2009 (6) TMI 19 - HC - Income Tax

Residential Status under section 6 residential status of crew members deduction of TDS from the amount / salary paid to such members - tribunal held that the Indian shipping company need not deduct tax at source with respect to its crew for the days on which the ship was outside the territorial waters of India and the number of such days exceeds 182 in any particular year held that there was no scope to find fault with the action of the Indian shipping company in not having deducted any tax at source in respect of the salary paid to such crew for the relevant period tribunal decision upheld.

Summary

Issues:
Interpretation of Income Tax Act provisions regarding tax deduction by Indian shipping company for crew working outside India's territorial waters.

Analysis:
The High Court of Madras addressed the issue of whether an Indian shipping company is required to deduct tax at source for its crew working outside India's territorial waters for more than 182 days in a year. The Court examined Sections 2(30), 2(42), and 6 of the Income Tax Act, 1961, which define terms like "non-resident" and "resident." The Court emphasized that for a person to be considered a 'non-resident,' they must have worked for an Indian shipping company outside India's territorial waters for over 182 days. The Court also highlighted the Explanation to Section 6, which extends the period for crew members of Indian ships to 182 days instead of 60 days.

The Court concluded that the statutory provisions clearly provide for the exemption of tax deduction for non-residents who meet the criteria of working for an Indian shipping company outside India's territorial waters for more than 182 days. In this case, since the crew members satisfied this condition, the Indian shipping company was justified in not deducting tax at source for their salaries during the relevant period. The Court found no legal question, let alone a substantial one, that would warrant entertaining the appeal. Consequently, the Court dismissed the appeal, upholding the Tribunal's decision.

In summary, the Madras High Court's judgment reaffirmed that an Indian shipping company is not required to deduct tax at source for crew members working outside India's territorial waters for over 182 days in a year, as long as the statutory conditions for non-resident status are met. The Court's analysis focused on the specific provisions of the Income Tax Act and the Explanation to Section 6, which extended the exemption period for crew members of Indian ships. The decision highlights the importance of adhering to the statutory requirements for tax deductions in such cases.