The ITAT Chennai Bench has issued a significant verdict that will bring relief to top professionals who work overseas. The Tribunal decided that the physical stay requirements under Section 6 are not superseded by job titles or designations (such as CEO, President, or Managing Director).
If an NRI satisfies the 182-day non-residency criterion, the Indian tax agency cannot tax their worldwide income (international pay, bank deposits, or credit card expenses), even if they have a significant position in a foreign company.
What Was the Case About
The assessee is an individual and had filed his return of income in the status of a Non-Resident. The Assessing Officer issued notices to the assessee and also reclassified the assessee as a Resident of India, thereby bringing his global income to tax.
The Department’s move meant massive additions to his declared income. These included deposits in foreign bank accounts and foreign credit card expenses, pushing his assessed income far above what he had originally declared.
The assessee had consistently filed his returns as a Non-Resident Indian (NRI), and the battle before the ITAT was fundamentally about one question: was he a resident or a non-resident during those years?
The Employment Argument
The assessee’s legal team argued that he had left India to take up employment with a US-based religious organisation, and had continued in that role through all four assessment years under scrutiny.
The evidence placed on record was compelling. The organisation had issued a formal offer of employment letter, appointing the assessee as its President with defined remuneration and responsibilities.
The organisation’s Form 990 filings — mandatory disclosures filed with the US tax authorities — clearly mentioned his name as “President” and reflected annual remuneration paid to him, along with confirmation of full-time engagement of 30 to 40 hours per week. He also held an L1 employment visa with a US organisation named as his sponsoring employer.
The Department’s Counter-Argument
The tax department tried a different angle. It argued that the assessee was not merely an employee but held a key managerial position with complete control over the organisation’s operations, and that his family members were managing its affairs. The implication: he was too powerful to be called a mere “employee.”
The Tribunal was unimpressed. The bench held that the word “employment” in the statute makes no distinction based on designation or seniority — what matters is the existence of a contractual relationship of service. Since the assessee received fixed compensation under a contract and paid US income tax on it, his role as President did not strip him of employee status.
The Verdict
Passport entries and travel records confirmed that the assessee’s stay in India during each of the four years was less than 182 days — the threshold required to qualify as a resident. The Tribunal upheld his Non-Resident status under Section 6(1) read with Explanation 1(a) of the Income Tax Act, and dismissed the Revenue appeals.
Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Tax laws and regimes are subject to frequent changes by the government. Readers should verify details with official Income Tax Department notifications or consult a Chartered Accountant before making any financial decisions. Financial Express is not responsible for any decisions made based on this information.