Section 6

Section 6 — the law in short

What the courts have decided on section 6, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Kenneth Malcolm Holland v DCIT (International Taxation), Gurgaon High CourtHelps departmentNo later treatment found
  My client is a US national who came to India to teach and wants the two-year professors' exemption in the treaty. He has no Tax Residency Certificate from the US and the department will not give him an Indian one. Can he still claim the exemption?
  No. The Punjab and Haryana High Court held that a non-resident claiming relief under a treaty is hit by s.90(4) unless he obtains a certificate of residence from the government of the country of which he claims to be resident, and that a passport, an appointment letter and Form 16 are no substitute. The department's order, recited at para 4 and left undisturbed, had also said that under Rule 21AB(3) it is a person resident in India who may apply to the Assessing Officer for a certificate of residence, so that a non-resident cannot obtain an Indian TRC; the Court dismissed the writ on s.90(4) alone and made no finding of its own on that rule.
• Sumana Bandyopadhyay v DDIT High CourtHelps taxpayer
  The AO taxed my foreign salary because it landed in my Indian NRE account. Can he do that if I am a non-resident?
  No. Salary that became due and accrued to a non-resident for services rendered outside India does not become chargeable on a receipt basis merely because the foreign employer paid it into an Indian NRE account. Income accrues where the services are rendered, not where the money is banked, and the High Court allowed the appeal and answered the question in the assessee's favour.
• CIT v Suresh Nanda High CourtHelps taxpayerNo later treatment found
  My passport was seized and I could not leave India. Do those days count towards the 182 days?
  No, where the stay was involuntary and the seizure itself was found to be wrongful. The Delhi High Court upheld the Tribunal and held that the period for which a citizen is in India against his will, brought about by executive action later found to be without authority of law, must be excluded in calculating the period under s.6(1)(a). The test it laid down is one of animus: there must be something to show that the individual intended, or had the animus, of residing in India for the minimum prescribed duration. The Court added that this is not a thumb rule - each case has to be examined on its own facts.
• CIT v. N. Sundarraman (Madras High Court) — deposits funded by convertible foreign exchange routed through NRE accounts later redesignated as NRNR keep the s.115E rate, and a wrong 'resident' description in the return does not alter the assessee's real status High CourtHelps taxpayer
  My client remitted his overseas salary into NRE accounts, later had them redesignated as NRNR deposits, and described himself as 'Resident' in his return by mistake while claiming section 115H. The assessing officer says he is a resident, that no valid section 115H declaration was filed with the return, and has denied the twenty per cent rate. Is there anything in this?
  Yes, on two grounds the Madras High Court accepted. First, on the facts found by the Tribunal the redesignation of the NRE accounts into NRNR accounts had been made only out of the convertible foreign exchange lying to the assessee's credit in accounts opened with the inflow of the original foreign exchange transferred to India as approved by the Reserve Bank of India, so the deposits remained foreign exchange assets. Second, the Court held that the assessee's real status cannot be denied merely because he made a wrong declaration when he satisfied all the conditions, and that being 'not ordinarily resident' he was not a 'resident' and so fell within the definition of non-resident Indian in section 115C(e) and was entitled to section 115E in its own right, with no obligation to file any declaration under section 115H.
• DIT v Manoj Kumar Reddy Nare High CourtHelps taxpayer
  I work abroad on deputation and came back to India for a few weeks. Do those days count against me under the 60-day test?
  No, on these facts. The Karnataka High Court declined to interfere with a concurrent finding that, excluding the time during which the assessee was visiting India, he was not in India for the requisite 60 days, so he was a non-resident and could not be taxed as a resident under s.6(1)(c). The Revenue's appeal was dismissed for want of a substantial question of law.
• Atanu Banerjee v DDIT (Investigation) ITATCuts both waysNo later treatment found
  I bought a house abroad years ago while I was a non-resident. Now that I have been resident in India, can it be taxed under the Black Money Act?
  The argument that acquisition while non-resident puts the asset outside the Act did not succeed before the Delhi Bench. The Tribunal proceeded on the basis that the assessee, being resident in India from assessment year 2016-17, was required to declare the foreign asset and explain its source, and that s.72(c) deems a pre-commencement asset in respect of which no declaration was made under Chapter VI to have been acquired in the year the s.10 notice was issued. It did not decide the appeal: it restored the matter to the Commissioner (Appeals) for fresh adjudication so that the assessee could produce evidence of the source of the investment and of his residential status.
• DCIT v M. Mahadevan ITATHelps department
  The Assessing Officer has computed my days in India from immigration records instead of the stamps in my passport. Can he go behind the passport like that?
  Yes, on this decision. The Chennai Bench of the Tribunal upheld the officer's reliance on data of the Foreigners Regional Registration Office in preference to passport stamps, holding that the agency is mandated to keep data of entry and exit on a real-time basis and that, being a Central Government agency, its data cannot be suspected or doubted. It also held that the burden lies on the assessee to prove by demonstrative evidence that his case falls outside section 6, and that having overseas business and travelling does not by itself put him outside Indian tax. A tax residency certificate from the UAE, obtained in 2021 for earlier years, did not displace the domestic computation.
• Timothy John Brinkman v DDIT (Inv.) ITATHelps taxpayerNo later treatment found
  I am a foreign national who became resident in India and missed Schedule FA in my first return, but I put it right in a revised return. Is the Rs 10 lakh penalty still due?
  Not on these facts. The Mumbai Bench deleted a penalty under s.43 where a British citizen, resident in India for a fixed five-year assignment, omitted his United Kingdom assets from Schedule FA in the original return and disclosed them in a revised return filed within the time allowed by s.139(5). The Tribunal held that the Revenue had not established that he had ever been an Indian citizen or that the foreign investments came out of undisclosed Indian income, and that the Act is aimed at undisclosed foreign income and assets, not at a bona fide omission.
• Saket Kanoi v DCIT ITATHelps taxpayer
  The officer says my client pays no tax in Dubai, so the India-UAE agreement cannot apply to him. Is that right?
  No. The Delhi Tribunal held that a resident of the UAE is entitled to the benefit of the India-UAE agreement even though the UAE levies no tax on him. Being 'liable to tax' in a Contracting State does not require that tax was actually paid; it is enough that the State has the right to tax, whether or not the right is exercised. The Assessing Officer's reasoning that there was no double taxation, so no relief was due, was rejected.
• Ashok Kumar Pandey v ACIT ITATHelps department
  I am resident in both India and the US. Which country wins under the treaty tie-breaker?
  India, on these facts. A permanent home being available in both countries, the Tribunal went to the centre of vital interests and held that personal and economic relations taken together pointed to India — spouse and children here, and active involvement in an Indian company as against passive US holdings. The US-source income was accordingly taxable in India.
• ACIT v Nishant Kanodia ITATHelps taxpayer
  I left India to run my own business abroad, not for a job. Do I get the 182-day test?
  Yes. Explanation 1(a) to s.6(1) is not confined to salaried employment — leaving India to carry on business or a profession abroad falls within it. With a stay of 176 days in India, below 182, the assessee was a non-resident and the Revenue's appeal was dismissed.
• Petition No. 7 of 1995, In re ITATHelps departmentNo later treatment found
  I flew out of India in October. Does the day I left count as a day of stay in India for the 182-day test, and does a part-day count?
  Yes, on this ruling - and the day of arrival counts too. The Authority for Advance Rulings, working out whether the applicant was resident under section 6(1)(a), held that for that purpose the days on which he entered India as well as the days on which he left India have to be taken into account. An argument that the stay should instead be computed in hours was put aside as impractical, and in any event no data had been furnished from which an hours-based figure could be worked out. Counting both days made the applicant resident, and the application was rejected as not maintainable.
• Vance Robert Heffern v CIT Advance RulingHelps taxpayerSuperseded by amendment
  Our US employer has seconded a telecom manager to India and is bearing his Indian tax. He has no formal technical qualification and cannot produce his certificates. Can he still be a technician for the s.10(5B) exemption?
  Yes, on the law as it then stood. The Authority ruled that Vance Robert Heffern, seconded by ALLTEL Information Services International Holding Inc. to its group company in India as a telecom manager, qualified as a technician under s.10(5B), and that the taxes borne by his employer were exempt for forty-eight months from his arrival in India. Neither his inability to produce educational certificates nor the absence of technical education was a disqualification, because specialised knowledge may be obtained either by education or by special experience; his fourteen years in the ALLTEL group and the work he was doing in India fell within the notified field of information technology. Section 10(5B) has since been deleted from the Act.
• In re Cyril Eugene Pereira Advance RulingHelps departmentSuperseded by amendment
  I live and work in the UAE, where individuals pay no income tax. Can I claim the India-UAE treaty on my Indian dividends, interest and capital gains?
  No, on the Authority's 1999 view. It ruled that the applicant, permanently resident in Abu Dhabi, could not be treated as a resident of the UAE under article 4 of the India-UAE agreement, because article 4(1) requires liability to tax in that State and the UAE imposes no income tax on individuals. It followed that he could not claim the reduced rates on dividends and interest under articles 10(2)(b) and 11(2)(b), and that the capital gains protection in article 13(3) was unavailable, so the gains remained taxable in India under domestic law. The reasoning has not survived; the ruling bound only the applicant.
• Statutory position — section 10(4D): what a specified fund in an IFSC is exempt on, and how much of it survives the non-resident test CBDT Circulars & InstructionsCuts both ways
  Our Category III AIF is registered in GIFT City and some of its unit holders are Indian residents. What exactly is exempt under section 10(4D)?
  Section 10(4D) exempts income of a specified fund of four described kinds — income from the transfer of a capital asset referred to in section 47(viiab) on a recognised stock exchange located in an IFSC where the consideration is paid or payable in convertible foreign exchange; income from the transfer of securities other than shares in a company resident in India; income from securities issued by a non-resident, not being a permanent establishment of a non-resident in India, where that income does not otherwise accrue or arise in India; and income from a securitisation trust chargeable under the head 'Profits and gains of business or profession'. The exemption runs only 'to the extent such income accrued or arisen to, or is received, is attributable to units held by non-resident (not being the permanent establishment of a non-resident in India) or is attributable to the investment division of offshore banking unit', computed in the prescribed manner.
• Statutory position — section 9A: an offshore fund managed from India has no business connection here, but only if every condition in section 9A(3) is met CBDT Circulars & InstructionsCuts both ways
  My client is an offshore fund that has moved its portfolio manager to Mumbai. The Assessing Officer says the manager is a business connection and the whole fund is now taxable in India. Is there a safe harbour?
  Yes, but it is a conditional one. Section 9A(1) provides that, notwithstanding section 9(1), the fund management activity carried out through an eligible fund manager acting on behalf of an eligible investment fund shall not constitute a business connection in India of that fund, and section 9A(2) provides that, notwithstanding section 6, the fund shall not be said to be resident in India merely because the manager undertaking fund management activities on its behalf is situated in India. The protection is available only where the fund answers the definition in section 9A(3), which carries thirteen lettered conditions, (a) to (m), every one of which has to be satisfied.
• Statutory position — s.115C: the Chapter XII-A definitions, and the convertible-foreign-exchange condition that the whole chapter turns on CBDT Circulars & InstructionsCuts both ways
  My client is a person of Indian origin living in Dubai. He bought shares in an Indian listed company out of rupees lying in his NRO account. The assessing officer says Chapter XII-A does not apply to him at all and has taxed the gain at the ordinary rate. Is he right?
  On these facts, yes — and the reason is the funding, not the status. Section 115C(b) defines a "foreign exchange asset" as any specified asset "which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange", so an asset bought out of rupee funds is not a foreign exchange asset, and nothing in Chapter XII-A — not s.115E, not s.115F, not s.115H — can reach it. Being a non-resident Indian within s.115C(e) is a necessary condition but never a sufficient one.
• CBDT Circular 2/2021 CBDT Circulars & InstructionsHelps departmentNo later treatment found
  I was stranded in India by the COVID flight ban in FY 2020-21. Am I resident now?
  There is no blanket relief, but the Board did not refuse one either. On the representations for a relaxation of the day count for previous year 2020-21, the Board concluded that on the Act read with the tax treaties there does not appear to be a possibility of double taxation for that year, and it reserved the relaxation question: individuals who are in fact being taxed twice were asked to furnish the information in Form-NR by 31 March 2021, and the Board said that after understanding those situations it would examine whether any relaxation is required and, if it is, whether a general relaxation can be given for a class of individuals or a specific one in individual cases. Along the way the circular sets out the day-count thresholds for the year, and makes the point that an individual who became resident because of exceptional circumstances would most likely be not ordinarily resident.
• CBDT Circular 13/2017 on seafarer salary in an NRE account CBDT Circulars & InstructionsHelps taxpayer
  My client is a non-resident seafarer and his foreign employer credits his salary straight into his Indian NRE account. Is that receipt in India?
  No. The Board clarified that salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship is not included in total income merely because it has been credited to an NRE account maintained with an Indian bank. Under s.5(2)(a) only income received or deemed to be received in India is taxable for a non-resident, and the Board treats the credit into the NRE account as not making the salary income received in India.
• Statutory position — place of effective management under section 6(3)(ii) from AY 2017-18, and the CBDT Circular 6/2017 guidelines CBDT Circulars & InstructionsCuts both ways
  A foreign company in my client's group is run largely from India. From when can it be treated as resident here, and what test does the department actually apply?
  From assessment year 2017-18, a company is resident in India if it is an Indian company or if its place of effective management in that year is in India — 'the place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance, made'. CBDT Circular No. 6 of 2017 dated 24 January 2017 lays down the guidelines: a company 'engaged in active business outside India' is presumed to have its POEM outside India if the majority of its board meetings are held outside India, and only a company failing that test goes through the two-stage enquiry of identifying who actually makes the key management and commercial decisions and then where those decisions are in fact made.
• Statutory position — s.6(2) and s.6(6)(b): an HUF is resident unless control and management is situated WHOLLY outside India, and the not-ordinarily-resident test looks to the manager CBDT Circulars & InstructionsCuts both ways
  The karta of my client's HUF has lived in Dubai for years and all the family's decisions are taken there, but one property is managed from India by his brother. The Assessing Officer says the HUF is resident in India. On what test?
  On the test in s.6(2): a Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case EXCEPT where during that year the control and management of its affairs is situated wholly outside India. The word that decides the case is "wholly". Any part of the control and management of the family's affairs being situated in India during the previous year makes the family resident. If the family is resident, s.6(6)(b) then asks whether it is "not ordinarily resident": it is, if its MANAGER has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for 729 days or less.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.