ASSIGNMENT ON

PRINCIPLES OF TAXATION LAW

TOPIC- RESIDENTIAL STATUS

SUBMITTED TO-
MS. SHIVANI
SUBMITTED BY-
JASMEET KAUR
ROLL NO. 244/13
SECTION-D

1
 INTRODUCTION
In India, as in many other countries, the charge of income tax and the scope of taxable
income varies with the factor of residence. Thus, identification and classification of the
residence of a person is one of the first steps carried out in order to proceed with assessing
the liability of an individual. There are two categories of taxable entities viz. (1) residents
and (2) non-residents. Residents are further classified into two sub-categories (i) resident and
ordinarily resident and (ii) resident but not ordinarily resident.

Section 6 of the Income Tax Act deals with residence. This article aims to clarify and
elucidate the concept of residence under the IT Act and to show how there are different types
of statuses applicable and consequently, different incidences of tax liability on individuals
respectively1.

Concept of “Residence” under Income Tax Act

Tax incidence and imposition on an assessed is dependent on his residential status. For
example, whether an income, accrued to an individual out of India, is taxable in India is
dependent upon the residential status of an individual in India. Likewise, whether an income
secured by a foreign national in India (or out of India) is taxable in India is dependent on the
residential status of an individual, rather than his citizenship. Consequently, the
determination of the residential status of the person is very important to ascertain his tax
liability1. One can affirmatively conclude that taxation of the assessee is dependent on his
residence. As a result, the first question is always towards appropriate establishment of the
residential status of an assessee.2

In the case of the Resident, the entire income is taxable, oblivious to the fact that it is earned
in India or outside India. In the situation of a Non-resident, only the income earned in India
is taxed. There should be a basis for the government for taxing any income of an individual.
Indian Government has taken 3 conditions for levy of income-tax in India2:

1. Residence.
2. Source of Income.
3. Receipt of Income.

1
Taxman, Students’ Guide to Income Tax, Tans Prints (India) Pvt. Ltd., 33rd Ed., 2005-06.
2
Dr.Jyoti Rattan, Taxation Laws, 6th Edition,Bharat Publisher (2015-16)
2
RESIDENTIAL STATUS

For a better understanding of the expression residential status, the meaning of the term
Residence needs to be analyzed. Baylay J. opines that residence “denotes the place
where an individual eats, drinks and sleeps or where his family or servants eat,
drink and sleep3." Almost same opinion is given by Blackburn, J. that “A man‘s
residence is a place where he sleeps.”4 Nonetheless, same meaning cannot be applied
to an artificial person such as company as "A company cannot eat or sleep, but it can
keep house or do business5. So more extended meaning is given to this word under
Income Tax Act and some other statutes i.e. the term is used in connection with carrying
on of a business. Therefore, depending upon where a person resides or carries on
business, residential status is to be decided.

GENERAL RULES FOR DETERMINING THE RESIDENTIAL STATUS 

(a)Residential status with regard to every person: Residential status is to

be determined with respect to every person. 

(b)Residential status during Previous Year: It is to be determined during the 

relevant Previous Year.

(c)Different residential status for different pervious years: A person may have 
different Residential status for different Previous Years. 

(d) Same residential status for different sources of income in one previous year: A
person cannot have different Residential status for different sources of income in one
year. It mean if a person is resident in India in a relevant Previous Year in respect
ofanysourceofincome,heshallbedeemedtoberesidentinlndia in respectofeach ofhis other
sources of income6. 

(e) Resident in India as well as in foreign country in some Previous Year: A person
may be resident in India and any other foreign country in the same Previous Year.
Because, if a person is resident in India during the relevant Previous Year it does not

3
[R v North Curry (1825) 4 B & C 959]
4
(1869) OM & H 151, 158.
5
De Beers Consolidated Mines Ltd v Howe (1906) 5 TC 198.
6
Section 6(5) of Income Tax Act, 1961

3
mean that he would definitely be non-resident in any other foreign country in that
Previous Year. However, whether he is resident in any foreign country during that
Previous Year depends upon the law of that country.7 

(f)Citizenship and nationality not to effect residential status: Citizenship and

nationality have nothing to do with the residential status of a person. An Indian
national/citizen may be non-resident in India whereas a foreign national may be resident
in India during the relevant Previous Year. 

(g) Burden of proof: Burden of proof that assessee was not resident in India during
Previous Year lies on assessee. Subsequently, tax department will decide whether
assessee was resident or non-resident in India during Previous Year.

TYPES OF PERSON DEPENDING UPON RESIDENTIAL STATUS

Depending upon Residential status, a person is of two types:

(1) Resident in India

(2) Non-Resident (NR) in India.

Further in some cases (individual & HUF) a resident person is again divided into two
parts

(1) Resident and ordinarily resident (ROR)

(2) Resident and Not ordinarily resident (RNOR). 

However there are fixed rules to decide whether a person is Resident or Non Resident in
India and different rules are given to decide the Residential status of different types of
persons i.e., two alternate tests for an individual, two tests for a company and single test
for any other person (HUF, partnership firm, AOPs, BOIs, LA and artificial juridical
person). Again we have fixed rules to decide whether a resident person is (1) Resident
and ordinarily resident (ROR) or (2) Resident and Not ordinarily resident (RNOR). 8

RESIDENTIAL STATUS OF AN INDIVIDUAL [SECTION 6(1)] 

According to Section 6(1) an Individual is Resident in India during the Previous Year
7
Dr.Jyoti Rattan, Taxation Laws, 6th Edition,Bharat Publisher (2015-16)
8
KailashRai: Taxation Laws, 9th Edition, Allahabad Law Agency, 2007

4
if he satisfies one of the following two conditions: 

(1) He is in India for 182 days or more during the relevant Previous Year; or 

(2) He is in India for 60 days or more during the relevant Previous Year AND has
been in India for 365 days or more during four Previous Years immediately
preceding the relevant Previous Year. 

An Individual who does not satisfy any of the two above conditions is Non-Resident in
India during the Previous Year. 9

Exceptions [Explanation to Section 6(1)]: In the following cases, sixty days in second
condition mentioned above had been substituted by one hundred and eighty-two days;

(a) An individual who is a citizen of India and who leaves India in any Previous 
Year as a member of the crew of an Indian ship; 
However, in the ease of an individual, being a citizen of India and a member of the crew
of a foreign bound ship leaving India, the period or periods of stay in India shall, in
respect of such voyage, be determined in the manner and subject to such conditions as
may be prescribed." or 

(b) An individual who is a citizen of India and who leaves India in any Previous Year
for the purposes of employment outside India. 

“For the purpose: of employment” means such individual should be employed in India
when he leaves India for the purposes of employment outside India. Therefore if he is
unemployed person and is going abroad for getting some job outside India then he will
not be covered under this exception10.

(c) An individual who is a citizen of India, or is a person of Indian origin11 who, being
outside India (ordinarily resides outside India) comes on a visit to India in any
Previous Year. 

It means in these exceptional cases second condition becomes non-functional and an

individual should satisfy only first condition to be resident in India i.e., he is in India for
182 days or more during the relevant Previous Year.

9
Vinod K. Singhania: Direct Taxation: Law and Practice of Income Tax, Taxman, 36thEdition, (2007)
10
British India (P) Ltd. v CIT (2006) 155 Taxman 326 (AAR New Delhi)
11
Section 115C of Income Tax Act, 1961 ( A person is of Indian origin if he or either of his parents or any of his
grandparents was born in undivided India)

5
Therefore in case of Indian members of the crew of a foreign Indian ship would be non-
resident in India, if they are on board such ship outside the territory waters of India for
182 days or more during any year. Accordingly such seamen will be charged to tax in
India only in respect of earning received in India or the earnings for the period when
they are working within Indian waters on coastal ships, etc.12

Important points

> Stay in India need not be continuous: For deciding the Residential status, stay in
India need not be continuous. During relevant Previous Year he might have come to
visit India 3 or 4 times staying for 2 months every time. In such situation his total stay
would be counted to decide his residential status. 

> Place and purpose of stay in India not important: The place of stay and purpose of
stay in India is immaterial. He may stay anywhere in India i.e. either in Delhi, Mumbai,
Kolkata or in any state of India. 
> Home in India is not essential: Home in India is not essential to decide residential
status of a person. He might have stayed in his own house or in friend's house or in a
hostel or hotel or guest house or he may be a complete wanderer. 
> Presence in territorial water of India: Presence in territorial water of India means
presence in India. 
> Where stay in India is for few hours: Inborderlinecases ifapersoncomesto
Indiaforapartofadaythenhisstayistobecountedinhoursand24hours would be counted as
one day. 
> Where hour of entry and departure is not given: Where hour of entry and departure
is not given, then the day on which he enters India and the day on which he leaves India
should be counted in his stay in India. 

Example I: Mr A, a law graduate from Panjab University Went abroad for the first time
for studying or for business on August 13, 2016. Find out his residential status during
the Assessment Year 2017-18.

Solution: His residential status during the Previous Year 2016-17: 

Month Days spent in India

April 30
May 31
June 30
July 31
August 13

12
Circular no. 586, dated 28.11.1990

6
 Total 135

Mr A was in India for 135 days during the Previous Year 2016-17. 

So he does not fulfil First condition under section 6(1). 

As he went abroad for the first time it means he was in India before August 13, 2016,
So he fulfils Second condition under section 6(1) and hence Resident in India during the
Previous Year 2016-17.

Example 2: Mr A, a law graduate from Panjab University went aboard for the first time
as a member of a crew of foreign bound ship leaving India on August 13, 2016. Find
out his Residential status during the Assessment Year 2017-18.

Solution: His residential status during the Previous Year 2016-17:

Month Days spent in India

April 30
May 31
June 30
July 31
August 13
Total 135

As he is covered under
exception so he should satisfy only one condition to be resident in India i.e., he is in
India for 182 days or more days during the relevant Previous Year as he does not fulfil
this condition so he is non-resident in India during the Previous Year 2016-17.

Example 3: Mr A, a law graduate from Panjab University working as law officer with
X&CO. and went abroad for first time for the purpose of employment outside India on
August 13, 2016. Find out his Residential status during the Assessment Year 2017-18.

Solution: His residential status during the Previous Year 2016-17:

7
 Month Days spent in India
April 30
May 31
June 30
July 31
August 13
Total 135

As he is covered under
exception so he should satisfy only one condition to be resident in India i.e., he is in
India for 182 days or more days during the relevant Previous Year as he does not fulfil
this condition so he is non-resident in India during the Previous Year 2016-17.

In Example 1, Example 2 and Example 3, Mr A is leaving India on the same date i.e.
August 13, 2016 but for different purposes. In Example 1, he is resident in India during
the Previous Year 2016-17 but in Example 2&3 he is non-resident in India during the
same previous year. This shows that the purpose of going abroad is also an important
factor in deciding the Residential Status of an Individual.

Example 4:Mr X, a foreigner got a job in India and came here for the first time on
October 3, 2016. Find his residential status during the previous year 2016-17.

Solution:
Month Days spent in India
October 29
November 30
December 31
January 31
February 29
March 31
Total 181

Days for which he was in India during the Previous Year 2016-17= 181 Days

So he does not fulfil first condition under section 6(1).

As he came to India for the first time means he was never in India before so does not
fulfil Second condition (60 days or more during the relevant Previous Year AND 365
days or more during four Previous Years immediately preceding the relevant Previous

8
Year) under section 6(1) and hence Non Resident (NR) in India during the Previous
Year 2016-17.13

Resident and ordinarily resident (ROR) And Resident and Not

ordinarily resident (RNOR) individual [Section 6(6) (a)]
Further, an Individual who is Resident in India is of two types-

(i) Resident and ordinarily resident (ROR)

(ii) Resident and Not ordinarily resident (RNOR).

An Individual is said to be Resident and Not ordinarily resident (RNOR) in India in any
Previous Year if he satisfies one of the following two conditions:

(I) is a non-resident in India in nine out of the ten Previous Years immediately
preceding that year, or
(II) is in India for a total period of seven hundred and twenty-nine days or less during
the seven Previous Years immediately preceding relevant Previous Year.

It is important to note that for fulfilling first condition, we have to apply Section 6(1)
again for ten Previous Years immediately preceding the relevant Previous Year and
decide whether in each year he was Resident or Non Resident. 
It means an Individual is said to be Resident and ordinarily resident in India in any
Previous Year if he does not satisfy both of the above two conditions or satisfies
following two conditions: 

(i) is resident in India for at least two out of ten Previous Years immediately
preceding the relevant Previous Year, and 
(ii) is in India for a total period of seven hundred and thirty days or more during the
seven Previous Years immediately preceding relevant Previous Year14. 

The Apex Court of India in the case of Pradip J. Mehta v CIT15, has held that an
assessee will be ‘not ordinarily resident’ in India within the meaning of Section 6(6)(a)
if he was not resident for 9 out of 10 years. A person would become an ordinary
resident only (a) if he is resident in India for 2 out of 10 preceding years, and (b) he had
been in India for at least 730 days or more in the previous seven years. 

13
Vinod K. Singhania: Direct Taxation: Law and Practice of Income Tax, Taxman, 36thEdition, (2007)
14
Kanga, Palkhivala and Vyas, The Law and Practice of Income Tax, Lexis Nexis Buttersworths, I Vol, IX Ed.,2004,
p-348.

15
(2008) 300 ITR 231 (SC).

9
In Example 1 we have decided that Mr A, a law graduate from Punjab University who
went abroad for the first time for studying or business on August 13, 2016 is Resident in
India during the Previous Year 2016-17. Now we will decide whether he was Resident
and ordinarily resident (ROR) or Resident and Not ordinarily resident (RNOR) during
the relevant Previous Year.

Solution: As he went for the first time it means every year he was in India for 365
days16, so every year he was resident in India for ten Previous Years immediately
preceding the relevant Previous Year (Fulfils first condition for being Resident and
ordinarily resident (ROR).
Previous Year Condition 1 of Section 6(6)(a) e.g., Condition 2 of Section 6(6)(a) e.g., Days
Residential status under Section 6(1) spent in India during seven Previous
Years immediately preceding the
Days spent in India Resident(R) or
relevant Previous year
during Previous Year Non Resident(NR)
2015-16 365 R 365
2014-15 365 R 365
2013-14 365 R 365
2012-13 365 R 365
2011-12 365 R 365
2010-11 365 R 365
2009-10 365 R 365
2008-09 365 R (Not required )
2007-08 365 R -
2006-07 365 R -
Resident for 10 Previous Years i.e. 2556 days i.e. second condition
first condition under section 6(6)(a) is under section 6(6)(a) is fulfilled.
Fulfilled.

Further he satisfies second condition for being Resident and ordinarily resident (ROR)
as during the seven Previous Years immediately preceding relevant Previous Year he
was in India for more than 730 days hence Resident and ordinarily resident (ROR)
during the Previous Year 2016-17.17

Example:An employed Indian citizen leaves India on 20.09.2014 for the purpose of
employment. He came to India for a visit on 18.04.2015 and went back on 01.10.2015.
Finally he came back to India on 15.06.2016. Find out his residential status during
Assessment Year 2017-18.

Month Days spent out of India

16
More than 182 days, hence fulfils the first condition of Section 6(1).
17
N.M.Tripathi, 1976 GrishAhuja, Direct taxes law and practice, Bharat, 18th Edition, Bharat Publisher (2008-
09)

10
 April 30
May 31
June 14
Total 75
Solution: Residential status during Assessment Year 2017-18 i.e. Previous Year 2016-
17.

He was out of India during Previous Year 2016-17 for 75 days.

Previous Year Condition 1 of Section 6(6)(a) e.g., Condition 2 of Section 6(6)(a) e.g.,
Residential status under Section 6(1) Days spent in India during seven
Previous Years immediately
Days spent in India Resident(R) or
preceding the relevant Previous year
During Previous year Non Resident(NR)

2015-16 167* NR 167

2014-15 173** NR 173
2013-14 365 R 365
2012-13 366 R 366
2011-12 365 R 366
2010-11 365 R 366
2009-10 365 R 365
2008-09 366 R (not required)
2007-08 365 R -
2006-07 365 R -
Total Resident for 8 Previous Years i.e. 2166 days i.e. second
first condition under section 6(6)(a) is condition under section 6(6)(a)
Fulfilled. is fulfilled.

He was in India for 290 days (365-75) and hence resident in India.

ROR/RNOR

As he satisfies both the conditions of Section 6(6)(a) therefore ROR in India during
Previous Year 2016-17.

*Residential Status during Previous Year 2015-16

Month Days spent in India

April 13
May 31
June 30

11
 July 31
August 31
September 30
October 01
Total 167

As he covered under exception, therefore first condition is applicable (Should be in

India for 182 days). He does not fulfil that condition therefore non-resident in India.

**Residential Status during Previous Year 2014-15

Month Days spent in India

April 30
May 31
June 30
July 31
August 31
September 20
Total 173

As he covered under exception, therefore first condition is applicable (Should be in

India for 182 days). He does not fulfil that condition therefore non-resident in India.18

Example:Mr B, a foreigner, a film producer comes to India every year for 100 days
since 1985.

(i) Find out his Residential Status during Assessment Year 2017-18?
(ii) Would it make any difference if he spends 110 days instead of 100 days?

Solution:

(i) His residential status during Assessment Year 2017-18 i.e. during Previous Year
2016-17:
 Days spent in India during Previous Year 2016-17 = 100
 Days spent in India during four years immediately preceding the relevant Previous
Year (i.e. during 2015-16,2014-15,2013-14 and 2013-12) =400

18
Dr.Jyoti Rattan, Taxation Laws, 6th Edition,Bharat Publisher (2015-16)

12
 Therefore, he does not satisfy first condition but satisfies second condition of section
6(1) so he is resident in India.

ROR or RNOR [Section 6(6)(a)]:

Previous Year Condition 1 of Section 6(6)(a) e.g., Condition 2 of Section 6(6)(a)
Residential status under Section 6(1) e.g., Days spent in India during
seven Previous Years
Days spent in India Resident(R) or
immediately preceding the
During Previous year Non Resident(NR)
relevant Previous year

2015-16 100 R 100

2014-15 100 R 100
2013-14 100 R 100
2012-13 100 R 100
2011-12 100 R 100
2010-11 100 R 100
2009-10 100 R 100
2008-09 100 R (not required)
2007-08 100 R -
2006-07 100 R -
Total Resident for 8 Previous Years i.e. first 700 days i.e. second
condition under section 6(6)(a) is condition under section 6(6)(a)
Fulfilled. is not fulfilled.

As he fulfils both conditions of section 6(6)(a) so he becomes ROR during Previous

Year 2016-17.19

RESIDENTIAL STATUS OF A HINDU UNDIVIDED FAMILY (HUF),

A PARTNERSHIP FIRM OR ASSOCIATION OF PERSONS (AOPS)
[SECTION 6(2)] 
According to Section 6(2) of Income-tax Act, 1961 these entities are resident in India in
any Previous Year if the control and management of their affairs is wholly or partly in
India during that year. Therefore, these entities are said to be Non-resident (NR) in India
during the Previous Year if the control and management of their affairs wholly outside
India during that year. 
19
Dr.Jyoti Rattan, Taxation Laws, 6th Edition,Bharat Publisher (2015-16)

13
 The control and management of Residential status of A Hindu Undivided
it’s affairs Family (HUF), a partnership firm or

Association ofPersons(AOPs) 

Wholly in India Resident(R)

Partly in India partly outside India Resident (R)
Wholly outside India Non-Resident (NR)

“The control and management of its affairs " generally means where head and brain or
decision making power lies. Further it is well settled law that the control and
management includes De facto and not de jure control and management 20. Ifa person
having control and management power in India and power of attorney is given to a
person outside India to exercise the decision making power with regard to the business
affair and such powers are actually exercised outside India then it means the control
and management lies outside India, hence that entity would be non-Resident (NR) in
India during the relevant Previous Year.

Affairs: It means business affair and not personal affairs of HUF. 

The control and management of its business affairs” in case of Hindu Undivided
Family (HUB): In case of HUF “The control and management of its business affairs"
lies at the place where decision making power lies i.e., where the Kano of HUF resides.
But simply because Karts is residing in India does not indicate that HUF is resident in
India during that year. Here we have to see who actually is exercising the decision
making power. If Karta of HUF is in India but decision making power is exercised by
any coparcener or other person outside India then it means HUF is non-resident (NR) in
India in that relevant Previous Year. Similarly if Karta of HUF is outside India but
decision making power is exercised by any coparcener or other person in India then it
means HUF is resident in India in that relevant Previous Year. Generally, HUF is
presumed to be Resident in India unless it is otherwise proved by the assessee21.

Itis important tonotethat placeofmaintainingtheaccountordivisionof profits not important

to decide residential status of HUF. 

Resident and ordinarily resident (ROR) And Resident and Not

ordinarily resident (RNOR) HUF [Section 6(6) (b)] 
20
CIT v Nand Lal, Gandalal (I960) 40 ITR I (SC)
21
Subbayya Chettiar (V.V.R.N.M) v CIT (1951) 19 ITR 168 (SC)]

14
Further, HUF which is resident in Indiaduring Previous Yearis furtheroftwotypes (i)
Resident and ordinarily resident (ROR) (ii) Resident and Not ordinarily resident
(RNOR). The resident HUF is said to be Resident and Not ordinarily resident (RNOR)
in India in any Previous Year if he satisfies one of the following two conditions:

(i) If Karta is non-resident in India in nine out of the ten Previous Years preceding
relevant Previous Year, or
(ii) If Karta is in India for a total period of seven hundred and twenty-nine days or less
during the seven Previous Years immediately preceding relevant Previous
Year. 22

Hence, the HUF is said to be Resident and ordinarily resident in India in any Previous
Year if Karts does not satisfy any or both of the above two conditions or satisfies
following two conditions: 

(i) If Karts is resident in India for at least two out of ten Previous Years immediately
preceding the relevant Previous Year, and 
(ii) If Karts is in India for a total period of seven hundred and thirty days or mom
during the seven Previous Years immediately preceding relevant Previous Year. 

Important Points: 

> Residential status of Karma is not important to decide the residential status of
HUF: It is significant to note that the residential status of Karts is not important to
decide the residential status of HUF but it is important to decide whether resident HUF
is Resident and ordinarily resident (ROR) or Resident and Not ordinarily resident
(RNOR) in India during relevant Previous Year. 

“The control and management of Its business affairs” in case of partnership

firm/association of persons (AOPs): In case of partnership firm/association of persons
(AOPs) “The control and management of its business affairs" lies with the
partners/members so, if the partners/members generally meet in India with regard to its
business affairs then firm is resident in India during that relevant Previous Year.
However control and management includes defacto and not de jure control and
management. 

But simply because the partners/members are residing in India does not indicates that
the firm/association of persons (AOPs) is resident in India during that year. Here we
have to see who actually are exercising the decision making powers. If it is exercised by
the partners/members, then firm/association of persons (AOPs) is resident in India but if
22
Vinod K. Singhania: Direct Taxation: Law and Practice of Income Tax, Taxman, 36thEdition, (2007)

15
it is exercised by any other person 23 outside India then firm is non-resident in India in
that relevant Previous Year. 

> A resident firm can never be resident and ordinarily resident (ROR) or resident
and not ordinarily resident (RNOR): It is important to note that firm/association of
persons (AOPs) Resident in India is further not divided into (i) Resident and ordinarily
resident (ROR) and (ii) Resident and Not ordinarily resident (RNOR). 24

RESIDENTIAL STATUS OF A COMPANY [SECTION 6(3)]25

According to section 6(3) of Income tax Act, 1961 a company is said to be resident in
India in any Previous Year, if:

(i) it is an Indian company; or

(ii) its place of effective management, in that year,is in India. 

“place of effective management”: means a place where key management and

commercial decisions that are necessary for the conduct of business of an entity as
a whole are in substance made.

For deciding Residential status, a company is of two types:

(i) Indian company and

(ii) Foreign company. Indian company is always resident in India even if control and
management of its business affairs is from outside India or even if shareholders of
Indian company having more than 51% voting rights are non-resident. Whereas
Foreign company whose turnover or gross receipt in the previous year is more
than Rs.50 crore is resident in India if its place of effective management in that
year is in India. Whereas resident in India if its place of effective management in
that year is in India. Whereas Foreign company whose turnover or gross receipt
in the previous year is Rs. 50 crore or less is always non-resident in India even if
its place of effective management in that year is in India.26

Company Residential Status Condition

Indian Company Always Resident (R) No
Foreign Company whose turnover Resident (R) Place of effective
23
If partners have given power of attorney to any person outside India and decision making power is exercised
by such person outside India.
24
Vinod K. Singhania: Direct Taxation: Law and Practice of Income Tax, Taxman, 36thEdition, (2007)
25
Substituted by Finance Act, 2016, w.e.f. 01.04.2017
26
N.M.Tripathi, 1976 GrishAhuja, Direct taxes law and practice, Bharat, 18th Edition, Bharat Publisher (2008-
09)

16
or gross receipt in the previous year is management, in that
more than Rs. 50 crore. year is in India.
Foreign Company whose turnover Always Non-Resident (R) No
or gross receipt in the previous year is
more than Rs. 50 crore or less.

 A resident company can never be Resident and Ordinarily Resident (ROR) or

Resident and Not ordinary resident (RNOR): It is important to note that like
firm/association of persons (AOPs), a company Resident in India is further not
divided into (i) Resident and ordinary resident (ROR) and (ii) Resident and Not
ordinary Resident (RNOR) in India during relevant Previous Year.27

RESIDENTIAL STATUS OF EVERY OTHER PERSON [Section 6(4)]

According to Section 6(4) of Income-Tax Act, 1961 every other person (means Body of
Individual (BOIs), A Local Authority and Every artificial and Juridical person) is said
to be resident in India in any Previous Year, if control and management of its affairs is
situated wholly or partly in India during the relevant Previous Year.

The control and management of Residential status of every other person

it’s affairs (means Body of Individual (BOIs), A Local
Authority and Every artificial and juridical
person)
Wholly in India Resident (R)
Partly in India Partly outside Resident (R)
India
Wholly outside India Non- Resident (NR)

 Body of Individuals (BOIs), A Local Authority and Every artificial and

juridical person can never be Resident and Ordinary Resident (ROR) or
Resident and Not ordinarily resident (RNOR): Further, it is important to note
that like firm/association of persons (AOPs), a Body of Individuals (BOIs), a Local
Authority and Every Artificial and Juridical person of Resident in India is further
not divided into:
(i) Resident and ordinary resident (ROR) and
(ii) Resident and not Ordinary resident (RNOR).

27
KailashRai: Taxation Laws, 9th Edition, Allahabad Law Agency, 2007

17
 CONCLUSION

Tax incidence and imposition on an assessed is dependent on his residential

status. For example, whether an income, accrued to an individual out of India, is
taxable in India is dependent upon the residential status of an individual in
India. Likewise, whether an income secured by a foreign national in India (or
out of India) is taxable in India is dependent on the residential status of an
individual, rather than his citizenship. Consequently, the determination of the
residential status of the person is very important to ascertain his tax liability.
One can affirmatively conclude that taxation of the assessee is dependent on his
residence. As a result, the first question is always towards appropriate
establishment of the residential status of an assessee.28

In the case of the Resident, the entire income is taxable, oblivious to the fact
that it is earned in India or outside India. In the situation of a Non-resident, only
the income earned in India is taxed. There should be a basis for the government
for taxing any income of an individual. Indian Government has taken 3
conditions for levy of income-tax in India:

1. Residence.

2. Source of Income.

3. Receipt of Income.

A Hindu undivided family, firm or other association of persons are classified as

residents in India in any previous year in every case excluding where during
that year the control and administration of its affairs is entirely outside India.
Additionally, the existence of one of the partners in India who keep
himselfabreast with the affairs of the business will not comprise a second centre
of management in India. It has been constantly held by the Courts that just mere
presence of partners in India would not lead to a supposition that the running
and supervision of the firm had been exercised in India.29

28
KailashRai: Taxation Laws, 9th Edition, Allahabad Law Agency, 2007
29
Dr.Jyoti Rattan, Taxation Laws, 6th Edition,Bharat Publisher (2015-16).

18
 BIBLIOGRAPHY

 Kanga, Palkhivala and Vyas, The Law and Practice of Income Tax, Lexis
Nexis Buttersworths, I Vol, IX Ed.,2004.
 Girish Ahuja and Ravi Gupta. Concise Commentary on Income Tax,
Bharat Law House Pvt. Ltd., 6th Ed., 2005.
 Taxman, Students’ Guide to Income Tax, Tans Prints (India) Pvt. Ltd.,
33rd Ed., 2005-06.
 A.C. Sampath Iyengar, The Law of Income Tax, Bharat Law House
Private Limited.
 Ajoy Halder, “Residence with respect to Artificial entities”, Taxman, Feb
28- March 5, 2004.
 Sampath Iyenger. Law of Income Tax: A commentary on Income Tax
Act, 1961, Bharat Law House Pvt. Ltd.
 Dr. Rattan Jyoti, Taxation Laws, Bharat Law House Pvt. Ltd., 2017.

19