1988 (3) TMI 119 - AT - Income Tax

Issues Involved:
1. Taxability of salary income received for the period ending 31-3-1983.
2. Applicability of Notification No. GSR-304(E) dated 31-3-1983.
3. Retrospective effect of the Income-tax Act on offshore areas.
4. Jurisdiction and legislative authority for taxation.

Detailed Analysis:

1. Taxability of Salary Income Received for the Period Ending 31-3-1983:

The primary issue was whether the salary income received by Mr. Paul Weigel for the period ending 31-3-1983 was taxable in India. Mr. Weigel, an employee of DFIDCO, worked on a rig within India's territorial waters for a few days in August 1982, with the remaining period spent outside the territorial waters. The Income-tax Officer (ITO) assessed the income based on the entire salary, including the period spent outside territorial waters, resulting in a taxable income of Rs. 2,94,630 after deductions.

2. Applicability of Notification No. GSR-304(E) Dated 31-3-1983:

The ITO referenced Notification No. GSR-304(E), which extended the Income-tax Act to the Continental Shelf (CS) and Exclusive Economic Zone (EEZ) of India effective from 1-4-1983. The assessing officer argued that the provisions of the Finance Act, 1983, applied to the salary income of the assessee for the assessment year 1983-84.

3. Retrospective Effect of the Income-tax Act on Offshore Areas:

The Tribunal examined whether the notification had retrospective effect. It was concluded that the notification could not retrospectively authorize the levy of income-tax on income earned in the previous year 1982-83. The Tribunal emphasized that statutes imposing tax liability typically have prospective effect unless expressly stated otherwise. Delegated legislation, such as rules or notifications, cannot retroactively affect a taxpayer's rights unless explicitly empowered by statute.

4. Jurisdiction and Legislative Authority for Taxation:

The Tribunal referred to Article 297 of the Constitution of India and the Territorial Waters Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 (MZ Act). Sections 6(6) and 7(7) of the MZ Act allowed the Central Government to extend the Income-tax Act to the CS and EEZ, but no modification was made to the definition of India in section 1(2) of the Income-tax Act to include offshore areas during the previous year 1982-83. The Tribunal also cited precedents where the Income-tax Act was extended to new territories with specific retrospective provisions, which were absent in this case.

Conclusion:

The Tribunal held that the offshore areas could only be regarded as part of India for income-tax purposes from 1-4-1983, and only for specific activities as detailed in the notification. Therefore, the salary income earned by Mr. Weigel for the period ending 31-3-1983 was not taxable in India, except for the amount disclosed for the period within territorial waters. The appeals were allowed, and the assessee's claim of exemption was upheld.

Other Issues:

The issue of interest under section 139(8) was treated as consequential and accepted.

Final Judgment:

Appeals allowed.

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