Clarification in respect of residency under section 6 of the Income-tax Act, 1961

By SRELJ Bureau

Section 6 of the Income-tax Act, 1961 (the Act) contains provisions relating to residency of a person. The status of an individual as to whether he is resident in India or a non-resident or not ordinarily resident, is dependent, inter-alia, on the period for which the person is in India during a year.

Various representations have been received stating that there are number of individuals who had come on a visit to India during the previous year 2019-20 for a particular durationand intended to leave India before the end of the previous year for maintaining their status as non-resident or not ordinary resident in India. However due to declaration of the lockdown and suspension of international flights owing to outbreak of Novel Corona Virus (COVID-19), they are required to prolong their stay in India. Concerns have been expressed that they may involuntarily end up becoming Indian residents without any intention to do so.

In order to avoid genuine hardship in such cases, the CBDT has decided vide circular no 11 dated May 8, 2020, that for the purposes of determining the residential status under section 6 of the Act during the previous year 2019-20 in respect of an individual who has come to India on a visit before 22nd March, 2020 and:

  • has been unable to leave India on or before 31st March 2020, his period of stay in India from 22nd March, 2020 to 31st March, 2020 shall not be taken into account; or
  • has been quarantined in India on account of Novel Corona Virus (Covid-19) on or after 1st March, 2020 and has departed on an evacuation flight on or before 31st March, 2020 or has been unable to leave India on or before 31st March, 2020, his period of stay from the beginning of his quarantine to his date of departure or 31st March, 2020, as the case may be, shall not be taken into account; or
  • has departed on an evacuation flight on or before 31st March, 2020, his period of stay in India from 22nd March, 2020 to his date of departure shall not be taken into account.

Further, as the lockdown continues during the Financial Year 2020-21 and it is not yet clear as to when international flight operations would resume, a circular excluding the period of stay of these individuals up to the date of normalisation of international flight operations, for determination of the residential status for the previous year 2020-21 shall be issued after the said normalisation.

80IB is applicable on entire project: ITAT Mumbai

By SRELJ Bureau

Clause (d) inserted in section 801B[10) with effect from April 1, 2005, is prospective and not retrospective and hence could not be applied for the period prior to April 1, 2005. Since deduction under section 801B[1Oj were on the profits derived from the housing projects approved by the local authority as a whole. ITAT held that once the project is approved by the local authorities, then deduction has to be allowed on the whole of the project .

INCOME TAX APPELLATE TRIBUNAL , MUMBAI ‘H ‘ BENCH

ITA No.7050/Mum/2010 – (Asst Year 2007-08)

The Income Tax Officer Vs Harsh Construction

Date of pronouncement 12th, March, 2012

ORDER

PER VIJAY PAL RAO, JM

This appeal by the revenue is directed against the order dated 22.7.2010 of the CIT(A) for the AY 2007-08.

2 We may point out that the assessment year has been wrongly mentioned in the Form no.36 as 2006-07 whereas the impugned order which is the subject matter of the appeal is for the AY 2007-08.

3 The revenue has raised the following grounds in this appeal:

1 “On the facts and in the circumstances of the case, the Id. CIT(A) erred in law in holding that the assessee is entitled to deduction u/s 801B(10) of Rs. 1,90,03,948I- by placing reliance upon the decision of ITAT Special Bench Punê (2009) 30 SOT 155, in the case of Mt Brahma Associates, which has not been accepted by the Revenue and Appeal has been preferred before the Hon’ble Bombay High Court on the question of law involved.”.

2 “On the facts and in the circumstances of the case and law, the Learned CIT(A) has erred in holding that the assessee is entitled to deduction uls.801B(10) of Rs. 1,90,03,948/- by placing reliance upon various decisions ignoring the facts that the legislative intention of providing incentive u/s 801B(10) is only on account of affordable residential dwelling units and that no commercial built up area was allowed prior to 01/04/2005

3 “On the facts and circumstances of the case the Id. CIT (A) erred in law in allowing the said deduction, for A.Y. 2007-08, even though the commercial built up area exceeded 2000 sq.ft., while the maximum permissible commercial built-up area is only 2000 sq.ft., which is clearly applicable in terms of clause (d) of section 8OlB(10) and effective from 01I04I2005”.

4 We have heard the ld DR as well as the ld AR of the assessee and considered the relevant material on record. At the outset, we note that the CIT(A) has decided the issue in favour of the assessee by following the order for the AY 2006-07 and particularly following the decision of the Tribunal in the case of JCIT v. Brahma Associates, which was upheld by the Hon’ble jurisdictional High Court reported in 330 ITR 289.

4.1 Since the issue is regarding the disallowance of the claim of the assessee u/s 80IB(10) on the ground of commercial establishment in the project, which is covered in favour of the assessee by the decision of the Hon’ble jurisdictional High Court (supra) as the pre-amended provisions of sec. 80IB(10) are applicable for the AY under consideration. The Tribunal in assessee’s own case for the AY 2006-07 has decided the issue in para 9 as under:

“9. We have considered the rival submissions carefully. We find that as far as the first objection raised by the Revenue regarding excess commercial area is concerned, the Hon’ble Bombay High Court in the case of CIT vs. Brahma Associates [supra] while reversing the decision of the Special Bench of the Tribunal in the case of Brahma Associates vs. JCIT 315 1TR (AT) 268 (PN) held as under:

‘Held that clause (d) inserted in section 801B[10) with effect from April 1, 2005, is prospective and not retrospective and hence could not be applied for the period prior to April 1, 2005. Since deduction under section 801B[1Oj were on the profits derived from the housing projects approved by the local authority as a whole,: the Tribunal was not justified in restricting the section 801B[10) deduction only to a part of the project. However, in the present case, since the assessee had accepted the decision of the Tribunal in allowing section 8016[10] deduction to a part of the project, the findings of the Tribunal in that behalf could not be disturbed.”

Thus, from the above, it is clear that once the project is approved by the local authorities, then deduction has to be allowed on the whole of the project and, therefore, following this decision, we reject this objection of the Revenue.”

5 Accordingly, respectfully following the order of the Tribunal as well as the decision of the Hon’ble jurisdictional High Court, in the case of Brahma Associates (supra), we decide this issue against the revenue and in favour of the assessee.

6 In the result, the appeal filed by the revenue is dismissed.

Order pronounced on this 12th, day of Mar 2012