MAHESH DADHICH ,JAIPUR vs. INCOME TAX OFICER , JAIPUR

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, “SMC” BENCH, JAIPUR BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI T. R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.1915/JPR/2025 (Assessment Year:2015-16)

Mahesh Dadhich Vs. ITO 708 Belvedere Park Sun N Ward 7(2) Moon Building Swez Jaipur Farm Sodala Jaipur 302019, Early Residing at 34 Shiv Colony Imliwala Fatak, Jaipur �थायीलेखासं./जीआइआरसं./PAN/GIR No:AEMPD 2450D Appellant .. Respondent Assessee by : Sh. Siddharth Ranka & Sh. Sauravh Harsh, Adv. Departmentby : Mrs. Arti Rawat, JCIT Date of Hearing 27.07.2026 Date of Pronouncement 26.10.2026 O R D E R Per Annapurna Gupta, AM:- The present appeal has been filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi

P a g e | 2 ITA No.1915/JPR/2025 Mahesh Dadhich (hereinafter referred to as “Ld. CIT(A)”), dated 02.12.2025under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). 2. The grounds raised by the assessee read as under:- 1. That in the facts and circumstances of the case the Id. Assessing Officer grossly erred in issuing notice u/s. 148 of the Act, being the non-jurisdictional Assessing Officer of the assessee appellant and that the jurisdiction of the assessee appellant, being a Non-Resident Indian, vested with International Taxation wing of the department.

2.1. That in the facts and circumstances of the case the Id. Lower Authorities grossly erred in not appreciating the fact that the assessee was neither qualifying the conditions of section 6(1)(a) of the Act nor of section 6(1)(c) of the Act read with Explanation 1(a) thereof, to be treated as a Resident Indian, hence, the assessee appellant was a Non-Resident Indian for the year under consideration.

2.2. That in the facts and circumstances of the case the Id. Lower Authorities grossly erred in ignoring the fact that the assessee appellant being a member of the crew of an Indian ship, the number of days as per section 6(1)(c) read with Explanation 1(a) thereof, ought to have been read as 'One Hundred Eighty Two days' instead of 'Sixty Days'. The Id. Assessing Officer completely overlooked Explanation 1(a) to section 6(1)(c) of the Act.

2.3. That in the facts and circumstances of the case the Id. Lower Authorities grossly erred in ignoring the fact that in order to treat the assessee appellant a Resident Indian as per section both theconditions ought to have been satisfied, i.e., that the assessee should be in India for more than 365 days in past 4 years and that the assessee should be in India for 182 days or more during the year under consideration and that both the conditions ought to be satisfied. In the instant case, since both the conditions were not being satisfied, hence, the assessee appellant could not have been treated as a Resident Indian.

P a g e | 3 ITA No.1915/JPR/2025 Mahesh Dadhich 3. The solitary issue in the present appeal relates to the residential status of the assessee whether non-resident, as contended by the assessee as opposed to resident treated by the authorities below in terms of Section 6 of the Act ,for the purposes of charging the salary income earned by him to tax in India. 4. The facts relating to the issue as noted in the order of the AO is that the assessee is a license holder as master/ship captain and engaged on LPG tankers with Selendia Shi Management and VR Ship Management Companies as seafarer. During the impugned year, the assessee had served out of India for 207 days i.e. from 23rd May to 6th September 2015 (107 days) and from 05th December 2014 to 14th March 2015 (100 days) and earned salary income of Rs.48,86,295/-. 5. The fact that the salary income accrued outside India is not disputed. The only dispute is with regard to the residential status of the assessee. The AO has treated the assessee as resident in India and therefore taxed the income which accrued and arose outside India also as liable to tax in India in terms of Section 5 of the Act. The assessee on the other hand has claimed he is a non-resident and therefore the income which accrue or arose outside India and was received outside India was not liable to tax in India. The position of law in this regard that in the case of a resident global income including that which accrued or arose outside India is liable to tax in India in terms of Section 5 of the Act is not disputed, nor the position of law that in the case of a non-resident, the income which accrue and arose outside India is not liable to tax in India in terms of Section 5 of the Act. The only issue for determination

P a g e | 4 ITA No.1915/JPR/2025 Mahesh Dadhich therefore is the residential status of the assessee. The AO treated the assessee as resident in India in terms of Section 6(1)(c) of the Act. 6. The Ld. CIT(A) in an ex parte order passed has confirmed the findings of the AO. 7. The case of the assessee before us is that both the Revenue Authorities have failed to consider Explanation 1(a)/(b) to Section 6(1)(c) of the Act which apply in the assessee’s case and as per which the assessee’s residential status was non-resident. Our attention as drawn to the provisions of Section 6(1) of the Act as under:- ….. Residence in India. 6. For the purposes of this Act,— (1) An individual is said to be resident in India in any previous year, if he— (a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more ; or (b) [***] (c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year. Explanation 1.—In the case of an individual,— (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 (44 of 1958), or for the purposes of employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two 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 sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two days" had been substituted and in case of such person having total income, other than

P a g e | 5 ITA No.1915/JPR/2025 Mahesh Dadhich the income from foreign sources, exceeding fifteen lakh rupees during the previous year, for the words "sixty days" occurring therein, the words "one hundred and twenty days" had been substituted.

Explanation 2.—For the purposes of this clause, in the case 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. ....... 8. As is evident, the residential status of an assessee is determined on the basis of number of days of stay in India. As per the facts of the present case the number of days of stay of the assessee in India for the impugned year and the preceding 7 years is tabulated at page 5 of the assessment order as under:-

P a g e | 6 ITA No.1915/JPR/2025 Mahesh Dadhich 10. Considering the provisions of Section 6(1)(a) and (c) of the Act, the AO and the Ld. CIT(A) has noted that the basic condition for a person to qualify as resident in India of the period of stay in India amounting to 182 days or more is not fulfilled in the present case for the impugned year. Therefore he has ruled out the assessee being treated as a resident as per Section 6(1)(a) of the Act. 11. Thereafter, he considered the provisions of Section 6(1)(c) of the Act and noted that for being treated as resident in India as per Section 6(1)(c) of the Act, the assessee’s period of stay in India ought to have been 60 days or more in the year and 365 days or more in the preceding four years. Applying to the facts of this case, he noted that the assessee stay in India exceeded 60 days in the impugned year and in preceding four years had exceeded 365 days. There is no dispute about the assessee fulfilling the condition specified under Section 6(1)(c) of the Act. The AO/Ld. CIT(A) have applied the provisions of Section 6(1)(c) of the Act and held the assessee to be resident in India. 12. Ld. Counsel for the assessee however has pointed out that the assessee’s case falls under Explanation 1(a)/(b) to Section 6(1)(c) of the Act. He contended that being employed with a foreign shipping company, he qualified as a citizen of India who wasleaving India for the purpose of employment outside India and as per Explanation 1(a) therefore, the requirement of 60 days stay in India specified in Section 6(1)(c) of the Act would extend to 182 days for qualifying as resident . 13. Alternatively, he contended that even treating the assessee as employed outside India and applying clause (b) to Explanation 1, the

P a g e | 7 ITA No.1915/JPR/2025 Mahesh Dadhich period of 60 days specified in Section 6(1)(c) of the Act gets extended to 182 days. 14. The contention of the ld. Counsel for the assessee was that the assessee being employed in a foreign ship, he is to be treated as being outside India or leaving India for the purpose of employment outside India, therefore as per clause (a) or clause (b) of Explanation 1 to Section 6(1)(c) of the Act, the 60 days of period of stay in India specified in Section 6(1)(c) of the Act would get extended to 182 days for qualifying as resident in India. 15. The Ld. Counsel for the assessee during the course of hearing before us was asked to explain the purport of including “members of crew of an Indian Ship as defined in clause (18) of Section 3 of the Merchant Shipping Act, 1958 “specified in clause (a) of Explanation 1 to Section 6(1)(c) of the Act and how it would affect the determination of residential status of a crew of a foreign ship. 16. To this ld. Counsel for the assessee responded by stating that crew members of Indian Ship were included in clause (a) of Explanation 1(a) by the Finance Act 1990 w.e.f. 01.04.1990 for the purpose of bringing them on par with crew members of foreign ships who were employed outside India sailing outside Indian territory for whom clause (a) of the explanation applied. That crew members of Indian Ship were included so as to be governed by the same rules determining residential status as applicable to crew members of foreign shipping companies. 17. He contended that the Revenue earlier was taking a stand that crew members of Indian ship were to be treated as employed in India even

P a g e | 8 ITA No.1915/JPR/2025 Mahesh Dadhich when sailing outside the territories of India as defined in Section 2(25A) of the Act which defined the term India used in the Act to mean the territory of India as referred to in Article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the territorial waters, continental shelf, exclusive economic zones and other maritime zones Act, 1976 and the air space above its territory and territorial waters. The stand of the Revenue was that foreign going Indian Ships, remained in the territory of India even when sailing outside India by virtue of the provisions of Merchant Shipping Act, and therefore services rendered by crew members on Indian ships outside India would amount to services being rendered in India. The Hon’ble Bombay High Court in the case of CIT Vs. M/s Indo Oceanic Shipping Co. Ltd. 247 ITR 247 (Bomb.) held that Indian Ships operating beyond Indian territorial waters do not come within the term “India” as defined u/s 2(25A) of the Act. Even as per the definition of the word “India” under the General Clauses Act, it was held ,that Indian Ships outside territorial waters of India are not included. The Hon’ble Bombay High Court held that the provision of the Merchant Shipping Act cannot be read into the Income Tax Act. The Hon’ble Bombay High Court referred to CBDT Circular No.586 dated 28th November 1990 (186 ITR (St.) 167) dated November 28, 1990 which indicated that if a crewman is outside India for more than 182 days on an Indian Ship, he will not be treated as resident of India. This view was reiterated by the Hon’ble Bombay High Court in the case of CIT Vs. Avtar Singh Wadhwan dated 20.11.2000

P a g e | 9 ITA No.1915/JPR/2025 Mahesh Dadhich 247 ITR 260. That as a consequence an amendment was made in the statute by Finance Act 2015w.e.f. 01.04.2015 clarifying that members of crew of an Indian Ship needed to be brought on par with crew members of a foreign ship, to be treated as employed outside India and hence for the purposes of qualifying as resident in India, the number of days of stay in India was to be extended to 182 days as opposed to 60 days specified in Section 6(1)(c) of the Act by virtue of Explanation 1(a) of the Act. He referred to several decisions treating the period of stay in India of less than 182 days of crew of a foreign shipping company being treated as non-resident in India. His submissions in this regard are reproduced hereunder:- 1. The Appellant had entered into contracts of employment with two foreign shipping companies engaged in maritime transport and thus qualified as a Non-Resident under the provisions of the Act. The appellant had no taxable income during the relevant assessment year and the salary earned for services rendered outside India while serving in international waters was not chargeable to tax in India. Salary amount was received by the appellant in its NRE Account. 2. For ready reference, Explanation 1(a) to section 6(1) of the Act prior to amendment made vide Direct Tax Laws (Second Amendment) Act, 1989 w.e.f. 01-04-1990 and subsequent to amendment reads as under:

P a g e | 10 ITA No.1915/JPR/2025 Mahesh Dadhich

P a g e | 11 ITA No.1915/JPR/2025 Mahesh Dadhich crew members of Foreign Ships who are employed outside India and who are sailing outside Indian territory.

P a g e | 12 ITA No.1915/JPR/2025 Mahesh Dadhich years been in India for a period in excess of 365 days yet in relevant Financial Year 2014- 15 he has not been in India for a period of 182 days or more. Therefore, the Appellant was not a resident of India. The interpretation adopted by the Ld. A.O. is contrary to the plain language of the statute and cannot be sustained. 18. Ld. Counsel for the assessee has placed reliance on the decision of Karnataka High Court in the case of DIT Vs. Prahlad Vijendra Rao [2010 (11) TMI 803 vide order dated 08.11.2010]wherein the Hon’ble High Court held as under:- …… 6. Having heard the learned advocates appearing for the parties and after perusing the orders passed by the authorities and after having given our anxious consideration to the contentions raised, we are of the consideredview that there is no substantial question of law involved in this appeal for being formulated and adjudicated for the following reasons:-

(a) The Revenue does not dispute that assessee had worked as a chief engineer on the board of a ship belonging to his employer "M/s Live Stock Transport and Trading Co.", Kuwait and during the relevant period the assessee had stayed outside India for a period of 225 days and the salary that was earned by him was on account of the work discharged by him on board during the said period which is outside the shores of India.

(b) The CIT(A) has placed reliance in the case of CIT vs. Avtar Singh Wadhwan (2001) 165 CTR (Bom) 414: (2001) 247 ITR 260 (Bom) wherein it has been held that salary received by the non-resident marine engineer for services rendered by him on a foreign going Indian ship which mainly remained away from the Indian coast during the relevant accounting year accrued outside India and was not taxable in India. While answering the question of law thereunder with reference to s. 9(1)(ii) in the said case it has also been held that the salary which is earned in India will alone be regarded as income arising in India and not otherwise. The principle laid down in the said case is squarely applicable to the facts of present case also.

(c) The criteria of applying the definition of s. 5(2)(b) would be such Income which is earned in India for the services rendered in India and not otherwise.

(d) Under s. 15 of the Act even on accrual basis salary income is taxable i.e., it becomes taxable irrespective of the fact whether it is actually received or not; only when services are rendered in India it becomes taxable by implication. However, if services are rendered outside India such income would not be taxable in India. …….

P a g e | 13 ITA No.1915/JPR/2025 Mahesh Dadhich 19. Ld. Counsel for the assessee has also placed reliance on the decision of the Hon’ble Calcutta High Court in the case of Utanka Roy v. DIT [2016 (12) TMI 876 vide order dated 15.12.2016] wherein the Hon’ble High Court held as under:- …… The petitioner is an Indian citizen. He is an income tax assessee. He has filed a return for the assessment year 2011-2012 with the Income Tax authorities. The petitioner claims to be an engineer and to be engaged as such by a foreign company. The petitioner claims that, he has worked as an engineer with the foreign company for 286 days during the assessment year. He hasfiled income tax return for the assessment year disclosing an income of 5,63,850/-. He has thereafter received an assessment cum intimation notice under Section 143(1) of the Income Tax Act, 1961. He has applied under Section 264 of the Income Tax Act, 1961 against such intimation under Section 143(1). In course of hearing of the proceedings under Section 264, the petitioner has claimed that, he has received 27,92,417/-from his employer during the assessment year in question instead of the sum of 5,63,850/-.

The question whether the petitioner has rendered services in India or not is a question of fact. It is not disputed that the petitioner as a marine engineer had rendered services outside India for the period of 286 days. He has received his remuneration for such work from a foreign company. Consequently, the income received by the petitioner for services rendered outside India has to be considered as income received out of India and treated as such. …… 20. Ld. Counsel for the assessee has also placed reliance on the decision of the Hon’ble Calcutta High Court in the case of Rajeev Biswas v. Union of India [2022 (9) TMI 1327 vide order dated 22.09.2022] wherein the Hon’ble High Court held as under:- ……. The legal issue involved in the instant case is whether the income of the assessee could have been taken to have accrued in India only because it was mistakenly shown by the assessee to have accrued in India while filing the return of income on 11th January, 2013. Even in the said return the name of the employer of the assessee was shown as M/s. MSC Ship Management Hongkong Limited. Therefore, admittedly the assessee was employed outside the Indian Territory. The return was