TMI Blog2017 (2) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down by the Hon’ble Supreme Court with respect to interpretation of provisions of section 6 (6) of the income tax act and decide the issue afresh on the merits. - ITA No. 4172/Del/2005 - - - Dated:- 27-2-2017 - SHRI H S SIDHU JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER Assessee by : Shri Rajan Mahajan. Adv Respondent by: Ms Shweta Dutta. Sr DR O R D E R PER PRASHANT MAHARISHI, A. M. 01. This appeal is filed by the assessee against the order of the Ld. CIT (A) XXX New Delhi dated 29/08/2005 wherein the order passed by the income tax officer, TDS, Ward 50 (2), New Delhi under section 201 (1)/(1A) of the Income Tax Act, 1961, was upheld. 02. The brief facts of the case are that appellant is a non-resident foreign company incorporated in Japan and is engaged in the business of carrying passengers and cargo by air. The government of Japan is has a double taxation avoidance agreement with government of India and according to which income accrued to the airline company by its operations in India is taxable in Japan. On 24/02/2005, survey was conducted by the income tax authorities under section 133A of the income tax act at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 6 (6) of the income tax act have to be satisfied. Thereby he must have been a resident in India in 9 out of 10 preceding years, and he must have been resident in India for more than 2 years out of preceding 7 years. If either of these two conditions are not satisfied he will be treated as a resident but not ordinarily resident. It was further submitted that the issue is now squarely covered in favour of the assessee by the decision of the Hon ble Supreme Court in case of Pradeep J Mehta Vs. Commissioner of income tax. It was further stated that both the employees have not satisfied both above two conditions hence are resident but not ordinarily resident in India. Therefore, it was submitted that assessee was not required to withhold any tax under section 192 of the income tax act. 04. Ld. departmental representative relied upon the orders of the lower authorities and submitted that the residential status is required to be worked out once again in view of the submission made by the assessee and the decision of the Hon ble Supreme Court relied upon. 05. We have carefully considered the rival contentions as well as the orders of the lower authorities. In the present case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot ordinarily resident' in India, because, he was resident in India in eight out of ten years preceding the previous year 1981-82 and not nine out of ten years. In other words, he would be an individual who is 'not ordinarily resident' in India even if for all the remaining eight years he is a resident in India within the meaning of section 6(1) of the Act. Only if the assessee, has been resident in India for nine out of ten years, he will be ordinarily resident in India, otherwise he will be 'not ordinarily resident' in India. This contention though appearing to be attractive at first blush, is not at all warranted by the provisions of section 6(6)(a) of the Act. Section 6(6) does not define 'ordinarily resident in India' but describes 'not ordinarily resident' in India. It resorts to the concept of 'resident in India' for which criteria is laid down in section 6(1) of the Act. On its plain construction clause (a) of section 6(6) would mean that if an individual has in all the nine out of ten previous years preceding the relevant previous year not been resident in India as contemplated by section 6(1), he is a person who is 'not ordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second condition. (B) The decision of the Authority for Advance Rulings, In re Advance Ruling A. No. P-5 of 1995 [(1997) 223 ITR 379 (AAR)], to point out that the said authority while construing the meaning of the expression 'resident but not ordinarily resident', held that the correct construction of Section 6(6)(a) of the 1961 Act was that, a person would become `ordinarily resident' only if (a) he has been resident in nine out of ten preceding previous years; and (b) has been in India for at least 730 days in the seven preceding previous years and that, he will be treated as resident but not ordinarily resident if either of these condition is not fulfilled. (C) The decision of the Bombay High Court in Manibhai S. Patel v. CIT (1953) 23 ITR 27 (Bom), for the proposition that, in order, that an individual is `not ordinarily resident' in the taxable territories, he should satisfy one of the two conditions laid down in Section 4B(a) of the Indian Income Tax Act, 1922 (which corresponded to Section 6(6)(a) of the 1961 Act). It was held that, under Section 4B(a), what was required to be considered was the assessee's residence in the 'taxable territories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short 1922 Act ). Section 4B of 1922 Act reads thus: 4B. Ordinary Residence For the purpose of this Act (a) an individual is `not ordinarily resident' in British India in any year if he has not been resident in British India in nine out of the ten years preceding that year or if he has not during the seven years preceding that year been in British India for a period of, or for periods amounting in all to, more than two years. 16. The proposed definition of resident and not ordinarily resident was enacted by the British Rulers, i.e., the officers of the Indian Civil Services and those in armed forces serving in India, who were absent from India on furlough for a year out of every four years so that they could be treated as not ordinarily resident and avoid tax on income in their home country, notwithstanding continuous stay and service in India. 17. The High Court of Travancore and Cochin in PBI Bava v. CIT [supra] while interpreting Section 6(a) of the Travancore Income Tax Act, corresponding to Section 4B(a) of the 1922 Act, relying upon the speech of Sir James Grigg during the assembly debates on Section 4B, where he had said: a man is not ordinarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year in question. The assessee, however, could not be treated as ordinarily resident in India as he came within the mischief of the first condition laid down in Sub-section (6)(a) of Section 6, namely, that he was not resident in India in nine out of the ten previous years preceding the year 1964-65, though he did not come within the mischief of the second condition. 20. In the decision of the Authority for Advance Ruling In re Advance Ruling A. No. P-5 of 1995 [supra), it was held: It seems correct to construe the definition as providing that a person will become resident and ordinarily resident only if (a) he has been resident in nine out of the ten proceeding previous years, and (b) has been in India for at least 730 days in the seven preceding previous years and that he will be treated as resident but not ordinarily resident if either of these conditions is not fulfilled 21. The Income Tax Act of 1922 was replaced by the Income Tax Act of 1961. The Law Commission of India has recommended the total abolition of the provisions of Section 4B of the 1922 Act defining ordinary residence of the taxable entities. The Income-tax Bill, 1961 (Bill No. 27 of 1961) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt should, especially in the event of its contra view or dissent, have discussed the aforesaid judgments of the different High Courts and recorded its own reasons for its contra view. We quite see the fact that the judgments given by a High Court are not binding on the other High Court(s), but all the same, they have persuasive value. Another High Court would be within its right to differ with the view taken by the other High Courts but, in all fairness, the High Court should record its dissent with reasons therefor. The judgment of the other High Court, though not binding, have persuasive value which should be taken note of and dissented from by recording its own reasons. 25. Otherwise also, we find ourselves in agreement with the view taken by the three High Courts, namely, the Patna High Court in C.N. Townsend v. CIT, Bihar [supra], the Bombay High Court in Manibhai S. Patel v. Commissioner of Income Tax [supra] and the High Court of Travancore and Cochin in PBI Bava v. CIT [supra]. 26. The Law Commission of India had recommended that the provisions of Section 4B of 1922 Act defining ordinary residence of the taxable entities be deleted but the suggestion was not ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated 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. In the present case, the Circular issued by the Board in which the opinion of the Central Government the Ministry of Finance (Department of Revenue) letter No. 4/22/61-IT(AT), dated 25th November, 1961 has been noted, the interpretation similar to the one put by the various High Courts on Section 4B has been accepted to be the correct position. 29. In these circumstances, a person will become an ordinarily resident only if (a) he has been residing in nine out of ten preceding years; and (b) he has been in India for at least 730 days in the previous seven years. 30. Accordingly, this appeal is accepted. The order passed by the High Court and the Authorities below are set aside. It is held that the High Court in the impugned judgment has erred in its interpretation of Section 6(6) of the Act and the view taken by Patna High Court, Bombay High Court and Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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