. Because of these conflicts, the society claimed it could not file the appeal and supporting documents within the prescribed time. The Appellant therefore requested the Tribunal to condone the delay and restore the matter so that the case could be examined on merits.

Respondent’s Response (Revenue)

The Respondent opposed the Appellant submissions and supported the order passed by the CIT(A). It was argued that the delay of more than nine years in filing the appeal was extremely excessive and no convincing or legally sustainable reason had been provided for such delay. The Respondent contended that mere internal disputes among committee members of the society cannot be treated as a sufficient cause for condonation of delay under the law. It was further submitted that limitation provisions are mandatory and must be strictly followed. The Respondent therefore argued that the CIT(A) had rightly dismissed the appeal as time-barred and that there was no justification for the Tribunal to interfere with the order.

Court Findings and Decision

After considering the rival submissions and examining the record, the ITAT Mumbai observed that the appeal before the CIT(A) had been filed after a delay of 3615 days, which was extraordinarily long. The Tribunal noted that the explanation provided by the Appellant regarding disputes between committee members did not constitute a reasonable or sufficient cause to justify such an inordinate delay. Referring to settled legal principles governing limitation, the Tribunal emphasized that courts cannot extend statutory time limits on equitable or sympathetic grounds. The Tribunal reiterated the legal maxim “dura lex sed lex”, meaning that the law may be harsh but it must be applied as it stands.

In view of the absence of any convincing explanation for the delay, the Tribunal upheld the decision of the CIT(A) and dismissed the appeal in limine. The same reasoning was also applied to the connected appeals for other assessment years, which were consequently dismissed as well.

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Background of the Case

The appeals were filed by the Revenue against the order of CIT(A), for Assessment Years 2016–17 and 2017–18. DBS Bank Ltd., a scheduled banking company, had advanced loans to 3i Infotech Ltd. The borrower underwent a Corporate Debt Restructuring (CDR) process under which a portion of the outstanding loan of Rs.33.50 crores was compulsorily converted into 1,69,70,618 equity shares. Although the shares were allotted on 8 October 2015 at Rs.19.74 per share, they were actually credited into the bank’s Demat account on 27 November 2015 when the market value had sharply fallen to Rs.3.95 per share. After adjusting overdue interest, this resulted in a net loss of Rs.10.04 crores, which the bank wrote off as a bad debt/business loss in its books. 

The Assessing Officer, however, disallowed the claim by treating it as a capital loss. The Revenue approached the Tribunal challenging CIT(A)’s decision which had allowed the deduction following the Tribunal’s own order in the assessee’s case for AY 2015–16.

Arguments by the Appellant (Revenue)

The Revenue argued that the CIT(A) erred in allowing the deduction for the write-off of enhanced debt and wrongly imported RBI restructuring guidelines into income-tax provisions. According to the department, once the loan was converted into equity, the bank acquired a capital asset, and the subsequent fall in share value represented a capital loss, not a business loss or bad debt. The AO relied on judgments of the Bombay High Court in TN Power Financial & Infrastructure Development Corporation Ltd. and the Supreme Court decision in Southern Technologies, asserting that RBI guidelines cannot override the Income-tax Act. 

It was also submitted that the bank was not engaged in trading of shares and therefore the equity obtained on conversion could not be treated as stock-in-trade. The AO also rejected the bank’s alternative claims under sections 28 and 37, stating that a disallowed deduction under section 36 cannot be claimed under section 37 as a residuary provision. 

Respondent’s Response (Assessee)

The Respondent, submitted that the loss was not a capital loss but a diminution in the value of an existing loan asset, which forms part of the circulating capital of a banking business. The conversion into equity was not a voluntary investment decision but a compulsory component of the CDR package meant to maximize recovery of stressed assets. The receivable continued to retain the same commercial character as stock-in-trade, and the loss represented an erosion in recoverability, fully written off in the books. The assessee emphasized that, in AY 2015–16, the ITAT had already allowed an identical claim involving another CDR case, treating the loss as a deductible bad debt or business loss. 

It further argued that banking norms, RBI guidelines, and accounting standards require recognition of such diminution through the profit and loss account. Even if not strictly a bad debt, the loss was incidental to banking operations and allowable under section 28 or alternatively under section 37(1).

Court Findings and Decision 

The ITAT Mumbai held that the AO’s approach was incorrect and that the substance of the transaction must be recognized. It observed that the original loan was part of the circulating capital of the bank, and the conversion into equity was a compelled restructuring measure, not an investment. The substituted asset (shares) had significantly lower realizable value on the date of credit in the demat account, resulting in a genuine, irreversible loss. The Tribunal held that the write-off fulfilled the conditions under section 36(1)(vii) read with section 36(2), as the unrecoverable portion of the debt was written off in the books as irrecoverable. Even viewed differently, it was a business loss arising directly from the banking business and was allowable under section 28, or alternatively under section 37(1). 

The ITAT also relied on its earlier order in the assessee’s favour for AY 2015–16. Consequently, the Tribunal dismissed the Revenue’s appeal and upheld the CIT(A)’s decision allowing the deduction.

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Background of the Case

The appellant owned a commercial property at Raheja Woods, Pune, which had been leased since AY 2005–06. For over a decade, the appellant consistently reported the rental income from this property under the head “Income from House Property,” and the Revenue had accepted this classification in all prior and subsequent years, including as recent as AY 2023–24. However, for AY 2017–18, the Assessing Officer departed from this consistent position and reclassified the rental income of Rs.10.62 crore as “Profits and Gains of Business or Profession,” relying on the Supreme Court judgment in Chennai Properties and Investments Pvt. Ltd. The AO further allowed depreciation instead of the statutory deduction under section 24(a). This treatment was upheld by the CIT(A), prompting the appellant to file an appeal before the Tribunal.

Arguments by the Appellant

The appellant counsel argued that the activity was one of pure leasing, as the lease agreement clearly indicated that lessee bear all utility charges and maintenance costs, leaving no scope for ancillary services. They highlighted that since AY 2005–06, rental income from this very property had been accepted by the Revenue under the head “House Property,” supported by an affidavit filed before the Tribunal. The appellant relied heavily on the Supreme Court ruling in East India Housing and Land Development Trust Ltd. (42 ITR 49), which held that income derived from shops and stalls is to be taxed as income from house property. Further reliance was placed on Raj Dadarkar & Associates v. ACIT (394 ITR 592) and the recent Bombay High Court judgment in PCIT v. Banzai Estates Pvt. Ltd, both of which clarified that an entry in the object clause of a company’s Memorandum of Association cannot override the scheme of classification under the Income Tax Act.

The appellant distinguished its case from Chennai Properties, noting that in that case the company was formed solely to hold two properties and its only source of income was lease rent, whereas H&M Housing Finance and Leasing earned diverse income streams—interest on loans, debentures, capital gains on investments, and share of profits from a partnership firm. In addition, the assets reflected in the balance sheet showed significant investments beyond the leased property. On these facts, the appellant contended that the principle of consistency, coupled with statutory provisions under sections 22–24, required the rental income to be taxed under the head “Income from House Property.”

Respondent’s Response

The Revenue, represented by the Departmental Representative, supported the orders of the Assessing Officer and the CIT(A). It was argued that the Memorandum of Association of the appellant specifically listed leasing of properties as its main object. Therefore, the rental income represented business income, consistent with the principle laid down in Chennai Properties. The Revenue maintained that systematic and organized activity of leasing, as reflected in the MOA, constituted a business activity. It was also argued that merely because earlier assessments had accepted the rental income under “House Property” head, the Department was not estopped from applying the correct legal position in the year under consideration. On the issue of depreciation, the CIT(A) had held that depreciation was to be computed from AY 2005–06, being the first year the property was put to use, and not from AY 2014–15 as claimed by the appellant. The DR urged the Tribunal to affirm these findings.

Court Findings and Decision

The Tribunal observed that the core issue was whether the lease rent should be assessed as “Income from House Property” or “Business Income.” It noted that for over 18 years, the Revenue had consistently accepted the appellant treatment of rental income under the head “House Property,” both before and after AY 2017–18. The Tribunal distinguished Chennai Properties on facts, reiterating that in that case the entire business of the appellant revolved solely around two properties, whereas H&M Housing Finance and Leasing was engaged in multiple investment and financing activities, with only a portion of its assets devoted to the leased building.

The Tribunal emphasized that section 22 mandates that annual value of a property owned by the appellant must be taxed under “House Property,” unless it falls within the specific exception of being used for the appellant own business. That exception did not apply here, as the property was fully leased out.

Accordingly, the Tribunal held that the rental income was taxable under the head “Income from House Property,” thereby allowing the appellant claim for deduction under section 24(a). Having decided this principal issue in favour of the appellant, the Tribunal treated the alternative ground regarding depreciation as infructuous. However, it clarified that municipal taxes and insurance paid, amounting to Rs. 17,01,686 and Rs. 1,90,477 respectively, were allowable subject to verification of evidence by the AO.

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ITAT Mumbai Lease Rental Income

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Background of the Case

The Appellant, Priya Kapil Todarwal filed her return of income for the assessment year 2019–20 declaring a total income of Rs. 98,36,940. The return included a business loss of Rs. 11,60,579 from derivative transactions, a long-term capital gain of Rs. 1,02,45,891, a short-term capital gain of Rs. 6,164, and income from other sources amounting to Rs. 9,38,459. The appellant also claimed deductions under Chapter VI-A totaling Rs. 1,93,000, comprising sections 80C, 80D, 80G, and 80TTA. However, while processing the return under Section 143(1), the Centralized Processing Centre (CPC) disallowed these Chapter VI-A deductions on the ground that they constituted an “incorrect claim.” The appellant’s rectification application was also rejected, and the first appellate authority, the CIT(A), upheld the CPC’s position, leading the appellant to file an appeal before the Income Tax Appellate Tribunal (ITAT), Mumbai.

Arguments by the Appellant

The appellant argued that the disallowance of Chapter VI-A deductions was erroneous and contrary to the scheme of the Income Tax Act. The appellant submitted that the Act does not prescribe any specific sequence for the set-off of losses under Section 71(2), and that appellant had correctly and deliberately chosen to first set off a part of her business loss against income from other sources in order to maintain a positive gross total income and preserve her eligibility to claim Chapter VI-A deductions. The remaining portion of the business loss was set off against long-term capital gains. The appellant emphasized that the set-off method chosen was tax-neutral and within the boundaries of the law.

The appellant also cited decisions including Coated Fabrics Pvt. Ltd. vs. JCIT and Opus Realty Development Ltd. vs. ACIT, where similar bifurcated treatment of losses was allowed.

Respondent’s Response

The Respondent, Revenue defended by asserting that the set-off adopted by the appellant was not consistent with the automated processing logic and hence resulted in an “incorrect claim.” The respondent maintained that once losses are set off against gross total income, the net result should automatically determine eligibility for deductions. Since the CPC system, on its automated computation, did not find sufficient gross total income after loss set-off, it rejected the Chapter VI-A deductions. The respondent did not substantially counter the legal precedents or the circular cited by the appellant but relied on the justification that the system-based processing reflected a correct application of the law.

Court Findings and Decision

The ITAT Mumbai found merit in the appellant’s arguments and held that there was nothing in law to restrict the appellant from setting off part of the business loss against income from other sources in order to keep her gross total income positive. The Tribunal emphasized that Section 71(2) does not prescribe any rigid order for set-off, and thus, in the absence of statutory restrictions, the appellant’s computation must be accepted. The Tribunal noted that the set-off method did not lead to any tax avoidance or undue benefit, and the Chapter VI-A deductions were otherwise allowable. It also reiterated the binding nature of Circular No. 26 of 1955 and the consistent view of earlier judicial decisions that permitted flexible and strategic loss set-off.

Accordingly, the Tribunal directed the CPC to allow the deductions claimed under Chapter VI-A and deleted the disallowance made in the intimation under Section 143(1). The appeal was allowed in favour of the appellant.

Smart Tax Planning Isn’t Tax Evasion:

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Ms. Ila Jitendra Mehta, vs. Revenue [I.T.A. No. 5219 of 2024]

Background of the Case

The appellant, who faced a penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act for allegedly furnishing inaccurate particulars of income. The penalty amount was substantial, exceeding Rs. 2.28 crores. The issue arose from the appellant’s claim of exemption under section 54F of the Income Tax Act for the assessment year 2013-14, which was later found to be erroneous. During the assessment proceedings, the appellant acknowledged this mistake and submitted a revised computation of income. Additionally, the original income tax return was filed belatedly by the appellant’s accountant using a digital signature. The AO initiated penalty proceedings on the grounds of concealment of income but subsequently levied the penalty for furnishing inaccurate particulars, which became a point of contention in this case.

Arguments by the Appellant

The Appellant contended that the claim under section 54F was made inadvertently and was a bona fide mistake that was promptly rectified during the assessment proceedings by submitting a revised computation along with an explanation for not filing a revised return due to the belated original filing. She maintained that the penalty under section 271(1)(c) should not apply in her case, as there was no deliberate attempt to conceal income or provide inaccurate information. The appellant relied on precedents and emphasized that there was a possible legal interpretation supporting her claim, especially since the Tribunal had previously passed orders favorable to her during the assessment process. She further argued that the penalty proceedings were initiated for concealment but the penalty was imposed for inaccurate particulars, a mismatch that rendered the penalty unsustainable.

Respondent’s Response

The Revenue contested the appellant’s plea by emphasizing that a rigorous application of penalty provisions was necessary and that the exemption claimed was incorrect. They argued that the penalty was rightly imposed due to the furnishing of inaccurate particulars and that the difference between concealment and inaccurate particulars did not absolve the appellant of liability. The AO also pointed to the fact that the penalty proceedings were initiated properly, and the claim of inadvertent mistake did not constitute a valid defense against penalty imposition. The Revenue highlighted that since only a small number of cases are picked up for scrutiny, strict enforcement of penalty provisions should act as a deterrent and prevent misuse of exemptions.

Court Findings and Decision

The ITAT carefully examined the facts and the legal position, noting the clear distinction between concealment of income and furnishing inaccurate particulars, as upheld by higher courts in previous judgments. It observed that the AO initiated penalty proceedings on concealment but levied the penalty on inaccurate particulars without proper satisfaction or notice for the latter. This procedural irregularity was a crucial flaw. The Tribunal accepted the appellant’s explanation that the error was inadvertent and corrected during the assessment, demonstrating bona fide conduct. It rejected the Revenue’s arguments about dilution of penalty provisions due to selective scrutiny, emphasizing that penalties must be based on facts and intention, not the number of cases scrutinized. Ultimately, the penalty was held to be unsustainable both on merit and legal grounds and was accordingly deleted, allowing the appellant’s appeal in full.

Concealment vs Inaccurate Particulars

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Eastspring Investments India Equity Open Ltd. vs. Revenue [I.T.A. No. 1219 of 2025]

Background of the Case

The appellant, is a SEBI-registered Foreign Portfolio Investor (FPI) based in Mauritius, filed its return of income for AY 2022–23 declaring total income of Rs. 1,309.50 crore, including STCG of Rs. 1,96.34 crore (taxable at 15% under Section 111A) and STCG of Rs. 3.16 crore (taxable at 30% under Section 115AD) from the sale of right forms (not subject to STT). It also reported STCL of Rs. 24.24 crore on STT-paid transactions. The appellant followed a set-off mechanism whereby it first adjusted the brought forward STCL against the higher-taxable gains (30% on non-STT transactions), and then adjusted the balance against 15% taxable gains. The Assessing Officer (AO), however, rejected this computation, arguing that losses taxed at lower rates (15%) should not be first adjusted against gains taxed at higher rates (30%).

The DRP upheld the AO’s view and treated the entire Rs. 175.26 crore (Rs. 172.09 crore + Rs. 3.16 crore) as STCG, but taxed it as “Income from Other Sources” at 40%, also initiating penalty proceedings under Section 270A.

Arguments by the Appellant

The appellant argued that under section 70(2) of the Income Tax Act, any short-term capital loss can be set off against any short-term capital gain, regardless of the nature of underlying transactions or the applicable tax rates. It was emphasized that both the gains and losses arose under the same head of income, i.e., “Capital Gains,” and hence were eligible for set-off. The appellant further contended that the entire income from share transactions by FPIs is to be treated as capital gains as per CBDT Circular No. 6/2016 and consistent judicial precedent. They also challenged the AO’s treatment of Rs. 3.16 crores earned from rights entitlement sale as “Income from Other Sources,” asserting that such income, too, arose from a capital asset and must be taxed under the head “Capital Gains.”

Respondent’s Response

The Revenue, on the other hand, took the position that the set-off of brought forward STCL arising from STT-paid transactions should not be allowed against STCG from non-STT transactions. They argued that since different tax rates applied at the rate of 15% for STT-paid transactions under section 111A and 30% for non-STT transactions under section 115AD, the character of the income was inherently different. The Assessing Officer, supported by the DRP, also treated the Rs. 3.16 crores earned from the sale of rights entitlement as not arising from a capital asset and hence taxable under “Income from Other Sources,” disallowing both the set-off and the capital gains classification.

Court Findings and Decision

The ITAT Mumbai bench rejected the Revenue’s arguments and ruled in favour of the appellant. It held that the distinction in tax rates under sections 111A and 115AD does not affect the nature of income under the head “Capital Gains.” The Tribunal clarified that once an income is assessed under the same head, set-off cannot be denied merely due to different applicable rates. It also noted that the rights entitlement sold by the appellant was a capital asset under section 2(14), and therefore the gain on its transfer must be taxed as capital gains. Relying on CBDT Circular No. 6/2016 and past rulings including Platinum Investment Management Ltd., the ITAT concluded that FPIs are to be assessed under the “Capital Gains” head for such transactions, and directed the AO to allow the set-off and rectify the incorrect head of income.

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ITAT Mumbai STCL Set-Off

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Shantilal Bachubhai Rita vs. Revenue [Income Tax Appeal No. 2356 of 2024]

Background of the Case

The appellant, Shantilal Bachubhai Rita filed his ITR for the AY 2017-18, declaring a total income of Rs. 3,66,480. The appellant earned income from salary, business, and other sources, including interest income. During scrutiny, the AO observed that while the appellant reported interest income of Rs. 20,39,731, and claimed a deduction of Rs. 1,20,39,731 under Section 57(iii) of the Income Tax Act, 1961, for interest expenses, resulting in nil income under “Income from Other Sources.” The AO disallowed the entire deduction, arguing that the expenditure lacked nexus with the interest income. The disallowance was upheld by the Commissioner of Income Tax (Appeals), prompting the appellant to appeal before the Income Tax Appellate Tribunal (ITAT), Mumbai.

Arguments by the Appellant

The appellant contended that the borrowed funds were exclusively used to lend money to a company where he served as a director, and the interest paid on these borrowings was directly linked to the interest income earned. He provided detailed computations showing that the interest expense was proportionately allocated to interest-bearing loans advanced to the company. The appellant emphasized that the AO and CIT(A) ignored this precedent and failed to substantiate their claim that the arrangement was a “colorable device.”

The appellant also relied on a prior ITAT order in his own case for AY 2020-21 (ITA No. 3406/Mum/2024), where a similar disallowance was deleted. The Tribunal in that case held that the interest expenditure was incurred wholly and exclusively for earning interest income, satisfying Section 57(iii).

Respondent’s Response

The respondent, defended the disallowance, arguing that the appellant loan transactions lacked commercial purpose. Further the revenue submitted that the borrowed funds were diverted to a related company merely to claim deductions, not for genuine business needs. The Revenue also highlighted discrepancies in the appellant loan utilization, noting that 28.3% of borrowed funds were diverted to non-interest-bearing investments, undermining the exclusivity requirement under Section 57(iii). The Revenue contended that the CIT(A) correctly dismissed the claim as a tax-avoidance strategy.

Court Findings and Decision

The ITAT Mumbai ruled in favor of the appellant, and held that the borrowed funds were directly deployed for interest-earning loans, and the appellant had voluntarily disallowed Rs. 23,34,069 (proportionate to non-interest-bearing loans). Relying on the co-ordinate bench’s decision in the appellant own case, the Tribunal held that the interest expenditure met the Section 57(iii) criteria of being “wholly and exclusively” for earning interest income. The ITAT deleted the addition of Rs. 1,20,39,731, observing that the AO and CIT(A) failed to rebut the appellant evidence or justify departing from the precedent.

ITAT Mumbai Allows Deduction u/s 57(iii)

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Gramin Vibhag Shramik Shikshan Sanstha Palghar vs. Exemption Ward [ITA No.581/Mum/2025]

Appeared for Assessee by Mr. Yeshwant Gupta a/w Mr. Austin Meachery.

The Income Tax Appellate Tribunal (ITAT) in Mumbai recently ruled in favour of an assessee concerning the denial of exemption under Section 11 of the Income Tax Act for the Assessment Year 2021-22. The assessee, a trust engaged in charitable educational activities, filed its income tax return on March 23, 2022, declaring a total income of Rs.91,290. This return was processed under Section 143(1) of the Act, but the Centralized Processing Centre (CPC) disallowed the exemption under Section 11 to the extent of INR 3,16,97,382, citing the failure to submit registration details under Section 12AB.

The core issue was whether the assessee was eligible for the exemption under Section 11 for AY 2021-22, despite applying for registration under Section 12AB only on March 26, 2022 – a day before filing the return. The CPC argued that the delay in applying within the prescribed timeframe under Section 12A(1)(ac)(i) of the Act rendered the assessee ineligible for the exemption. Thereby, a demand of INR 1,49,51,840 was levied on the assessee trust.

Dissatisfied with this decision, the assessee appealed to the Tribunal. After reviewing the case, the Tribunal highlighted key points:

• The CBDT, through Circular 16/2021, had extended the deadline for filing Form 10A to March 31, 2022. Hence, the assessee’s application on March 26, 2022, was timely and not in violation of any deadline.
• The Tribunal noted that the CPC had erred by not accounting for this extension, which was a correctable mistake under Section 154 of the Income Tax Act.

Consequently, the Tribunal directed the Assessing Officer to grant the exemption under Section 11 for AY 2021-22. The appeal was allowed in favour of the assessee trust, setting a precedent for cases where compliance deadlines are influenced by CBDT notifications.

ITAT Mumbai Section 11 Exemption

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ACIT v. Shri Nishant Kanodia [ITA no.2155/Mum/2023] (ITAT Mumbai)

The assessee, who is an individual, underwent a search and seizure operation under section 132/133A of the Act. Subsequently, a notice under section 153A of the Act was served to the taxpayer

In response to the aforesaid notice, the assessee filed an income tax return declaring a total income of INR 23,61,660. Thereafter, notice under section 143(2) as well as under section 142(1) of the Act was issued and served on the assessee.

During the assessment proceedings, on perusal of the income tax return filed by the assessee, it was observed by the AO that the assessee had claimed his resident status as “Non–Resident” and had not offered his global income to be taxed in India. Accordingly, the assessee was asked to furnish documents in support of his residential status.

Further, based on documents seized during search, it was observed that the assessee stayed in India for 176 days and went to Mauritius during the year. However, from the work permit issued by the Government of Mauritius, seized during search, it was observed that the assessee went to Mauritius on an occupation permit to stay and work as an investor with Firstland Holdings Ltd. and not as an employee.

In response to the query raised by the AO during the assessment proceedings, the assessee submitted a copy of his passport for the relevant period. Further, the assessee provided the year-wise details of his stay in India for the period. The assessee submitted that he was physically present in India only for a period of 176 days during the relevant financial year.

It was further submitted by the assessee that he went to Mauritius for the purpose of employment with Firstland Holdings Ltd., on the post of Strategist – Global Investment of the company for a period of three years. Therefore, it was claimed that the assessee was a non-resident as per the provisions of section 6(1)(c) r/w Explanation 1(a) to section 6(1) of the Act.

The learned CIT(A), vide impugned order, agreed with the submissions of the assessee and held that the assessee was away from India for the purpose of employment outside India and was accordingly entitled to take the benefit of Explanation–1(a) to section 6(1)(c) of the Act. Being aggrieved, the Revenue was in appeal before the Hon’ble Tribunal.

The Hon’ble Tribunal found from the copy of the appointment letter issued by Firstland Holdings Ltd., Mauritius, that the assessee was appointed as Strategist – Global Investment for a period of three years which can be extended as per mutual discussion in due course. As remuneration, the assessee was offered a salary of USD 1,00,000 per month subject to the deduction of applicable taxes. Further, the assessee was also provided various other benefits, perquisites, allowances, etc.

The Tribunal observed that the issue of whether the term “employment outside India” includes “doing Business” by the assessee, came up for consideration before the Hon’ble Kerala High Court in CIT v/s O. Abdul Razak, [2011] 337 ITR 350 (Ker.) wherein the Hon’ble Court while deciding the issue in favour of the assessee took into consideration the CBDT Circular no.346 dated 30/06/1982 and held that no technical meaning can be assigned to the word “employment” used in the Explanation and thus going abroad for the purpose of employment also means going abroad to take up self-employment like business or profession.

Therefore, even if the assessee had left India for the purpose of business or profession, in the aforesaid decisions, the same had been for the purpose of employment outside India under Explanation–1(a) to section 6(1) of the Act.

Accordingly, even if it was accepted that the assessee went to Mauritius as an Investor in Firstland Holdings Ltd., Mauritius, in which he holds 100% shareholding, the Tribunal were of the considered view that by applying the ratio of aforesaid decisions, the assessee was entitled to claim the benefit of the extended period of 182 days, as provided in Explanation-1(a) to section 6(1) of the Act, for the determination of residential status.

Since it was undisputed that the assessee had stayed in India only for a period of 176 days during the year, which was less than 182 days as provided in Explanation 1(a) to section 6(1) of the Act, the assessee had rightly claimed to be a “Non-Resident” during the year for the purpose of the Act.

Accordingly, the Hon’ble Tribunal found no infirmity in the findings of the learned CIT(A) on this issue. As a result, the grounds raised by the Revenue was dismissed.

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