Going abroad for purpose of ‘employment’ includes self-employment to determine residential status under I-T Act

Facts:

a)  The assessee had earned consultancy income for rendering technical services for setting-up a hospital in Saudi Arabia. He had not offered the same as his income of the year as he claimed that during the year he was not a resident within the meaning of section 6(1);

b)  The A.O. found that assessee was not regularly employed abroad, but worked as a consultant for a foreign company. He opined that the term ‘for the purposes of employment’ used in the section 6 was to be interpreted in the context of employer–employee relationship and should be given a restrictive meaning;

c)  He, therefore, held that assessee was resident as per section 6(1) and the sum received by him had to be brought to tax as the income of assessee for the year;

d)  On appeal, the CIT(A) held that assessee had not left India for any period of time in connection with employment abroad as he was continuously resident in India. Therefore, he could not be considered as having left India and being stationed outside India for the purpose of employment. Accordingly, he had to be considered as resident only.

On appeal, the ITAT held in favour of assessee as under:

1)  As far as the argument of the learned CIT(A) that assessee did not leave India and was stationed outside the country was not material, as nowhere the section specified that assessee should leave India permanently so as to reside outside the country. Thus, the argument of the CIT(A) had no meaning. Therefore, that contention had to be rejected;

2)  The Hon’ble Supreme Court in the case of CBDT v. Aditya Birla [1988] 36 TAXMANN 009 (SC) considered that employment does not mean salaried employment but also includes self-employment/professional work. Therefore, the assessee’s earning from foreign enterprise and visit abroad for rendering consultation could be considered for the purpose of examining whether assessee was resident or not?;

3)  Thus, going abroad for the purpose of employment only meant that the visit and stay abroad had not be for other purposes such as a tourist or for medical treatment or for studies or the like;

4)  Going abroad for the purpose of employment, therefore, meant going abroad to take-up employment or any avocation. Unless assessee travelled on business visa or for the purpose of business/consultation, the entire period of travel abroad could not be considered as ‘going abroad for the purpose of employment’;

5)  The AO was to verify whether the visits were for the purpose of employment or for the purpose of tour or for any other reason. Only to the visits for the purpose of employment could be considered, while determining status of assessee as per the provisions of law;

6)  The assessee was requested to furnish necessary details of visas obtained and also place onrecord the English version of the stampings done on the passport, so as to support his contention that the travel was for the purpose of employment. For these reasons, the issue was to be restored to the file of the AO for fresh examination