Background of the Case

The assessee, a religious trust engaged in managing a centuries-old Jain pilgrimage centre, filed its return for AY 2017-18 declaring a taxable surplus of ₹2.01 lakh. During scrutiny, the Assessing Officer noticed cash deposits of ₹90 lakh during the demonetisation period, which the trust explained as donations received for the proposed Panchkalyanak Pratishtha Mahotsava and Mahamastikabhishek of Lord Adinath scheduled in April 2017. The Assessing Officer treated the donations of ₹75.46 lakh as unexplained cash credits under Section 68 on the ground that they were received shortly before demonetization and that the trust was not registered under Section 12AA during the relevant assessment year.

Consequently, exemption under Sections 11 and 12 was denied and tax was levied under Section 115BBE. The CIT(A) upheld the assessment, leading the assessee to file an appeal before the ITAT Agra.

Arguments by the Appellant (Assessee)

The assessee contended that although registration under Section 12AA was granted on 26.11.2018 with effect from AY 2019-20, the benefit of Sections 11 and 12 was available for earlier assessment years in view of the proviso to Section 12A(2), as the assessment proceedings were pending on the date of registration and the objects and activities of the trust had remained unchanged. It was further submitted that complete documentary evidence, including audited books of account, donor-wise ledgers, donation receipts and details of the religious event, had been furnished before the Revenue authorities.

The trust argued that the donations had already been disclosed as income in its books and, therefore, the same amount could not again be treated as unexplained cash credit under Section 68. The assessee also challenged the applicability of the enhanced tax rate under Section 115BBE, relying upon judicial precedents holding that the amended rate was prospective in nature.

Respondent’s Response (Revenue)

The Revenue submitted that since the trust was not registered under Section 12AA during the relevant assessment year, it was not entitled to claim exemption under Sections 11 and 12. The department further argued that the trust had no history of receiving such substantial cash donations and that the deposits made immediately before demonetisation raised serious doubts regarding their genuineness. Accordingly, the Revenue supported the orders of the Assessing Officer and the CIT(A), contending that the donations had rightly been treated as unexplained cash credits liable to tax.

Court Findings and Decision

The ITAT Agra allowed the appeal and held that the proviso to Section 12A(2), read with CBDT Circular No. 1/2015, extends the benefit of registration under Section 12AA to earlier assessment years where assessment proceedings were pending on the date of registration and the trust’s objects and activities remained unchanged. Since the assessee had obtained registration before completion of the assessment proceedings, it was entitled to exemption under Sections 11 and 12. The Tribunal further observed that the donations had been duly recorded in the audited books of account, supported by donor details, receipts and other documentary evidence, and had already been offered as income.

In such circumstances, the same receipts could not be taxed again as unexplained cash credits under Section 68 without rejecting the books of account or disproving the genuineness of the religious activities. The Tribunal also held that the enhanced rate of tax under Section 115BBE was not applicable to AY 2017-18 and directed that the income be taxed under the normal provisions of the Act.

Accordingly, all the additions made by the Revenue were deleted and the appeal of the assessee was allowed.

To download official order, Click Here

“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”

The post ITAT Agra: Subsequent Section 12AA Registration Allows Exemption for Pending Cases appeared first on Tax Unplug.

Background of the Case

The present appeal before the Telangana High Court arose from the denial of exemption under Section 54F of the Income-tax Act, 1961, to a Non-Resident Indian (NRI) who had entered into a Joint Development Agreement (JDA) along with 45 other landowners for development of their land. The assessee claimed exemption under Section 54F on the ground that his share of the capital gains had been invested in acquiring a residential villa to be constructed by the developer under the JDA. However, due to disputes between the partners of the developer, the construction was significantly delayed and the villa was neither completed nor registered within the prescribed period of three years.

The Assessing Officer, Dispute Resolution Panel (DRP) and the Income Tax Appellate Tribunal (ITAT) rejected the exemption holding that the assessee had neither acquired legal title nor received possession of the residential property within the statutory period prescribed under Section 54F.

Aggrieved by the Tribunal’s decision, the assessee preferred an appeal before the Telangana High Court.

Arguments by the Appellant (Assessee)

The assessee contended that he had fully complied with the conditions prescribed under Section 54F by investing the capital gains in the residential villa to be constructed under the Joint Development Agreement. It was argued that the delay in completion of construction and registration of the villa occurred solely because of disputes among the developer’s partners and was entirely beyond the control of the assessee. The assessee further submitted that once the investment in the new residential property had been made within the prescribed period, the exemption could not be denied merely because the builder failed to complete the construction or execute the registered conveyance within three years.

Respondent’s Response (Revenue)

The Revenue argued that the assessee was not entitled to exemption under Section 54F since the residential villa was neither completed nor registered within the period stipulated under the Act. It was submitted that although the Joint Development Agreement contemplated delivery of the villa within thirty-six months, construction was completed only in November 2023 and no registration had taken place in favour of the assessee. The department further contended that the disputes among the developers arose much after the expiry of the contractual period and that the assessee had failed to take effective steps to ensure timely completion of the project. Accordingly, the Revenue maintained that the statutory conditions under Section 54F had not been fulfilled.

Court Findings and Decision

The Telangana High Court allowed the appeal and held that exemption under Section 54F cannot be denied merely because the assessee did not receive legal title or possession of the residential property within the prescribed period due to circumstances beyond his control. The Court observed that Section 54F is a beneficial provision intended to encourage investment in residential properties and therefore deserves liberal interpretation. It held that where an assessee has invested the capital gains towards purchase or construction of a residential house, subsequent delay in completion of construction, execution of the sale deed or delivery of possession by the developer cannot defeat the statutory exemption.

Relying upon the earlier decisions in CIT v. C. Gopalaswamy and CIT v. Sambandam Udaykumar, the Court reiterated that the essence of Section 54F lies in the investment of capital gains and not in completion of every legal formality within the stipulated period.

Consequently, the orders passed by the Assessing Officer, DRP and ITAT were set aside and the assessee was held entitled to exemption under Section 54F.

To download official order, Click Here

“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”

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Earlier, Notification dated 17th September 2025 had prescribed 30th June 2026 as the last date for filing appeals before the GSTAT. However, based on representations received from various stakeholders, the Government has now issued a fresh notification superseding the earlier notification.

Revised Due Date for Filing before GSTAT

As per the notification dated 30th June 2026, the following timelines shall apply:

For Appeals under Section 112(1):

• Orders communicated before 1st May 2026: Appeal can now be filed up to 31st July 2026.
• Orders communicated on or after 1st May 2026: Appeal shall be filed within three months from the date of communication of the order.

For Applications under Section 112(3):

• Orders passed before 1st February 2026: Application can now be filed up to 31st July 2026.
• Orders passed on or after 1st February 2026: Application shall be filed within six months from the date of the order.

To download the official notification, Click Here

“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”

The post Government Extends GSTAT Appeal Filing Deadline to 31st July 2026 appeared first on Tax Unplug.

Background of the Case

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) recently adjudicated an important issue concerning the grant of additional interest under Section 244A(1A) of the Income Tax Act, 1961 in the case of ITC Infotech India Limited. The assessment for AY 2014-15 was originally completed under Section 143(3) on 23 January 2018, resulting in a refund becoming due to the appellant along with interest under Section 244A(1). Subsequently, the appellant succeeded in appeal before the Commissioner of Income Tax (Appeals), who passed an order dated 08 June 2018 granting relief. However, despite the appellate order, the Assessing Officer passed the consequential appeal effect order only on 02 February 2023. The appellant contended that this substantial delay exceeded the time limit prescribed under Section 153(5) and therefore entitled it to additional interest at the rate of 3% per annum under Section 244A(1A).

Since the CIT(A) merely directed verification of the claim without specifically directing grant of such interest, the matter reached the Tribunal.

Arguments by the Appellant (Assessee)

The appellant argued that Section 153(5) imposes a statutory obligation upon the Assessing Officer to pass an order giving effect to an appellate order within the prescribed time frame. According to the appellant, the appellate order was passed in June 2018, whereas the appeal effect order was issued only in February 2023, resulting in a delay of more than four years beyond the permissible period. The appellant submitted that Section 244A(1A) was introduced specifically to compensate taxpayers where the Revenue fails to implement appellate relief within the stipulated time. It was further contended that the appellant became entitled to additional interest commencing from the date immediately following the expiry of the period prescribed under Section 153(5) until the date on which the refund was actually granted. Therefore, the appellant requested the Tribunal to direct the Assessing Officer to grant the additional interest after verifying the computation.

Respondent’s Response (Revenue)

The Revenue primarily relied upon the order passed by the CIT(A) and submitted that the issue required verification of the appellant’s computation before any additional interest could be granted. While defending the appellate order, the Department maintained that the Assessing Officer should first examine the factual correctness of the claim and determine the amount, if any, payable under Section 244A(1A). The Revenue did not place any specific material on record to dispute the fact that the appeal effect order had been passed after the expiry of the statutory period. Accordingly, the Department supported the direction of the CIT(A) restricting the matter to verification of the claim rather than issuing a categorical direction for grant of additional interest.

Court Findings and Decision

After considering the submissions and examining the material on record, the Tribunal observed that the appeal effect order dated 02 February 2023 had admittedly been passed well beyond the period prescribed under Section 153(5) of the Act. The Tribunal held that once there is a delay in giving effect to an appellate order beyond the statutory timeline, the appellant becomes entitled to additional interest under Section 244A(1A). The Bench noted that these provisions were introduced as a deterrent against administrative delays and to compensate taxpayers who are deprived of timely refunds despite succeeding in appellate proceedings.

Relying upon the decisions of the Karnataka High Court in Wipro Ltd. v. JCIT and the Gujarat High Court in Nima Specific Family Trust v. ACIT, the Tribunal concluded that the appellant was entitled to additional interest at the rate of 3% per annum from 01 November 2018 until the date of actual grant of refund.

Accordingly, the Tribunal directed the Assessing Officer to verify the computation and grant the additional interest in accordance with law, thereby allowing the appeal of the appellant.

To download official order, Click Here

“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”

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Background of the Case

The present writ petition before the Bombay High Court (Aurangabad Bench) arose from a GST demand challenged by Pagariya Auto Private Limited. The petitioner approached the High Court contending that the issue involved in the matter was squarely covered by the earlier judgment of the Bombay High Court in Star Engineers (I) Pvt. Ltd. v. Union of India, wherein relief had been granted in cases involving bona fide and inadvertent errors under the GST regime.

During the course of hearing, the Revenue argued that although the GST Appellate Tribunal had not yet been constituted, the Government had already issued notifications and circulars providing that taxpayers intending to challenge appellate orders must deposit an additional 10% of the disputed tax amount over and above the earlier statutory pre-deposit made before the First Appellate Authority. The department further submitted that upon such deposit, coercive recovery proceedings would remain stayed.

Arguments by the Appellant (Taxpayer)

The petitioner submitted that the issue involved in the present matter was fully covered by the decision of the Coordinate Bench in Star Engineers (I) Pvt. Ltd., which had consistently been followed by various Benches of the Bombay High Court. It was argued that the alleged discrepancy arose due to a bona fide and inadvertent mistake and therefore the petitioner should not be compelled to deposit an additional 10% amount merely because the GST Appellate Tribunal had not yet become operational.

The petitioner further contended that insistence on further pre-deposit despite settled judicial precedents would impose an unjust financial burden upon taxpayers, particularly when the demand itself was disputed on substantial legal grounds.

Respondent’s Response (Revenue Department)

The Revenue opposed the grant of interim relief and relied upon various judicial precedents as well as Government notifications and circulars issued in view of the non-constitution of the GST Appellate Tribunal. The department submitted that in such circumstances taxpayers desirous of challenging appellate orders are required to deposit an additional 10% of the disputed tax amount in addition to the earlier statutory deposit already made before the Commissioner (Appeals).

The department argued that once such additional deposit is made, the taxpayer would become entitled to protection from coercive recovery proceedings during pendency of the dispute.

Court Findings and Decision

The Bombay High Court was not impressed with the submissions advanced by the Revenue and prima facie accepted the petitioner’s contention that the matter was covered by the judgment in Star Engineers (I) Pvt. Ltd. The Court observed that where the alleged discrepancy arises out of a bona fide and inadvertent mistake, the taxpayer should not be compelled to make an additional 10% pre-deposit merely because the GST Appellate Tribunal has not yet been constituted.

Accordingly, the High Court issued notice in the writ petition and granted ad-interim relief in favour of the petitioner by staying coercive action against the assessee without insisting upon the additional 10% deposit sought by the department. The ruling provides significant interim relief to taxpayers facing similar demands in absence of a functional GST Appellate Tribunal.

To download official order, Click Here

“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”

The post Bombay High Court Grants Interim Relief: No Additional 10% GST Pre-Deposit Required Where Demand Arises Due to Bona Fide Error appeared first on Tax Unplug.

Background of the Case

The present writ petition before the Allahabad High Court arose from criminal proceedings initiated against an Advocate practicing in indirect taxes and corporate laws. The petitioner, an Advocate enrolled with the Bar Council of Uttar Pradesh and also an Advocate-on-Record before the Allahabad High Court, had been engaged by his client to file statutory GST appeals under Section 107 of the CGST/SGST Act against assessment orders passed under Section 74 of the GST Act involving substantial tax demands for FY 2021-22, 2022-23 and 2023-24. While filing the appeals, the petitioner utilized the assessee’s Electronic Credit Ledger and Input Tax Credit for payment of the mandatory 10% pre-deposit requirement in accordance with CBIC Circular dated 06.07.2022 and relying upon the Gujarat High Court judgment in Yasho Industries Ltd., which had also been upheld by the Supreme Court.

However, the Appellate Authority rejected the appeals on the ground that payment of pre-deposit through Electronic Credit Ledger was not maintainable. Subsequently, instead of proceeding merely against the assessee, the GST Department lodged an FIR against both the assessee and the Advocate alleging criminal conspiracy, tax evasion and financial loss to the State Exchequer. During pendency of the writ petition, a charge-sheet and cognizance order were also passed against the Advocate, which were additionally challenged before the High Court.

Arguments by the Appellant (Advocate)

The petitioner contended that he had acted purely in his professional capacity while advising and filing the statutory appeals on behalf of his client. It was argued that utilization of Input Tax Credit for payment of mandatory pre-deposit was based on a bona fide interpretation of law supported by the CBIC Circular and the judicial precedents of the Gujarat High Court and the Supreme Court in Yasho Industries Ltd.

The petitioner further submitted that even assuming the legal interpretation adopted by him was erroneous, the same could never constitute a criminal offence or conspiracy with the client. It was emphasized that the petitioner had no business connection with the assessee and merely discharged his professional obligations as an Advocate. The petitioner argued that criminal prosecution of an Advocate for legal advice or procedural actions taken during representation of a client would strike at the very independence of the legal profession and adversely affect the constitutional right of citizens to obtain legal assistance.

Respondent’s Response (GST Department/State)

The GST Department defended the FIR by alleging that the assessee had wrongfully utilized Input Tax Credit for payment of the statutory pre-deposit requirement and thereby attempted to evade tax liability. The department alleged that such actions caused financial loss to the State Exchequer and were undertaken in conspiracy between the assessee and the petitioner Advocate.

However, during the course of hearing, the learned Additional Advocate General and the Deputy Commissioner of GST were unable to satisfactorily explain the basis on which the petitioner Advocate had been implicated in the criminal proceedings merely for filing statutory appeals and adopting a particular legal interpretation regarding pre-deposit through Electronic Credit Ledger.

Court Findings and Decision

The Allahabad High Court strongly deprecated the action of the GST Department and held that the FIR, charge-sheet and cognizance proceedings against the Advocate were wholly unsustainable in law. The Court observed that an Advocate, by virtue of his profession, is entitled to represent and defend clients fearlessly and independently, irrespective of the allegations involved against such clients. Merely because an Advocate adopts a particular legal position or files proceedings on behalf of a client, he cannot be treated as a conspirator in the alleged acts of the client.

The Court further observed that criminal prosecution of Advocates for professional acts performed during legal representation would strike at the very foundation of the legal profession and undermine the constitutional protections available under Articles 14 and 21 of the Constitution. The High Court specifically held that even if the GST Department believed that pre-deposit through Electronic Credit Ledger was legally impermissible, the petitioner’s action was still a professional act based on a particular interpretation of law and could never amount to criminal conspiracy.

Accordingly, the Allahabad High Court quashed the FIR, charge-sheet and cognizance order against the petitioner Advocate and held that continuation of criminal proceedings in such circumstances would amount to gross abuse of the process of law.

To download official order, Click Here

“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”

The post Allahabad High Court Quashes FIR Against GST Advocate: Filing Appeal Using ITC Cannot Amount to Criminal Conspiracy appeared first on Tax Unplug.

Background of the Case

The dispute in the present matter revolved around the levy of GST on assignment and transfer of leasehold rights in industrial plots allotted by industrial development corporations. Aerocom Cushions Private Limited had challenged a GST show cause notice issued by the department alleging that transfer of leasehold rights constituted a taxable supply of services under the GST regime.

The Bombay High Court (Nagpur Bench), while deciding the writ petition, relied extensively upon the earlier judgment of the Gujarat High Court delivered in the case concerning assignment of leasehold rights allotted by GIDC and held that such transfer essentially amounted to transfer of benefits arising out of immovable property and therefore could not be subjected to GST. The High Court accordingly quashed the show cause notice issued by the department.

Aggrieved by the decision of the Bombay High Court, the Revenue approached the Hon’ble Supreme Court by way of Special Leave Petition challenging the correctness of the judgment.

Arguments by the Appellant (Revenue)

The Revenue contended that assignment of leasehold rights by an allottee in favour of a third-party assignee amounted to a “supply of service” under Section 7 of the CGST Act read with Schedule II. According to the department, permission granted by industrial development corporations such as MIDC/GIDC for transfer of leasehold rights constituted a taxable activity liable to GST at the applicable rate.

The department further argued that transfer of leasehold rights involved commercial consideration and therefore could not be treated at par with sale of immovable property falling outside the scope of GST. On this basis, the Revenue sought interference with the judgment passed by the Bombay High Court.

Respondent’s Response (Taxpayer)

The respondent relied upon the detailed findings recorded by the Gujarat High Court wherein it was held that assignment and transfer of leasehold rights in industrial plots amounts to transfer of benefits arising out of immovable property. It was argued that such transactions are in substance transfer of immovable property rights and therefore fall outside the scope of “supply” under the GST law.

The respondent further contended that the Bombay High Court had correctly followed the Gujarat High Court ruling and rightly concluded that GST cannot be levied on assignment of leasehold rights in land. It was also submitted that the transaction was already subjected to stamp duty and registration under the applicable laws governing immovable property transactions.

Court Findings and Decision

The Supreme Court dismissed the Special Leave Petition filed by the Revenue and declined to interfere with the judgment of the Bombay High Court. Consequently, the ruling of the Bombay High Court attained finality.

The Bombay High Court had categorically held that assignment by sale and transfer of leasehold rights in industrial plots constitutes transfer of benefits arising out of immovable property and therefore does not amount to taxable supply under the GST law. The Court also observed that the Gujarat High Court’s ruling on the issue was binding in absence of any contrary decision by another competent High Court.

By dismissing the Revenue’s appeal, the Supreme Court has effectively reaffirmed the judicial position that transfer and assignment of leasehold rights in industrial plots allotted by development corporations such as MIDC/GIDC cannot be subjected to GST merely on the ground that consideration is involved in the transaction. The ruling provides significant relief and clarity to industries and businesses dealing in assignment of industrial leasehold rights.

To download official order of Bombay High Court, Click Here and for Supreme Court order, Click Here.

“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”

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One of the most important concepts under the Income-tax law is determination of “Residential Status”. The taxability of a person in India does not depend upon citizenship alone; rather, it depends upon whether the person qualifies as:

• Resident and Ordinarily Resident (ROR),
• Resident but Not Ordinarily Resident (RNOR), or
• Non-Resident (NR)

A common misconception is that an Indian citizen working abroad automatically becomes a Non-Resident, or that a foreign citizen cannot become taxable in India.

However, under the provisions of the Income Tax Act, residential status is determined primarily based on physical presence in India and certain additional conditions prescribed under the law.

This article provides a practical and simplified understanding of residential status and its implications.

Why Residential Status is Important?

Residential status determines:

• Whether foreign income is taxable in India;
• Whether overseas bank interest needs to be disclosed;
• Applicability of foreign asset reporting;
• Eligibility for certain exemptions and DTAA relief.

Therefore, determining the correct residential status is the first and most crucial step while filing an Income-tax Return (ITR).

Step 1 – Determine Whether the Person is Resident or Non-Resident

An individual shall be treated as Resident in India if he satisfies either of the following basic conditions during the relevant tax year.

Basic Condition 1 – 182 Days Test

A person becomes Resident if he stays in India for 182 days or more during the relevant tax year.

OR

Basic Condition 2 – 60 Days + 365 Days Test

A person also becomes Resident if he stays 60 days or more in current year and 365 days or more in preceding 4 tax years.

If none of the above conditions are satisfied, the person becomes a Non-Resident (NR) for the current tax year.

Special Relaxation for Indian Citizens Leaving India for Employment

The Income-tax law provides relaxation to Indian citizens leaving India for employment outside India.

In such cases:

• the 60-day condition does not apply; and
• only the 182-day test becomes relevant.

This provision commonly applies to:

• employees shifting abroad,
• expatriates,
• professionals accepting overseas employment.

Practical Example

Mr. A leaves India for employment in USA and stays in India for only 110 days during the financial year.

Since only the 182-day test applies and he stays in India is for only 110 days, which is less than the 182 days period, Mr. A shall qualify as a Non-Resident.

Visiting Indians and Persons of Indian Origin (PIO)

A different rule applies where:

• Indian citizens residing abroad; or
• Persons of Indian Origin (PIO)

comes to India on a visit, the 60-day condition is replaced with 182 days.

However, where Indian income exceeds Rs.15 lakh in the current tax year, the threshold changes from 60 days to 120 days.

Practical Position

Deemed Residency Provision

The law also contains a “deemed residency” provision. An Indian citizen may become deemed resident if:

• he is not liable to tax in any other country; and
• his Indian income exceeds ₹15 lakh.

This provision mainly targets individuals who avoid taxation globally by not becoming tax resident anywhere.

However, this provision generally does not apply where the individual is already liable to tax in another country, such as employment taxation in Singapore, UAE, UK, etc.

Step 2 – Resident Does Not Automatically Mean ROR

Many people believe that once a person becomes Resident, the analysis ends there. That is incorrect. After determining that a person is Resident, the next step is to determine whether such resident is:

• Resident and Ordinarily Resident (ROR); or
• Resident but Not Ordinarily Resident (RNOR).

RNOR is therefore a sub-category of “Resident.”

Who is RNOR?

A Resident becomes RNOR if he satisfies either of the following conditions:

• Non-resident in 9 out of preceding 10 tax years, or
• Stay in India for 729 days or less during preceding 7 tax years

If neither condition is satisfied, the person becomes Resident and Ordinarily Resident (ROR).

Important Practical Understanding

A person cannot directly become RNOR without first becoming Resident.

The correct sequence under the law is:

• Check whether the person is Resident or Non-Resident
• If Non-Resident → analysis ends
• If Resident → then determine: ROR or RNOR

Therefore, even if a person satisfies RNOR conditions, he shall still remain Non-Resident if he does not first satisfy the basic conditions for becoming Resident.

Taxability Based on Residential Status

The residential status directly affects the scope of taxable income in India.

*Generally Not Taxable. Taxability in India depends upon whether the said income has been taxed in other countries. If not taxed in other countries, then it shall be taxed in India.

Foreign Income – Important Exception

For RNOR and NR taxpayers, foreign income is generally not taxable in India, unless such income:

• is derived from a business controlled from India; or
• arises from a profession set up in India.

Thus, overseas salary, foreign bank interest, and foreign investments generally remain outside Indian taxation for NR and RNOR individuals.

Practical Example – Foreign Bank Account

Suppose an Indian citizen is employed and residing in Singapore and qualifies as a Non-Resident in India.

In such a case, Interest earned from a Singapore bank account may generally not be taxable in India.

However, if interest is earned from an Indian Bank account, it will be taxable in India even for a Non-Resident.

Accordingly, identifying whether a bank account is Indian or foreign becomes extremely important while preparing and filing the Income-tax Return.

Foreign Asset Reporting in Income Tax Return

It is important to note that Foreign Asset Reporting in Income Tax return is mandatorily applicable only to all resident and Ordinarily residents. Foreign Asset Reporting is not applicable to Non-residents and Resident but not ordinarily resident.

Conclusion

Residential status forms the foundation of income-taxability under Indian tax laws. Before determining taxability, disclosure requirements, or DTAA applicability, it is essential to correctly determine the residential status.

In practice, residential status provisions become highly relevant for:

• NRIs,
• expatriates,
• returning Indians,
• overseas employees,
• global entrepreneurs,
• and individuals having foreign assets or overseas income.

A proper understanding of these provisions ensures accurate tax compliance while avoiding unnecessary disputes, notices, and litigation.

For professional assistance and personalized guidance, you may consult qualified tax professionals such as Taxunplug for your tax and regulatory compliance needs.

The information provided in above blog is for general informational only and should not be considered as legal or tax advice. Request you to please follow latest updated in reference to above details. We advise to consult with a qualified tax professional such as “Taxunplug” for all your tax needs.

The post RESIDENTIAL STATUS UNDER INCOME-TAX LAW – COMPLETE GUIDE TO ROR, RNOR & NR STATUS appeared first on Tax Unplug.

Background of the Case

The assessee had received a settlement amount of Rs.6.58 crore pursuant to a Settlement Agreement entered into with another party in connection with long pending disputes relating to property and business rights. The disputes had arisen due to conflicting claims and litigations concerning development and ownership rights under earlier agreements and memorandums of understanding. The Assessing Officer treated the compensation received by the assessee as taxable income and made additions on the ground that the amount represented consideration for relinquishment of rights and therefore was taxable either as business income or capital gains. The CIT(A) further made protective additions in respect of certain amounts allegedly relatable to other parties involved in the settlement arrangement. Aggrieved by the additions, the assessee preferred appeal before the ITAT Kolkata.

Arguments by the Appellant (Assessee)

The assessee argued that the compensation amount was received only towards settlement of disputes and relinquishment of its “right to sue”, which is not regarded as a capital asset under Section 2(14) of the Income Tax Act read with Section 6 of the Transfer of Property Act. It was submitted that the assessee never acquired any enforceable ownership rights in the disputed property and the settlement merely compensated the assessee for withdrawing claims and pending litigations. Reliance was placed upon several judicial precedents including the decisions of the Hon’ble Supreme Court in Oberoi Hotels Pvt. Ltd., and various Tribunal decisions including Bhojison Infrastructure Pvt. Ltd., Chheda Housing Development Corporation and Ganeshsagar Infrastructure Pvt. Ltd. to contend that compensation received for surrendering a mere right to sue constitutes a capital receipt not chargeable to tax.

It was further argued that the protective addition made by the CIT(A) was wholly without jurisdiction since the amounts in question belonged to other corporate entities and had already been accounted for in their respective books.

Respondent’s Response (Revenue)

The Revenue contended that the compensation received by the assessee was directly connected with relinquishment and extinguishment of rights arising from agreements relating to the property and therefore constituted taxable receipts. According to the Department, the amount received by the assessee was liable to be taxed either as business income or as capital gains since the assessee had effectively surrendered valuable commercial rights under the settlement arrangement. The Revenue further defended the additions made during assessment proceedings and supported the view that the compensation had nexus with transfer or extinguishment of rights capable of taxation under the Income Tax Act.

The Department also attempted to justify the protective addition made by the CIT(A) in relation to the amounts attributable to other entities connected with the settlement.

Court Findings and Decision

The ITAT Kolkata held that the settlement amount received by the assessee was a capital receipt not liable to tax. The Tribunal observed that the compensation was received only for relinquishment of the assessee’s “right to sue” arising out of prolonged disputes and litigations and such right does not qualify as a “capital asset” within the meaning of Section 2(14) of the Income Tax Act. Relying extensively upon the judgments, the Tribunal reiterated that compensation received for surrendering a mere right to sue is outside the ambit of capital gains taxation. The Tribunal further noted that the assessee had not transferred any enforceable ownership rights in the property and the receipt was purely compensatory in nature arising from settlement of disputes.

In respect of the protective addition of Rs.11.42 crore, the Tribunal held that the amount admittedly belonged to other corporate entities and had neither been received nor accrued to the assessee. It was also observed that the CIT(A) exceeded jurisdiction in making protective additions without any substantive assessment in the hands of those entities.

Accordingly, the Tribunal deleted the additions and allowed the appeal of the assessee.

To download official order, Click Here

“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”

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Background of the Case

The assessee challenged the validity of reassessment proceedings initiated under Section 148 of the Income Tax Act for AY 2015-16 on the ground that the notice issued on 01.04.2022 was barred by limitation under the amended provisions of Section 149. The reassessment proceedings were initiated after introduction of the new reassessment regime by the Finance Act, 2021. The Revenue contended that while computing limitation, the period allowed to the assessee for responding to notice issued under Section 148A(b) should be excluded in terms of the proviso to Section 149(1), thereby extending the limitation period. The core issue before the ITAT Chennai was whether the reassessment notice dated 01.04.2022 for AY 2015-16 survived the limitation prescribed under the old and new reassessment regime.

Arguments by the Appellant (Assessee)

The assessee argued that under the old reassessment regime, the maximum period available for issuance of notice under Section 148 for AY 2015-16 expired on 31.03.2022, being six years from the end of the relevant assessment year. It was submitted that the first proviso to Section 149(1), inserted by the Finance Act, 2021, specifically protects completed and time-barred assessments from being reopened under the extended ten-year limitation introduced under the new regime. Reliance was placed on the judgment of the Hon’ble Supreme Court in Rajiv Bansal and various High Court decisions to contend that reassessment notices issued after expiry of the old limitation period are invalid. The assessee further argued that exclusion provisions relating to proceedings under Section 148A cannot revive a notice which itself fails the primary limitation test under the first proviso to Section 149(1).

Respondent’s Response (Revenue)

The Revenue argued that while computing limitation under Section 149, the period granted to the assessee for responding to notice under Section 148A(b), i.e., from 21.03.2022 to 28.03.2022, should be excluded in view of the proviso to Section 149(1). It was further contended that where the remaining limitation period after such exclusion is less than seven days, the Assessing Officer becomes entitled to an extended period of seven days for issuance of notice. Accordingly, the Department submitted that the Assessing Officer had time till 06.04.2022 to issue notice under Section 148 and therefore the notice dated 01.04.2022 was within the prescribed limitation period. The Revenue accordingly defended the validity of the reassessment proceedings initiated against the assessee.

Court Findings and Decision

The ITAT Chennai held that the reassessment notice issued under Section 148 on 01.04.2022 for AY 2015-16 was barred by limitation and therefore invalid in law. The Tribunal observed that as per the first proviso to Section 149(1), reassessment notices for years prior to AY 2021-22 cannot be issued if such notices had already become time barred under the old six-year limitation regime. Relying upon the judgment of the Hon’ble Supreme Court in Rajiv Bansal, the Tribunal held that the legislative intent behind the proviso was to prevent retrospective extension of limitation under the amended reassessment provisions. The Tribunal further rejected the Department’s contention regarding exclusion of time under Section 148A proceedings, holding that such exclusion provisions apply only when the notice first survives the limitation test under Section 149(1).

Since the limitation for AY 2015-16 expired on 31.03.2022, the notice dated 01.04.2022 was held to be invalid. Accordingly, the reassessment proceedings were quashed and the additions made therein were deleted.

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