TMI Blog1981 (2) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax on his total income at the rate applicable to his total word income ? " The facts leading to this reference are as follows: We are concerned with the assessment year 1964-65. On February 16, 1953, the assessee wrote to the ITO, Porbandar, that he was settled permanently in Uganda since 1950. Under s. 17(1) of the Indian I.T. Act, 1922, he being a non-resident, had exercised the option of being assessed in respect of his total income on the basis of total world income. Up to the assessment year 1958-59, the assessee was assessed in the status of non-resident and tax was charged on his total income with reference to the rates applicable to his total world income in pursuance of this option. For 1959-60 the status of the assessee was accepted as " resident but not ordinarily resident " and the same status continued up to the assessment year 1964-65, which is the year under reference. According to the ITO, the option, once exercised by the assessee on February 16, 1953, under s. 17(1) of the Act of 1922, was still binding on the assessee for all the years including the year 1964-65 and he sought to assess the assessee in respect of his total income at the rate applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onwards, any individual was resident in the taxable territories in any year if he was in the taxable territories in that year for a period amounting in all to one hundred and eighty-two days or more; or maintained or had maintained for him a dwelling place in the taxable territories for a period or periods amounting in all to one hundred and eighty-two days or more in that year, and was in the taxable territories for any time in that year; or having within the four years preceding that year been in the taxable territories for a period or for periods amounting in all to three hundred and sixty-five days or more, was in the taxable territories for any time in that year otherwise than on an occasional or casual visit; or is in the taxable territories for any time in that year and the ITO is satisfied that such individual having arrived in the taxable territories during that year was likely to remain in the taxable territories for not less than three years from the date of his arrival. Section 4B of the 1922 Act defined a person " not ordinarily resident " and under s. 4B: " For the purposes of this Act (a) an individual is `not ordinarily resident' in the taxable territories in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax on his total income, that is, on his total income in India at the maximum rate plus super-tax either at nineteen per cent. or super-tax which would be payable on his total income if it were the total income of a person resident in the taxable territories, whichever was greater, the option enabled such a person who was non-resident in India to have his tax payable on his income in India determined with reference to his total world income and thereupon the rate which was applicable would be the rate applicable to his total world income. As result of the exercise of the option, persons with smaller incomes were enabled to get the benefit of paying tax at the lesser rate, that is, at a rate lesser than the maximum rate, and they had also the benefit in respect of payment of super-tax. But it must be borne in mind that it was only an option under s. 17(1) that was exercisable by a person who was not resident in India. Under the Act of 1922 there were only two categories, namely, a person resident in India as defined in s. 4A, or a person not ordinarily resident in India as defined in s. 4B, but there was no definition of " non-resident " or a person " not resident in India ". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines a person who is said to be " not ordinarily resident " in India in any previous year and so far as cl. (a) of sub-s. (6) is concerned, it is on the same lines as the provisions of s. 4B of the 1922 Act. But by virtue of s. 2(30) of the 1961 Act, for assessment years 1962-63, 1963-64 and 1964-65, for the purposes of s. 113 the word " non-resident " would include also all persons who were not ordinarily resident in India. It may be borne in mind that so far as the facts of the present case are concerned, from assessment year 1959-60 onwards, the present assessee was being assessed in the status of " resident but not ordinarily resident " and so far as assessment years 1962-63, 1963-64 and 1964-65 are concerned, by virtue of the definition section 2(30), for the purpose of s. 113 he would be considered to be a " non-resident " because for the purpose of s. 113 the word "non-resident " would include a person who is " not ordinarily resident " within the meaning of s. 6(6) so far as these three years are concerned. We are not concerned in the present case with s. 92, 93 or s. 168 of the Act, and the only question is with reference to s. 113 as it was on the statute book for assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssees will, however, not be eligible for tax relief on account of personal allowances, nor will they be entitled to the exemption in respect of small incomes (viz., total income not exceeding Rs. 6,000 in the case of Hindu undivided families satisfying certain conditions, and Rs. 3,000 in any other case). " It may be pointed out that though s. II 3 as it was introduced in the I.T. Act, 1961, corresponded to s. 17 in the sense that it provided for tax in the case of non-residents, in several respects it differed from the scheme of the 1922 Act. So far as s. 113 was concerned, it provided, in sub-s. (1) on the same lines as s. 17(1) of the 1922 Act. However, when it came to giving the benefit of the option, some difference was made so far as the provisions of sub-s. (4) of s. 113 were concerned as compared to the similar provisions under s. 17(1). Under s. 17(1), first proviso, once the option was exercised by the assessee, tax was to be determined with reference to his total world income and then such tax was to be an amount bearing to his tax, including super-tax, which would have been payable on his total world income had it been his total income, the same proportion as his tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessments made subsequently in point of time after the exercise of the option, were to be governed by that option exercised by the assessee, irrespective of whether as a result of that option the assessee stands to gain or lose so far as the particular assessment year is concerned. So far as the option exercised under s. 17 of the 1922 Act is concerned, there is a provision made in the repealing section, namely, s. 297. Under s. 297, sub-s. (1), the Indian I.T. Act of 1922 was repealed and there was a saving clause, namely, sub-s. (2) and that saving clause provided (under cl. (h): "Notwithstanding the repeal of the Indian Income-tax Act, 1922 ...... (h) any election or declaration made or option exercised by an assessee under any provision of the repealed Act and in force immediately before the commencement of this Act shall be deemed to have been an election or declaration made or option exercised under the corresponding provision of this Act." Mr. Raval for the revenue has emphasised that the words in section 297(2)(h) are "corresponding to" and not " identical with ". The Supreme Court has pointed out in T. S. Balaram v. Volkart Brothers [1971] 82 ITR 50 at page 53 : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee is that because there was no reference for those two years, the provisions of s. 297(2)(h) would not apply to the present year under reference. It was also contended that even for the assessment year 1961-62, the assessee was assessed as a person " not ordinarily resident". In our opinion, the first two difficulties in the way of the revenue are impossible to overcome. Under the income-tax law, every person is assessed in view of his status, namely, the same individual may be assessed as an individual for his personal income; he may be assessed in his capacity as the karta of an HUF, and he may be assessed in a representative capacity if he happens to be the trustee of a trust, either public or private, but so far as the assessments are concerned, be is a different assessee with respect to each of the statuses in which he is being assessed. Therefore, if a person is assessed in the status of a person " not ordinarily resident ", he is not definitely to be assessed in the status of " non-resident ". The option which the assessee in the case before us exercised in 1953 was with reference to his status as a " non-resident " person and that option cannot be made applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esident " and hence the declaration made had come to an end, cannot be sustained. It is true that under s. 297(2)(h) of the 1961 Act, two conditions are required before an option exercised under the 1922 Act can be made applicable to a corresponding provision of the 1961 Act, and one of the requirements is that the option must have been in force immediately before the commencement of the 1961 Act. Merely because the option exercised by the assessee in 1953 could not be made applicable to the facts as they existed in 1959-60, 1960-61 and 1961-62, it cannot be said that the option was not in force. It was in force but it was in a state of suspended animation. As has been pointed out earlier, once the option is exercised under s. 17(1), proviso, of the 1922 Act, it was to become final and it was to apply to all subsequent assessments. That finality was not to be touched and that continuance of the option was not to be touched merely by reason of the circumstances that for some of the subsequent assessments, the assessee was not a " non-resident " but was " resident but not ordinarily resident ". Therefore, we base our conclusions on the above-mentioned two grounds, namely, firstly, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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