1985 (11) TMI 81 - AT - Income Tax

Summary

Issues Involved:
1. Whether the Income-tax Act, 1961 ('the Act') is applicable to the State of Sikkim.
2. Whether the assessee's status is 'resident' or 'non-resident' for tax purposes.
3. Whether the income earned by the assessee as a Judge of the Sikkim High Court is taxable under the head 'Salaries'.

Issue-wise Detailed Analysis:

1. Applicability of the Income-tax Act, 1961 to Sikkim:
The primary contention of the assessee is that the Income-tax Act, 1961, is not applicable to Sikkim. The argument is based on Article 371F of the Constitution, which allows the President to extend any enactment to Sikkim with such restrictions or modifications as deemed fit. The assessee argues that since no notification has been issued under Article 371F extending the Act to Sikkim, the Act does not apply to Sikkim. The Tribunal concurs, stating, "It is admitted by both the parties that the Act has not been extended to Sikkim." The Tribunal further notes that the inclusion of Sikkim in the list of backward areas in the Eighth Schedule of the Act does not imply the Act's applicability to Sikkim.

2. Status of the Assessee (Resident vs. Non-Resident):
The assessee claims non-resident status, arguing that he did not stay outside Sikkim for any period amounting to 90 days or more in any year since April 1977. The Tribunal accepts this argument, noting, "We also could not find any such notification under article 371F of the Constitution extending the Act to Sikkim." Consequently, the Tribunal holds that the assessee should be considered a non-resident for the purposes of the Act.

3. Taxability of Income Earned as a Judge of the Sikkim High Court:
The assessee contends that his salary as a Judge of the Sikkim High Court is not taxable under the head 'Salaries' due to the absence of an employer-employee relationship. The Tribunal examines various Supreme Court judgments cited by the assessee, including Union of India v. Sankalchand Himatlal Sheth, Union of India v. Gopal Chandra Misra, and Hargovind Pant v. Dr. Raghukul Tilak. The Tribunal concludes that while a Judge is a constitutional functionary and not a government servant, this does not imply that the salary received is not taxable. The Tribunal states, "He is in fact servant of the State and not of the State Government or the Central Government or the President of India."

The Tribunal further references Section 22D of the High Court Judges (Conditions of Service) Act and Section 23D of the Supreme Court Judges (Conditions of Service) Act, which clarify that the salary of a High Court Judge is chargeable under the head 'Salaries' under Section 15 of the Income-tax Act. The Tribunal concludes, "We, therefore, hold that the income of the assessee should be assessed as non-resident and it is deemed to accrue in India within the meaning of section 9."

Conclusion:
The Tribunal dismisses the appeal, holding that while the assessee is considered a non-resident for the purposes of the Act, the salary earned as a Judge of the Sikkim High Court is taxable under the head 'Salaries'. The appeal is dismissed with the final statement, "In the result, the appeal is dismissed."