Pranav B Prem

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has held that an individual who leaves India to take up employment in a foreign country is entitled to be treated as a Non-Resident Indian (NRI), even if he occupies a senior or leadership position in the foreign organization. The Bench comprising Aby T. Varkey (Judicial Member) and Jagadish (Accountant Member) upheld the view that the assessee qualified as a Non-Resident for four consecutive assessment years and that foreign-sourced income cannot be brought to tax in India. The Tribunal accordingly dismissed all four appeals filed by the Income Tax Department, which sought to tax deposits in overseas bank accounts and foreign credit card expenses by treating the assessee as a Resident.

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The case emanated from a search operation under Section 132 on January 20, 2021, followed by notices issued under Section 153A. Although the assessee filed returns as a Non-Resident for the relevant years, the Assessing Officer treated him as a Resident, citing prolonged stay in India and alleged managerial control over a U.S.-based entity. Based on this classification, the Assessing Officer made substantial additions to income, including deposits in foreign bank accounts, foreign credit card expenses and unexplained personal gifts.

In appeal, the CIT(A) deleted additions relating to overseas deposits and credit card expenditure after accepting the assessee's NRI status, while upholding minor additions relating to gifts. Before the Tribunal, the Revenue argued that Explanation 1(a) to Section 6 was not applicable because the assessee was not merely an employee but held a senior leadership role in the foreign organization, thereby exercising dominant control. The Department asserted that such a position should disqualify him from being considered as employed abroad for the purpose of claiming non-resident status.

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The Tribunal rejected this contention after examining documentary evidence demonstrating genuine foreign employment. The record included the employment offer letter issued in 2011 appointing the assessee as President of Jesus Calls International (USA) with defined remuneration, the Form 990 filings before U.S. tax authorities declaring annual compensation, U.S. income tax returns reflecting wages received from the foreign organization, the L1 employment visa issued in the name of the foreign employer, and travel records confirming that the assessee stayed in India for less than 182 days in each of the relevant years. The Tribunal observed that the expression “employment” does not distinguish between junior and senior roles and emphasized that what is relevant is the existence of a contractual relationship of service.

Holding that the statutory test of residence under Section 6 is quantitative and based solely on the number of days spent in India, the Tribunal concluded that the assessee was correctly treated as a Non-Resident in all four assessment years. Consequently, the deletions made by the CIT(A) in respect of foreign bank deposits and credit card expenses, which pertained to foreign-sourced income, were confirmed and all four departmental appeals were dismissed.

The assessee had also filed cross-objections relating to variations in personal gifts amounting to ₹3,31,350 for AY 2016-17 and ₹90,012 for AY 2018-19. The Tribunal held that these additions were based on seized material and were therefore permissible under Section 153A, particularly in view of the Supreme Court ruling in PCIT v. Abhisar Buildwell (2023). Since all other additions stood deleted, the cross-objections for the remaining years were rendered infructuous.

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The ITAT dismissed all four appeals filed by the Department and upheld the CIT(A)’s determination that the assessee was a Non-Resident for each of the four assessment years. The Tribunal also dismissed the assessee’s cross-objections after sustaining only the minor additions relating to personal gifts, thereby affirming that foreign-sourced income remained non-taxable in India.

Appearance

Counsel For Petitioner: Nathala Ravi Babu, CIT

Counsel For Respondent: G. Baskar, Advocate & P.M. Kathir, Advocate

Cause Title: ACIT Versus Paul Dhinakaran

Case No: ITA Nos.1562, 1563, 1591 & 1592/Chny/2025

Coram: Aby T. Varkey (Judicial Member), Jagadish (Accountant Member)