TMI Blog2008 (4) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... s 1995-96 and 1996-97 as per details below: -------------------------------------------- Financial year Asstt. year Number of days -------------------------------------------- Outside In India India -------------------------------------------- 1994-95 1995-96 234 131 1995-96 1996-97 259 107 -------------------------------------------- The appellant filed his return of income on 23rd Nov., 1999 declaring net taxable income of Rs. 6,61,210 after excluding the sum of Rs. 3,42,303 being monies received in foreign currency towards services rendered abroad claimed to be outside the purview of proviso to s. 5(1)(c). The AO processed the said return on 8th July, 2002. Subsequently, the AO issued notice under s. 148 dt. 6th Jan., 2003. The assessment under s. 147 r/w s. 143(3) was completed on 4th Aug., 2003 whereby the total income was assessed at Rs. 10,03,513. The amount of Rs. 3,42,303 claimed by the appellant as exempt was added by the AO to the total income. The AO primarily relied upon the decision of Hon'ble Gujarat High Court in the case of Pradip J. Mehta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with an Indian shipping company for services performed on foreign going Indian ship, would arise outside India as the term "India" does not cover foreign going Indian ships. Thus, he submits that since the services are rendered outside India, salary received for such services would also not accrue or arise in India and therefore would not be taxable in India. He pointed out that the Hon'ble High Court had followed its own decision in the case of CIT vs. Indo Oceanic Shipping Co. Ltd. Ors. (2001) 165 CTR (Bom) 404. 7. The learned counsel for the assessee submits that the assessee's residential status is that of "resident but not ordinarily resident" and hence the income earned for services rendered outside India i.e. foreign incomes for the asst. yrs. 1999-2000, 2000-01 and 2001-02 would be outside the purview of the IT Act within the meaning of the proviso to cl. (c) of sub-s. (1) of s. 5 of the IT Act. He argues that the proviso to s. 5(1)(c) grants relief in respect of foreign income accruing or arising to an assessee who was "resident but not ordinarily resident" and such income shall not be loaded in the total income of the assessee. 8. On the first issue of reopening of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961, and to state that the Department's view has all along been that an individual is 'not ordinarily resident' unless he satisfied both the conditions in s. 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." 9.2 He submitted that the first appellate authority was wrong in holding that the amendment to s. 6(6) of the IT Act, 1961 by the Finance Act, 2003 was retrospective and applicable to the case of the assessee. On the proposition that this amendment is not retrospective, he relied on the following decisions: (i) Abhay Pratap Singh Sengar vs. ITO (2007) 109 TTJ (Lucknow) 255 (2007) 108 ITD 8 (Lucknow); (ii) Dy. CIT vs. Kapila Singla (2007) 15 SOT 166 (Del). 9.3 He submitted that these Benches of the Tribunal have held that this amendment is a substantive provision inasmuch as it determines the tax liability of the person and, therefore, it cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessment and ground of the assessee that there is a change of opinion is to be rejected. On the other hand, arguments of the assessee with respect to the validity of the order passed under s. 143(3) r/w s. 147, Shri Anjaneyulu submitted that before the first appellate authority the assessee had not pressed the ground and even otherwise, the assessee has no case as the legal issue was discussed at length, after hearing by the first appellate authority. 13. On the issue of residential status the learned Departmental Representative strongly relied on the judgment of the Hon'ble Gujarat High Court in the case of Pradip J. Mehta vs. CIT. He drew the attention of the Bench to paras 5.3 to 5.5 of the order of the first appellate authority and supported the same. He prayed that the propositions laid down in the judgment of the Hon'ble Gujarat High Court be applied. 14. On the alternative contention of the assessee for claim of relied under s. 80RRA he submitted that the assessee had not furnished the required information before the assessing authority and hence his claim cannot be considered at this belated stage. 15. Rival contentions heard. On a careful consideration of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T), dt. 25th Nov., 1961, and to state that the Department's view has all along been that an individual is 'not ordinarily resident' unless he satisfied both the conditions in s. 4B(a), i.e.- (iii) he must have been a resident in nine out of ten preceding years; and (iv) 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." 15.2 On a careful reading of s. 6(1) along with the circular cited above we are of the considered opinion that where the individual is resident in the previous year, but was not a resident in India in 9 out of 10 previous years preceding the year or was in India for a total period of 730 days or more in seven previous years then his residential status will be that of resident but not ordinarily resident. A similar view was considered by the 'H' Bench of this Tribunal in the case of Jayram Rajgopal Poduval vs. Asstt. CIT in ITA No. 7072/Mum/2004 for the asst. yr. 2001-02 vide order dt. 18th Jan., 2008 [reported at (2008) 114 TTJ (Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that year and thus should fulfil either of the conditions of s. 6(6). That is he should meet either of the conditions of s. 6(1), say, be in India for 182 days or more in the previous year and thereafter either of the conditions enshrined in s. 6(6) be fulfilled, say, be in India for 182 days or more in the previous year and thereafter either of the conditions enshrined in s. 6(6) be fulfilled, say, he should not be the resident in India in 9 out of 10 previous years preceding that year. 9. Adverting to the facts of the case as borne out from the assessment order we note that the assessee was residing in India from 1st April, 1995 to 31st March, 2001 and during that period he was out of India only for 6 days, i.e., from 8th June, 1997 to 14th June, 1997. The proposition which therefore emerges is that in the previous year (i.e., from 1st April, 2000 to 31 March, 2001), he was in India for 365 days, thereby successfully satisfying the test of s. 6(1) and was also not resident in two years, i.e., asst. yrs. 1994-95 and 1995-96 in 10 years preceding the previous year (i.e., 1st April, 1990 to 31st March, 2000) thereby fulfilling the criteria as per s. 6(6), being not resident in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (6)(a) and not both be complied with for acquiring the residential status of RNOR. As in the facts and circumstances of the present case, the assessee has satisfied the first condition and not the second, were of the considered opinion that the learned CIT(A) erred in holding that the residential status of the assessee was ROR. 13. Now, we will refer to the legal position arising out of the judicial precedents on the issue; which seems to be no more res integra in view of the judgment of the Hon'ble apex Court in the case of CIT Anr. vs. Morgenstern Werner (2003) 180 CTR (SC) 202 : (2003) 259 ITR 486 (SC) in which the judgment of the Hon'ble Allahabad High Court in Morgenstern Werner vs. CIT (1999) 151 CTR (All) 416 : (1998) 233 ITR 751 (All) was affirmed. The facts of the case as recorded by the Hon'ble High Court are that the petitioner worked with the Kraft Work Union (Siemens), Germany, and drawing his salary of DM 3,882 per month in Germany. BHEL sought the services of a technical liaison officer. The Ministry of Industries, Government of India, informed the BHEL about the approval of the Government for engaging his services in that case for a period of 1.5 years in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is 'resident but not ordinarily resident' and the claim of exemption under s. 10(15)(iv)(fa) for interest amounting to Rs. 1,97,450 is as per law. The consequential charging of interest under s. 234B would also be brought to naught. We therefore, set aside the impugned order and accept the assessee's contention." We respectfully follow the decision of the Co-ordinate Bench on this issue. 15.3 Be it as it may, we find that the backdrop of the decision of the CIT(A) is the judgment of the Hon'ble Gujarat High Court in the case of Pradip J. Mehta vs. CIT, In fact, the assessments were reopened on this basis. We find that the Hon'ble Supreme Court has reversed that decision of the Hon'ble Gujarat High Court in Civil Appeal No. 4291 of 2002, dt. 11th April, 2008 [reported as Pradip J. Mehta vs. CIT (2008) 216 CTR (SC) 1 : (2008) 5 DTR (SC) 250-Ed.]. In this judgment the Hon'ble Supreme Court has approved the judgment in the case of P.R.I. Bava vs. CIT, Manibhai S. Patel vs. CIT (1953) 23 ITR 27 (Bom), C.N. Townsend vs. CIT. It held that the circulars issued by the CBDT are binding on the Department and also held that a person will become an ordinary resident only if-(a) he h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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