ITAT denies residency relaxation for business stay on tourist VISA

In a recent interesting matter of the Deputy Commissioner of Income Tax vs M. Mahadevan, the Income Tax Appellate Tribunal has denied relaxation of period stay given in the Income Tax Act to taxpayer who travelled for business on tourist VISA. Accordingly during the assessments, Global Income of the taxpayer was taxed in India.

While making the impugned determination of assessee’s taxable income in India, the Ld. AO has relied upon documents seized during the search proceedings, statements recorded as well as information gathered from external agencies including foreigner regional registration office (FRRO). The latter being an agencies under the Government of India empowered to keep a record of movement of foreigners and Indians across specified borders check points available at Airports, Land as well as Sea routes.

The main controversy was that the assessee was travelling on social visits and tourist Visas. It was the case of the Revenue that the assessee, as evident from Visas granted to him, was not travelling for business purposes and therefore cannot claim that the visits were for business purposes.

ITAT observed that “It is an accepted international practice that every country restricts its Visas for a specific purposes. Whenever a Visa is granted by a foreign jurisdiction for employment or business, clear stipulations are made. The principal idea being to ensure that the income earned in foreign jurisdiction gets locally taxed or governed by double taxation avoidance agreements, if any. No country grants Visa for employment or business purposes liberally. The mere argument that because Revenue has accepted that assessee was having overseas business and travelling would not, ipso facto, mean that the assessee would not be exigible to taxation in India.”

The argument taken by the assessee that because he is a resident of UAE for which a certificate of tax residency was also produced, and therefore he is beyond the purview of section-6 of the Act was also not accepted by the ITAT.