TMI Blog2003 (2) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... e period was to be paid outsideIndiain foreign currency. The claim of the assessee was that off-period salary paid outsideIndiawas not taxable inIndia. This contention of assessee did not find favour with the Assessing Officer and accordingly the same was taxed under section 9(1)(ii). However, on appeal, the claim of the assessee was allowed by the CIT(A). Aggrieved by the same, the revenue is in appeal in all these cases. 3. The learned DR. Mr. Salil Gupta has vehemently assailed the order of CIT(A) by contending that off-period salary is taxable in view of the provisions of Explanation to section 9(1)(ii) as substituted by Finance Act, 1999 which, according to him, is retrospective in operation, being clarificatory/declaratory in nature. It was emphasized by him that the words "for removal of doubts, it is hereby declared" used by the legislature show that the amendment was made to clarify the legal position and the amendment was declaratory in nature and, therefore, the same is applicable to earlier years also. In support of this contention, reliance has been placed on the Supreme Court judgment in the case of CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625. Alternatively, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the scope of section 9(1)(ii) as originally enacted and amended from time to time in the light of judicial interpretation. Such provisions as originally enacted read as under: "Section 9(1): The following incomes shall be deemed to accrue or arise inIndia-- (1)..... (ii) income which falls under the head "salaries", if it is earned inIndia." The interpretation of this section came up for consideration before the Hon'ble Gujarat High Court in the case of S.G. Pgnatale. Since the words "earned in India" were not defined in the Act, their Lordships referred to Corpus Juris Seccundum Volume 28 page 69 where the word "earned" has been construed as "entitled to a sum of money under the terms of contract, implies that wages are owing, and may carry the meaning of unpaid but does not necessarily imply that they are due and payable." They further referred to the judgment of Hon'ble Supreme Court in the case of E.D. Sassoon Co. Ltd. v. CIT [1954] 26 ITR 27 wherein their Lordships observed at page 51 as under: "The word 'earned' even though it does not appear in section 4 of the Act has been very often used in the course of the judgments by learned judges both in the High Courts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered inIndiashall be regarded as income earned inIndia." 8. By insertion of the Explanation, the scope of section 9(1)(ii) was enlarged so as to include remuneration payable for services rendered inIndiawhich otherwise was not includible. Such income became taxable even though it was paid outsideIndia. However, another dispute arose as to whether the salary payable and paid outside India to non-resident for the period for which no services were rendered in India and during which such non-resident was away from India to avail leave period could be taxed under section 9(1)(ii). Some benches of the Tribunal took the view that remuneration payable for the off-period could not be equated with salary payable for services rendered inIndiaand, therefore, non-resident could not be taxed under section 9(1)(ii). However, contrary view has also been expressed by some benches. This dispute no more exists now in view of the amendment made by the legislature by substituting the Explanation to section 9(1)(ii) by Finance Act, 1999 w.e.f1-4-2000. Section 9(1)(ii) effective from1-4-2000reads as under: "Section 9(1): The following incomes shall be deemed to accrue or arise inIndia:-- (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve in operation. Such contention cannot be accepted for the reason that the said amendment, in our opinion, cannot be considered either as declaratory or clarificatory since it has enlarged the scope of the main section by including new item of income. Normally, the Explanation is inserted either to explain the meaning of the words in the main section or to clarify the confusion regarding the meaning of such words. In such cases, no doubt, the Explanation can be said to be declaratory or clarificatory having retrospective effect. In principle, to that extent, we are in agreement with the learned DR. But where the amendment seeks to expand the scope of the main section and affects the rights and obligation of the parties, then such amendment cannot be given retrospective effect unless specifically so provided. Reference can be made to the decision of Delhi High Court in the case of Engineers Impex (P.) Ltd. v. D.D. Sharma [2000] 244 ITR 247 wherein it has been held as under: "An Explanation is appended to a section to explain the meaning of the words contained in the section and normally it is to be read to harmonize with and to clear up any ambiguity in the main section. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich fits the description. An explanation is different in nature from a proviso for a proviso excepts, excludes or restricts while an explanation explains or clarifies. Such explanation or clarification may be in respects of matters whose meaning is implicit and not explicit in the main section itself. In Hiralal Ratanlal v. State of UP [1973] 1 SCC 216 (225): (AIR 1973 SC 1034 (1040)), it was ruled that if on a true reading of an Explanation it appears that it has widened the scope of the main section, effect be given to legislative intent notwithstanding the fact that the Legislature named the provision as an Explanation. In D.G. Mahajan v. State of Maharashtra this Court said that legislature has different ways of expressing itself and in the last analysis the words used alone are repository of legislative intent and that if necessary an Explanation must be construed according to its plain language and "not on any a priority consideration." The legal position as summarized above clearly shows that label given to a statute is not relevant but it is the intent of the legislature which is relevant. So, depending upon the intent of the legislature, an Explanation mayor may not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct w.e.fApril 1, 1979. In the circumstances, the purchase behind the addition of the Explanation was only to clarify and settle the controversy. The Explanation was to have effect only fromApril 1, 1979. We are, therefore, of the view that the Explanation to section 9(1)(ii) of the Act cannot be considered to be declaratory nor can it apply to any period anterior toApril 1, 1979." Similarly, the Explanation as substituted by Finance Act, 1999 cannot be considered as declaratory or clarificatory. The Explanation, originally enacted remains the same and one more item of income, i.e., off-period salary has been added. This clearly shows that scope of main section has been further widened. Further, any statute which saddles any person with liability to pay tax cannot be considered as declaratory statute. Therefore, in our considered opinion, the Explanation to section 9(1)(ii) cannot be considered as declaratory or clarificatory. This view is also fortified by the fact that even the Board Circular says that amendment is to expand the scope of section 9(1)(ii). That is why the circular specifically says that such amendment would apply to assessment year 2000-2001 and subsequent years. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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