The Delhi High Court has issued a significant ruling restricting the Black Money Act's application to individuals who remain in India against their will. According to The Economic Times, the court has stayed the income tax department's directive requiring Dubai-based businessman Rajiv Saxena to furnish information on his foreign assets. The ruling establishes that tax officials cannot routinely apply the Black Money Act (BMA) merely because a person has been treated as a 'resident' after remaining in India for more than 181 days against their will. As reported by The Economic Times, the court noted that in the course of hearings, if it is found that the petitioner does not qualify as a resident, the BMA proceedings cannot continue. The income tax department had sought details of Saxena's foreign assets (by tagging him as a resident) following his extradition to India in January 2019 in connection with the AgustaWestland case.
Under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, effective from July 1, 2015, individuals classified as residents are required to disclose overseas assets in their income tax returns. As reported by The Economic Times, the income tax department had maintained that the Income Tax Act does not differentiate between voluntary and involuntary residence, arguing that since the petitioner had been living in India from January 30, 2019 onward, he should be regarded as a resident. However, the court observed that if, during the course of proceedings, the petitioner is found not to qualify as a resident, action under the BMA cannot be pursued. Under the Income Tax Act, a resident is taxed on local and foreign earnings while NRIs are spared from paying tax on overseas income.
According to The Economic Times, Ashish Karundia, founder of the CA firm Ashish Karundia & Co, noted that there can be various reasons for involuntary stay, including passport revocation. Ashish Mehta, partner at the law firm Khaitan & Co, explained that the Black Money Act does not establish a separate process for deciding residential status but relies entirely on the classification determined under the Income Tax Act, 1961. He pointed out that shortly before the BMA came into force, the Delhi High Court, in its 2015 judgment in the Suresh Nanda case, ruled that periods of compulsory or involuntary stay in India should be excluded when calculating the duration of presence for determining residential status. Ashish Mehta further noted that BMA does not provide an independent mechanism for determining residential status. It simply adopts the residential status as determined under the Income Tax Act, 1961.
As reported by The Economic Times, the ruling creates complications for the Income Tax department as individuals who are prevented from leaving the country - including deported fugitives, defaulters subject to lookout circulars, extradited suspects, or those cooperating with investigative agencies - cannot automatically be compelled to reveal details of their overseas bank accounts, businesses, or assets. The BMA was introduced by a government that had prioritised the fight against corruption and was intended to address limitations in the Income Tax Act and enable taxation of undisclosed wealth held abroad, including funds parked in Swiss and offshore bank accounts. Ashish Karundia noted that the revenue's position appears to be that any relaxation beyond exceptional situations would subvert the statutory framework, potentially rendering individuals stateless for tax purposes.