TMI Blog2008 (4) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of Section 6(6) of the Income Tax Act, 1961 (for short "1961 Act"). 3. Brief facts of the case culminating into filing of the present appeal, are as under: 4. The assessee was appointed as Marine Engineer by Wallem Shipping Management Ltd., Hong Kong on 5 th October, 1976 and, during the course of his employment, he was posted to work on high seas and paid abroad for many years. The assessee while filing his return for the assessment year 1982-83 (for short "relevant year") claimed the status of "not ordinarily resident in India" as defined in Section 6(6)(a) of the 1961 Act and to exclude income accruing outside India under Section 5(1)(c ) of the 1961 Act, which provides that in the case of a person not ordinarily resident in India within the meaning of sub-section (6) of Section 6, the income which accrues or arises to him outside India shall not be so included in his total income. 5. Relevant portion of Sections 5 and 6 of 1961 Act is quoted as under: "Section 5 - Scope of total income (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conclusion that, during the last 9 previous years, the assessee was non-resident for only three years and during the last seven previous years, he had stayed in India for a period of 1,402 days. It was held that the status claimed by the assessee of 'not ordinarily resident' was not acceptable. 9. Assessee being aggrieved by the order of the Assessing Officer, filed an appeal before the CIT (Appeals), who, by his order dated 13 th of August, 1985 while concurring with the view taken by the Assessing Officer, dismissed the appeal. Further appeal filed by the assessee before the Tribunal was also dismissed on 24 th of July, 1987. 10. The assessee thereafter filed an Application before the Tribunal under Section 256(1) of the 1961 Act (as it existed at the relevant time) seeking following two questions of law to be referred to the jurisdictional High Court for its opinion: "(1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the status of the assessee for the year in question was not that of 'resident but not ordinarily resident' as claimed by him? (2) Whether the Tribunal has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be said to be 'not ordinarily resident' in India, which position will entitle such person to claim exemption under section 5(1)(c) of the Act in respect of his foreign income. An individual who has not been resident in India, within the meaning of section 6(1), for less than nine out of ten preceding years does not satisfy that statutory criteria laid down for treating such individual as a person who can be said to be 'not ordinarily resident' in India, as defined by section 6(6). A resident of India who goes abroad and is not a resident in India for two years during the preceding period of ten years will therefore, not satisfy the said condition of not being a resident of India for nine out of ten years." 13. It may be mentioned here that the Assessee had cited the following judgments before the High Court to support his claim: (A) The decision of the Patna High Court in C.N. Townsend v. CIT (1974) 97 ITR 185 (Pat), for the proposition that, if any of the conditions mentioned in clauses (a), (b) or (c) of section 6(1) of the 1961 Act is fulfilled, the assessee will be a 'resident' within the meaning of the 1961 Act and if he comes within the mischief of eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question was whether he was 'not ordinarily resident' in 'taxable territories' under the second part of Section 4B(a). It was held that, he did not satisfy the second condition. (D) The decision of the Travancore-Cochin High Court in P.B.I. Bava v. CIT (1955) 27 ITR 463 (Trav. Coch), to point out that, in the context of section 4B(a) of the Indian Income Tax Act, 1922, the High Court had held that a person was not ordinarily resident in any year unless he satisfies both of the conditions of the said provision which make a person ordinarily resident, namely, (i) the condition that he must have been resident, in nine out of ten years preceding that year, and (ii) the condition that he must have been, here for periods of more than two years during the seven years preceding that year. It was held that a person is 'not ordinarily resident' in India in the previous year if he has not been 'resident' in nine out of the ten years preceding that year; he need not establish that he was 'not resident' in nine out of the ten years. It was observed that 'not resident' and 'not ordinarily resident' are not positive concepts but only the converse of 'resident' and 'ordinarily reside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of ambiguous and obscure drafting" as observed by Sir Jamshedji Kanga in his "Law and Practice of Income-tax" (p.362) but the basic outlines are clear enough to support the conclusion reached by the Appellate Assistant Commissioner of Income-tax, Trivandrum. His approach was right when he said : "In my opinion, the only direct way of deciding whether the appellant was 'not ordinarily resident' in the relevant years is to formulate and answer the direct question, 'Has the appellant been resident in Travancore in 9 out of such 10 years?' This question permits of only one answer and that answer is an emphatic 'No'. When such is the answer to the question, how can I help treating the appellant as 'not ordinarily resident'? The answer which the Income-tax Officer seeks to get can be obtained only if the question could be framed as 'Has the appellant been not resident (or non-resident) in Travancore in 9 out of such 10 years?' But this is not the direct question but very indirect and roundabout and is, in my opinion, quite inappropriate." 18. The Bombay High Court in Manibhai S. Patel v. Commissioner of Income Tax [supra], held: "...the Legislature is primarily concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irected to refer to the correspondence resting with the Ministry of Finance (Department of Revenue) letter No. 4/22/61-IT(AT), dated 25 th November, 1961, and to state that the Department's view has all along been that an individual is "not ordinarily resident" unless he satisfies both the conditions in section 4B(a), i.e., (i) he must have been a resident in nine out of ten preceding years; and (ii) he must have been in India for more than two years in the preceding seven years. Thus, a person will be "resident and ordinarily resident" if both these conditions are satisfied but he will be "resident but not ordinarily resident" if either of those conditions is not satisfied." 23. It may be noted here that the Parliament has amended Section 6(6) of the 1961 Act by Finance Act 2003 w.e.f. 1 st April, 2004, which reads as under: "Section 6(6) A person is said to be "not ordinarily resident" in India in any previous year if such person is- (a) an individual who has not been resident in India in nine out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been in India for a period of, or perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eep the provisions of 4B of 1922 Act in tact. It shows that the legislature accepted the interpretation put by the various High Courts prior to enactment of 1961 Act. It is only in the year 2003 that the Legislature amended Section 6(6) of the 1961 Act, which came into effect from 1 st April, 2004. 27. It is well settled that when two interpretations are possible, then invariably, the Court would adopt the interpretation which is in favour of the tax payer and against the Revenue. Reference may be made to the decision in Sneh Enterprises v. Commissioner of Customs, New Delhi [(2006) 7 SCC 714], of this Court wherein, inter alia, it was observed as under: "While dealing with a taxing provision, the principle of "Strict Interpretation" should be applied. The Court shall not interpret the statutory provision in such a manner which would create an additional fiscal burden on a person. It would never be done by invoking the provisions of another Act, which are not attracted. It is also trite that while two interpretations are possible, the Court ordinarily would interpret the provisions in favour of a tax-payer and against the Revenue." 28. This Court in a catena o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
