Supreme Court Issues Notice in Plea Seeking To Maintain NRI Status For 2020-21 FY For Purpose Of Taxation Under IT Act

Supreme Court has issued notice in a plea filed by Dubai based non-resident Indian Gaurav Baid, directions to consider him a Non-Resident Indian for Financial Year 2020-21 regardless of number of days of his stay in India, on account of the Covid19 pandemic.

A three-judge Bench of Justice UU Lalit, Justice Indira Banerjee and Justice KM Joseph heard the plea that has challenged the recent Central Board of Direct Taxes (CBDT) circular that has not provided any relief to NRIs on the issue of being taxed on their global income because of losing their NRI status for purpose of taxation under the Income Tax Act.

The Court has issued notice in all connected matters, returnable on 16th April 2021. During the hearing today, the Petitioner was represented by Senior Advocates Mukul Rohatgi and Vivek Kohli and instructed by Advocates Sameer Abhyankar and Amish Tandon. During the hearing, Senior advocate Mukul Rohatgi requested the Court for a short date. "They have done something which is so different, it doesn't make sense what they have done."

Rohatgi said "I'd endorse that, shortest possible date be given as these people will be penalised in both the countries. That's the tragedy of it. Heavily penalised." Senior Advocate AM Singhvi stated The present plea has sought quashing of CBDT circular dated 3rd March 2021 and has alternatively sought directions to CBDT to issue an appropriate direction with respect to petitioner who is employed in a tax neutral State, United Arab Emirates.

The present petitioner has argued that he has been placed in a pernicious position of losing his 'Non resident status' for purposes of Indian Income Tax Act for no fault his due to involuntary extension of stay of NRIs on account of Covid 19 pandemic and subsequent lockdown and suspension of air travel.

According to the petitioner, the impugned notification was issued pursuant to the Supreme Court Order dated 10th Feb 2021 in the previous round of litigation, directing the petitioner to approach the CBDT with a representation, since the CBDT had dealt with a similar situation and conferred benefit in Financial year 2019-20. The previous petition was filed by the present petitioner seeking directions to the Central government to consider his representation for being treated as an NRI for FY 20-21.

The petitioner has submitted that when a representation was made to CBDT it refused to grant the relaxation sought and further observed that there shall be no 'double taxation' of petitioner in light of the existing India-UAE DTAA.

The petitioner has further argued that the impugned notification suffers from consistencies as it contains no reasons as to why impediments in travelling abroad ought not be taken into account while assessing petitioner's residency status. It fails to appropriate a settled position of law that presence in India against the will or without consent of citizen should not ordinarily be counter adverse to his chosen interest.

According to petitioner, the impugned OM betrays principle of legitimate expectation, as the CBDT had issued a clarification in FY 19-20 in exactly identical circumstances and petitioner had valid expectation that same benefit would be extended FY 20-21.

The plea has further stated that the petitioner's situation being considered differently for being employed in a Zero tax country from those citizens who are resident in a Tax levying country amounts to arbitrariness, and is a thinly veiled attempt by Indian government to tax individual who otherwise would not have fallen within the tax net.

According to the petitioner, CBDT has while issuing notification and directing petitioner to the DTAA deliberately ignored the fact that he is resident in a zero tax country and reference to DTAA will have no relevance.

According to the petitioner, the CBDT Circular states that there can not be an issue of double taxation on account of the existence of Double Taxation Avoidance Agreements which India has signed with several countries. Therefore the CBDT has said that each case would be considered separately and no general relief can be granted for exclusion of the number of days spent in India in FY 2020-21.

However according to the petitioner even though there is a DTAA between UAE and India, it it does not help the petitioner because UAE is a zero tax country. The present petitioner had in the previous round of litigation approached the Top Court in Feb 2021 seeking relief from being considered as a 'resident' of India under Section 6 of the Income Tax Act.

The writ petition was filed seeking a direction that petitioner's "non-resident status" for the purposes of the Income Tax Act, be maintained for Financial Year 2020 – 21 regardless of the number of days spent in India on account of the pandemic and he be immunised from liability to tax in India on his global income for the present financial year.

The Petitioner, Gaurav Baid, is a Non Resident Indian, presently based in Dubai, United Arab Emirates, who came to India in the month of March 2020 on a visit and was finally able to travel back after spending upwards of 182 days in India in the Financial Year 2020 – 21. The Petitioner was assessed as an NRI in Financial Year 2019-20