Assessee Held Non-Resident; Foreign Bank Deposits & Credit Card Spend Not Taxable in India

A search under Section 132 was conducted in the case of the assessee, an individual, on 20.01.2021. Pursuant thereto, notices under Section 153A were issued for AYs 2015-16 to 2018-19. In response, the assessee filed returns declaring the same income as originally returned, consistently claiming Non-Resident status.

The Assessing Officer, however, treated the assessee as a Resident and completed assessments under Section 153A by bringing his global income to tax. Additions were made on account of deposits in foreign bank accounts, foreign credit card expenses, and personal gifts.

On appeal, the CIT(A) held that the assessee was a Non-Resident during all the relevant years under Explanation 1(a) to Section 6(1) and deleted additions relating to foreign bank deposits and credit card expenses, while sustaining limited additions towards personal gifts for AYs 2016-17 and 2018-19.

Issue Raised: Whether the assessee was a Resident or Non-Resident under Section 6 of the Income-tax Act, 1961, and therefore, whether foreign bank deposits and foreign credit card expenses could be taxed in India.

Tribunal’s Decision: The ITAT Chennai upheld the order of the CIT(A) and dismissed all four appeals filed by the Revenue. The Tribunal held that the assessee had left India for the purpose of employment with Jesus Calls International, USA, and continued such employment during the relevant assessment years. Based on documentary evidence such as the employment offer letter, Form 990 filings in the USA, US income tax returns, and employment visa, the assessee was rightly treated as a Non-Resident under Explanation 1(a) to Section 6(1). The Tribunal held that the statute does not distinguish employment based on designation and that the assessee satisfied the conditions for Non-Resident status, with stay in India being less than 182 days in each year.

Therefore, additions relating to foreign bank deposits and foreign credit card expenses were rightly deleted. The Tribunal also dismissed the cross objections filed by the assessee, holding that for AYs 2016–17 and 2018-19 there was incriminating material justifying the limited additions towards personal gifts sustained by the CIT(A).

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