MODULE 1- INTRODUCTION Flashcards
CIT v Sodra Devi
There existed a partnership firm with Ms. Sodra Devi and her 3 minor sons as partners. It was questioned as to whether the income of the three minor sons was to be included in her income for the purposes of tax.
Section 16(3) of the Act provides :
“In computing the total income of any individual for the purpose of assessment, there shall be included – (a) so much of the income of a wife or minor child of such individual as arises directly or indirectly :
(ii) from the admission of the minor to the benefits of the partnership in a firm of which such individual is a partner”
The Apex Court held that individual only meant males on perusal of the statements and objects of the act as decided by the judiciary, however, it was not possible for the courts to fill the gaps in a fiscal statute.
Tata Consultancy Services v. State of Andhra Pradesh
The Tata Consultancy Services v. State of Andhra Pradesh case was a Supreme Court of India case that addressed whether software is considered “goods” under the Andhra Pradesh General Sales Tax Act and can be taxed. The court ruled that software is considered a good and can be taxed because it meets the criteria of being bought, sold, transferred, and stored.
NMDC v State of MP
‘Slime’ or ‘slimes’ is a term well understood in mining industry and trade. It is different from ‘fines’ and ‘concentrates’ ____ the term as used in the Second Schedule, Entry23 of the Mines and Minerals Act.
‘Slime’ or ‘slimes’ cannot be included in ‘fines’ or ‘concentrates’ for the purpose of charging royalty under Section 9(1) read with Entry-23 of the Second Schedule of the Mines and Minerals Act.
KT Moopil Nair v State of Kerala
The liability under the Act would thus amount to Rs. 50,000 a year, as already demanded from the petitioner on the basis of the provisional assessment under the provisions of s. 5(A). The petitioner is making an income of Rs. 3,100 per year out of the forests. Besides, the liability of Rs. 50,000 as aforesaid, the petitioner has to pay a levy of Rs. 4,000 on the surveyed portions of the said forest. Hence, his liability for taxation in respect of his forest land amounts to Rs. 54,000 whereas his annual income for the time being is only Rs. 3,100 without making any deductions for expenses of management. Unless the petitioner is very enamoured of the property and of the right to hold it may be assumed that he will not be in a position to pay the deficit of about Rs. 51,000 every year in respect of the forests in his possession.
The legal consequences of his making a default in the payment of the aforesaid sum of money will be that the money will be realised by the coercive processes of law. One can, easily imagine that the property may be sold at auction and may not fetch even the amount for the realisation of which it may be proposed to be sold at public auction. In the absence of a bidder forthcoming to bid for the offset amount, the State ordinarily becomes the auction purchaser for the realisation of the outstanding taxes. It is clear, therefore, that apart from being discriminatory and imposing unreasonable restrictions on holding property, the Act is clearly confiscatory in character and effect. It is not even necessary to tear the veil, as was suggested in the course of the argument, to arrive at the conclusion that the Act has that unconstitutional effect. For these reasons, as also for the reasons for which the provisions of ss. 4 and 7 have been declared to be unconstitutional, in view of the provisions of Art. 14 of the Constitution, all these operative sections of the Act, namely 4, 5A and 7, must be held to offend Art. 19(1)(f) of the Constitution also.
Govind Saran v Commissioner of Sales Tax
In other words, the Court held that there are 4 components that each tax must meet:
1) The event at which tax is to be levied (sale to the end customer, sale from manufacturer to distributor, etc);
2) The taxable person i.e. who is liable to pay tax (manufacturer, distributor, end customer);
3) The rate of tax imposed (2%, 18%, etc);
4) The measure or value to which tax rate will be applied (15% of sale price (Rs. 1000)
The ordinary rule under the State Act was that the sale made by every dealer in a series of sales by successive dealers is liable to tax. For example, a sale from a manufacturer to distributor may be taxed, the sale from the distributor to the retailer may be taxed again, and the sale by the retailer to the end customer may be taxed again. This is multi-point taxation.
However, the second condition under Section 15 expressly prohibits multi-point taxation. It compels the State Act to levy tax at one point only in a series of sales. Therefore, the State Act must provide the single point at which the tax is to be imposed. In the words of the Supreme Court:
The single point at which the tax may be imposed must be a definite ascertainable point so that both the dealer and the sales tax authorities may know clearly the point at which the tax is to be levied.
In his order, the Finance Commissioner essentially held that the State Act did not clearly provide for the single point at which tax was to be levied and therefore that the tax had to fail. The correctness of this view fell for the interpretation of the Supreme Court.
In other words, the Supreme Court held that the State Act cannot be silent on such a crucial requirement prescribed under Section 15 of the Central Act. The missing ingredient in the State Act was the event at which tax is to be levied (sale to the end customer, sale from manufacturer to distributor, etc).
This proved to be fatal and the Supreme Court provided relief to the appellant on the basis of the missing ingredient.
5 Heads of Income
a. Income under the head Salary
b. Income under the head House Property
c. Income under the head Profits and Gains from Business and Profession (PGBP)
d. Income under the head Capital Gains
e. Income under the head Other Sources.
Person- 2(31)
Income-tax is charged in respect of the total income of the previous year of every person. Hence, it is important to know the definition of the word person. As per section 2(31), Person includes
1) Individual: An individual is a natural human being; i.e.; male, female, minor or a person of sound or unsound mind.
2) HUF : Hindu Undivided Family (‘HUF’) is treated as a ‘person’ under section 2(31) of the Income-tax Act, 1961 and is considered as separate entity for the purpose of assessment under the Act. Under Hindu Law, an HUF is a family which consists of all persons lineally descended from a common ancestor and
includes their wives and unmarried daughters. An HUF cannot be created under a contract, it is created
automatically in a Hindu Family. Jain and Sikh families even though are not governed by the Hindu Law, but they are treated as HUF under the Act.
Section 2(31)- Definition of Company
Company: Section 2(17) of the Income tax Act, 1961 defines the term company to mean :
i. any Indian company, or
ii. any body corporate incorporated by or under the laws of a country outside India, i.e., a foreign company, or
iii. any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income Tax Act, 1922 or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1st
day of April, 1970, or
iv. any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the CBDT to be a company only for such assessment year or assessment years as may be specified by the order of CBDT.
Firm as Person [2(31)]
It includes a partnership firm whether registered or not and shall include a Limited Liability Partnership as defined in the Limited Liability Partnership Act, 2008.
Association of Person [2(31)]
Two or more persons join in for a common purpose or common action to
produce income, profits or gains. It may consist of individuals, HUF, companies, firms, etc. as members of AOP. The object of the formation of AOP must be to produce income. It is not enough that the persons receive the income jointly.
Body of Individuals-[2(31)]
BOI denote the status of persons who are assessable in like manner and to
the same extent as the beneficiaries individually.
Local Authority [2(31)]
It means a municipal committee, district board, body of port commissioners, or other authority legally entitled to or entrusted by the Government with the control and management of a Municipal or local fund.
Every artificial / juridical person not falling within any of the above categories- [2(31)]
This is a residuary clause. If the assessee does not fall in any of the first six categories, he is assessed under this clause.
Generally, a statutory corporation, deity or charitable institution or an endowment for charitable or
religious purposes falls under artificial juridical person.
Assessee [Section 2(7)]
Normal Assessee: An individual
who is liable to pay taxes for the
income earned during a financial
year is known as a normal assessee.
Representative Assessee: There
may be a case in which a person is
liable to pay taxes for the income
or losses incurred by a third party.
Such a person is known as a
representative assessee.
Deemed Assessee: An individual
might be assigned the responsibility
of paying taxes by the legal
authorities and such individuals are
called deemed assessees.
Assessee in Default: Assessee-in-
default is a person who has failed
to fulfill his statutory obligations as
per the income tax act such as not
paying taxes to the government or
not file his income tax return.
Assessment Year [Section 2(9)]
“Assessment year” means the period of twelve months commencing on 1st April every year.
Therefore, the period beginning on 1st April of one year and ending on 31st March of the next year. Income of previous year of an assessee is taxed during the following assessment year at the rates prescribed by the relevant
Finance Act.
Previous Year [Section 3]
Income tax is payable on the income which is earned during the Previous Year and it is assessed in the immediately succeeding financial year which is called an Assessment Year.
All assesses are required to follow a uniform previous year, i.e., The Financial Year (1st April to 31st March) as
their Previous year. Although assessee may maintain books of accounts on calendar year basis (1st January to
31st December) but his previous year for income tax purposes shall be the Financial year.
Each financial year is both, a previous year as well as an assessment year. It is the previous year for the income
earned during the financial year and assessment year for the income earned during the preceding previous
year. For example financial year 2021-22 is the previous year for the income earned during the financial year
2021-22 and assessment year for the income earned during the previous year 2020-21.
In case of newly set up business or profession or a source of income newly coming into existence, the first
previous year will be the period commencing from the date of setting up of business/profession or as the case
may be, the date on which the source of income newly comes into existence and ending on the immediately
following March, 31.
India [Section 2(25A)]
The term ‘India’ means –
(i) the territory of India as per Article 1 of the Constitution,
(ii) its territorial waters, seabed and subsoil underlying such waters,
(iii) continental shelf,
(iv) exclusive economic zone, or
(v) any other specified maritime zone and the air space above its territory and territorial waters.
Specified maritime zone means the maritime zone as referred to in the Territorial Waters, Continental Shelf,
Exclusive Economic Zone and other Maritime Zones Act, 1976.
Meaning of Tax
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or national), and tax compliance refers to policy actions and individual behaviour aimed at ensuring that taxpayers are paying the right amount of tax at the right time and securing
the correct tax allowances and tax reliefs.
Direct Taxes
1) Direct tax is a tax wherein the levy of tax is made on a person and the responsibility of paying such tax is fixed on that person.
2) The burden of direct tax cannot be transferred to other person.
3) The purpose of direct tax is to redistribute the wealth of a nation.
Indirect Tax
1) In this the levy of tax is made on one person and the responsibility of paying the tax to the Government is fixed on some other person.
2) Indirect tax is levied on goods and services.
3) The burden of indirect tax can be transferred to the end users.
4) Indirect tax increases the price of goods or services.
TAX STRUCTURE: Constitution of India
The roots of every law in India lies in the Constitution, therefore understanding the provisions of Constitution is
foremost to have clear understanding of any law. Let us first understand what it talks about tax:
Article 265: no tax shall be levied or collected except by the Authority of Law.
Article 246: distributes legislative powers including taxation, between the parliament of India and the
State Legislature.
Schedule VII- enumerates powers under three lists
Union List: Powers of Central Government
Legislative List: Powers of State Government
Concurrent List: Both Central and State Government have powers, in case of conflict; law made by
Union Government prevails.
Name the following situations in which the Income of previous year of an assessee is assessed in the previous year itself:
- Income of Non-Resident from Shipping: [Section 172]- A non resident who is carrying on a shipping business and earns income at any port in India, shall be charged to tax before the ship is allowed to leave Indian Port. Hence income is deemed and computed at a presumptive rate of 7.5% of the amount of the fare/ freight charged by the non-resident ship from the Indian port.
- Income of persons leaving India either permanently or for long duration: [Section 174]- When it appears to the Assessing Officer (A.O.) that an individual may leave India and has no intentions of returning back during an assessment year, then the income is charged to tax during the same Assessment year.
- Income of bodies formed for short duration: [Section 174A]- When it appears to the Assessing Officer (A.O.) that any organization is formed for a particular event and is likely to be dissolved during the current assessment year.
- Income of person trying to transfer his assets with a view to avoid tax: [Section 175]- When it appears to the Assessing Officer (A.O.) that during the current assessment year any person is likely to charge, sell, transfer, dispose of or otherwise part with any of his assets to avoid payment of any liability under this Act, the total income of such person for the period from the expiry of the previous year to the date, when the Assessing Officer commences proceedings under this section is chargeable to tax in that assessment year.
- Income of discontinued business: [Section 176]- Where any business or profession is discontinued in any assessment year, the income of the period from the expiry of the previous year up to the date of such discontinuance may, at the discretion of the Assessing Officer, be charged to tax in that assessment year.
CAPITAL AND REVENUE RECEIPTS
An amount referable to fixed capital is a capital receipt whereas a receipt referable to circulating capital would be a revenue receipt. While the latter is chargeable to tax, the former is not subject to income-tax unless otherwise expressly provided.
CIT v GR Karthikeyan
The assessment year concerned is 1974-75. The assessee, G.R. Karthikeyan, assessed as an individual, was having income from various sources including salary and business income.
During the accounting year relevant to the said assessment year, he participated in the All India Highway Motor Rally. He was awarded the first prize of Rs 20,000. The rally was restricted to private motor cars. The length of the rally route was approximately 6956 kms. One could start either from Delhi, Calcutta, Madras or Bombay, proceed anti-clockwise and arrive at the starting point. The rally was designed to test endurance driving and the reliability of the automobiles. One had to drive his vehicle observing the traffic regulations at different places as also the regulations prescribed by the Rally Committee.
The Income Tax Officer included the same in the income
of the respondent-assessee relying upon the definition of income‘ in clause (24) of Section 2. On appeal, the Appellate Assistant Commissioner held that inasmuch as the rally was not a race, the amount received cannot be treated as income within the meaning of Section 2(24)(ix).
The High Court held in favour of the assessee on the following
reasoning:
(a) The expression ‘winnings‘ occurring at the inception of sub-clause (ix) in Section 2(24) is distinct and different from the expression ‘winning‘. The expression ‘winnings‘ has
acquired a connotation of its own. It means money won by gambling or betting.
(b) A perusal of the memorandum explaining the provisions of the Finance Bill, 1972, which inserted the said sub-clause in Section 2(24), also shows that the idea behind the sub-
clause was to rope in windfalls from lotteries, races and card games etc.
(c) Section 74(A) which too was introduced by the Finance Act, 1972 supports the said view. Section 74(A) provides that any loss resulting from any of the sources mentioned therein can be set off against the income received from that source alone. The sources referred to in the said section are the very same sources mentioned in sub-clause (ix) of Section 2(24) namely lotteries, crossword puzzles, races including horse-races, card-games etc.
The SC held that since the definition of income in Section 2(24) is an inclusive one, its ambit, in our opinion, should be the same as that of the word income occurring in Entry 82 of List I of the Seventh Schedule to the Constitution (corresponding to Entry 54 of List I of the Seventh Schedule to the Government of India Act).
For the above reasons we hold that the receipt in question herein does constitute income‘ as defined in clause (24) of Section 2 of the Act. The appeal is accordingly allowed
and the question referred by the Tribunal under Section 256(1) of the Act is answered in the negative i.e. in favour of the Revenue and against the assessee.
Mehboob Productions v CIT
There is some difficulty on the facts of the case in deciding whether the assessee’s film became entitled to receipt of this grant or subvention or subsidy by reason of its being awarded a certificate of merit or on the recommendation of the Films Advisory Committee.
The expression “income” has been considered in several cases and it will now be proper to refer to and discuss some of them. I would first refer to Commissioner of Income-tax v. Shaw Wallace & Co. , in which case the Privy Council attempted to indicate what the term “income” in the Indian Income-tax Act, 1922, connoted:
The object of the Indian Act is to tax ‘income’, a term which it does not define. It is expanded, no doubt, into ‘income, profits and gains’, but the expansion is more a matter of words than of substance. Income, their Lordships think, in this Act connotes a periodical monetary return ‘coming in’ with some sort of regularity, or expected regularity, from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall. Thus income has been likened pictorially to the fruit of a tree, or the crop of a field. It is essentially the produce of something which is often loosely spoken of as ‘capital’. But capital, though possibly the source in the case of income from securities, is in most cases hardly more than an element in the process of production.
Thus, according to this decision, the term “income” in the Act connotes a periodical monetary return, coming in with some sort of regularity or expected regularity from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return and, according to the Privy Council, anything in the nature of a windfall must be excluded from what may be properly regarded as income.
What we are considering as “windfall” is some unexpected receipt not in the contemplation of the assessee and not directly attributable to or occurring by way of its business profits. To put it in other words, if the assessee had produced the picture, Mother India, or if it can be said that it was producing motion pictures with the idea that they would be exempted from entertainment duty by the Government of Bombay and the amount attributable to the collections of entertainment duty would be paid over to the assessee, then such receipt, perhaps, may not be said to be a windfall received by the assessee. Similarly, if the assessee had produced a motion picture with a particular situation which becomes extremely successful commercially by reason of some extraneous fact, the extra profits received by the assessee or by the exhibitors may be called windfall profits loosely or in ordinary parlance, but would not be a “windfall” for our purposes. Where the obtaining of a particular advantage or receipt could not be said to be within the ordinary contemplation of the party obtaining or receiving it, then only would it be proper to characterise the advantage or receipt as a windfall. On the other hand, where there was clear expectation, though small, of receiving such advantage or profit, then it cannot be properly regarded as windfall merely because the advantage or receipt is much more than could have been reasonably contemplated.
Applying that definition to the receipt of the amount of Rs. 10,67,212 by the assessee in the present case, though the said amount did come in from a definite source, it was not a return expected by the assessee for the labour, and/or skill bestowed, and/or capital invested by him, but was, in my opinion, “in the nature of a mere windfall”. I, therefore, agree with my brother, Desai, that it is not “income”. Though called an exemption from entertainment duty, it did not really have the character of an exemption, but was in the nature of a prize, though its computation was on the basis of the entertainment duty paid by the public.
Raghuwanshi Mills v CIT
The case of Raghuvanshi Mills Ltd v Commissioner Of Income-Tax was a Supreme Court of India case that ruled that money received from consequential loss policies was income.
- The mills insured their plant, machinery, and building against fire.
- They also took out consequential loss policies to protect against loss of profits, agency commission, and standing charges.
- The mills were destroyed by fire and received money from the consequential loss policies.
- The court ruled that the money received from the policies was income and was subject to income tax.
The court ruled that the money received from the policies was income because it was connected to the company’s ownership and business operations.
CIT v Sitaldas
The judiciary has consistently upheld the principle that income, once earned, remains taxable even if it is applied or spent for specific purposes. One of the leading cases on this topic is CIT v. Sitaldas Tirathdas [(1961) 41 ITR 367 (SC)], where the Supreme Court held that when income is earned by the assessee, its subsequent application towards discharge of an obligation does not remove it from the purview of taxation.
In this case, the assessee was obligated to pay a certain portion of his income to his wife and children under a court decree. The assessee claimed that this income should not be taxed as it was applied towards a legal obligation. However, the Supreme Court ruled that the income was taxable because it was first earned by the assessee and then applied to fulfill the obligation.
Raja Bejoy Singh Dudhuria v. Commissioner of Income-Tax
The tribunal focused on the statutory interpretation of “income” under section 3 of the Indian Income-Tax Act, 1922, emphasizing that income encompasses what reaches the individual as income to be taxed. The court reasoned that since the maintenance payments were legally mandated and allocated before the appellant’s income was realized, they did not constitute taxable income. The payments were seen as charges on the appellant’s income rather than a use of his income. Additionally, the tribunal differentiated between personal liabilities, such as maintenance under societal norms, and obligations imposed by legal decrees, reinforcing that the latter do not fall under taxable income.
Section 6- Residential Status
Section 6 of the Income Tax Act prescribes the criteria to determine the residential status of all tax payers for
purposes of income-tax. An assessee’s residential status must be determined with reference to the previous year in respect of which the income is sought to be taxed. i.e. the residential status of a person must be determined every year because the residential status of a person may change from one year to next year and so on depending upon the situation.
TEST OF RESIDENCE FOR INDIVIDUAL
Under Section 6(1) of the Income-tax Act, an individual is said to be resident in India in any previous year if period of physical stay in India is:
a. 182 days or more in that previous year, OR
b. 60 days or more in that Previous Year AND 365 days or more in Preceding 4 years
If an assessee fails to meet both the above criteria in any Previous Year, then he is considered as Non-Resident for tax purpose in that Previous Year.
Exception to the Basic Condition
In case of the following individuals:
(a) being a citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958, or for the purposes of
employment outside India, the provisions of the second condition shall apply in relation to that year as if for the words “sixty days (60 days)”, occurring therein, the words “one hundred and eighty-two days (182 days)” had been substituted.
(b) being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, the provisions
of the second condition shall apply in relation to that year as if for the words “sixty days (60 days)”, occurring therein, the words “one hundred and eighty-two days (182 days)” had been substituted.
Deemed Resident
An Individual will be considered as Deemed Resident in the below case:
1) Individual being a Citizen of India, AND
2) having Total Income in excess 15 lakhs in the Previous Year (Other than foreign Source) AND
3) not liable to tax in any other country/territory, by reason of domicile, residence or any similar criteria.
[Section 6(1A) i.e. concept of Deemed Resident introduced vide Finance Act, 2020]
Non-Resident (NR)
If an individual does not satisfy any of the above basic conditions then, he will be treated as Non-Resident.
It must be noted that the fulfillment of any one of the above conditions (a) or (b) as applicable will make an individual resident in India for tax purposes. Further it is to be noted that these conditions are alternative and not cumulative in their application.
Resident and Ordinarily Resident (ROR)
An individual may become a resident and ordinarily resident in India if he satisfies both the following conditions given u/s 6(1) besides satisfying any one of the above mentioned conditions:
(i) he is a resident in atleast any two out of the ten previous years immediately preceding the relevant previous year, and
(ii) he has been in India for 730 days or more during the seven previous years immediately preceding the relevant previous year.
Definitions of Tax
“A tax is compulsory contribution from the person to the government to defray the expense incurred in the common interest of all without reference to special benefits conferred”. - Prof Seligman
“A tax as a share of the income of citizens which the state appropriate in order to procure for itself the means necessary for the production of general public services”. - Deviti. De Marco
Characteristics of a Good Tax System
1) Equity
2) Certainty
3) Convenience
4) Economy
Income [Section 2(24)]
“Income is the consumption and savings opportunity gained by an entity within a specific timeframe, which is generally expressed in monetary terms. However, for households and individuals, “income is the sum of all the wages, salaries, profit, interests payments, rents, and other forms of earnings received in a given period
of time.”
In general terms, Income is a periodical monetary return with some sort of regularity. However, the Income
Tax Act, even certain income which does not arise regularly are treated as income for tax purposes.
e.g. Winnings from lotteries, crossword puzzles.
The definition of Income as given in Section 2(24) of the Act starts with the word includes therefore the list is inclusive not exhaustive. The definition enumerates certain items, including those which cannot ordinarily be
considered as income but are treated statutorily as such.
CONCEPT OF INCOME
1) Income may be received in cash or kind. When the income is received in kind, its valuation will be made in accordance with the rules prescribed in the Income-tax Rules, 1962.
2) Income arises either on receipt basis or on accrual basis. It may accrue to a taxpayer without its actual receipt. The income in some cases is deemed to accrue or arise to a person without its actual accrual
or receipt. Income accrues where the right to receive arises.
3) The income-tax law does not make any distinction between income accrued or arisen from a legal source and income tainted with illegality. In CIT v. Piara Singh (1980) 3 Taxman 67, the Supreme Court
has held that if smuggling activity can be regarded as a business, the confiscation of currency notes by customs authorities is a loss which springs directly from the carrying on of the business and is, therefore, permissible as a deduction.
4) There is no difference between temporary and permanent income under the Act. Even temporary income is taxable under the Income Tax Act.
5) Income whether received in lump sum or in installment is liable to tax
6) Normally, gifts constitute a capital receipt in the hands of the recipient. However, certain gifts are brought within the purview of income-tax, for example, receipt of property without consideration is brought to
tax under section 56(2)(x). Gifts of personal nature do not constitute income subject to maximum of Rs. 50,000 received in cash. The recipient of gifts like birthday, marriage gifts, etc. is not liable to income-tax as received in kind however as per the Finance Act, 2009 gifts in kind having fair value upto Rs.
50,000 are not liable to tax but having fair value of more than Rs. 50,000 is wholly taxable.
Important Points related to Residential Status
1) The fact that an assessee is resident in India in respect of one year does not automatically mean that he would be resident in the preceding or succeeding years as well. Consequently, the residential status of the assessee should be determined for each year separately. This is in view of the fact that a person resident in one year may become non-resident or not ordinarily resident in another
year and vice versa.
2) It must also be noted that the residential status of an individual for tax purposes is neither based upon nor
determined by his citizenship, nationality and place of birth or domicile. This is because of the fact that, for
tax purposes, an individual may be resident in more than one country in respect of the same year.
3) It must also be noted that the residential status of an individual for tax purposes is neither based upon nor
determined by his citizenship, nationality and place of birth or domicile. This is because of the fact that, for
tax purposes, an individual may be resident in more than one country in respect of the same year
4) The stay may be anywhere in India and for any length of time at each place in cases where the stay in India is at more places than one, what is required is the total period of stay should not be less than the number of days specified in each condition.
5) The common feature in both the above conditions is the stay of the individual in India for a specified period. The period of stay required in each of the conditions need not necessarily be continuous or consecutive nor it is stipulated that the stay should be at the usual place of residence, business or employment of the individual. Purpose of stay is immaterial in determining the residential
status.
Place of Control and Management
“Control and Management” means de facto control and management and not merely the right to control or
manage. Control and management is situated at a place where the head, the seat and the directing powers are
situated. The mere fact that the family has a house in India, where some of its members reside or the karta is in
India in the previous year, does not constitute that place as the seat of control and management of the affairs
of the family unless the decisions concerning the affairs of the family are taken at that place. Although, it is
the karta who normally has control and management of the affairs of a Hindu Undivided Family yet any other
coparcener can control and manage the affairs. Therefore, the mere fact of absence of the karta does not make
the family non-resident.
