2010 (9) TMI 160 - HC - Income Tax

Residential status - Resident but not Ordinary Resident Held that - applicant will be resident but not ordinarily resident for the assessment years 1996-97 to 2004-05 as he will have been a resident in eight and less number of preceding previous years although his physical stay in India would have exceeded 730 days by the end of the previous year relevant for the assessment year - respondent-assessee was not a resident for three out of ten previous years preceding the assessment years 1998-1999 and 1999-2000 - appeals, being bereft of merit, are dismissed.

Summary

Issues:
Challenge to common order of ITAT regarding residential status for Assessment Years 1998-1999 and 1999-2000.

Analysis:
1. The Assessing Officer (AO) noted the respondent-assessee did not disclose income from abroad for the mentioned assessment years and claimed residential status as "Resident but not ordinarily resident." The AO disagreed and considered the respondent-assessee as "Resident and ordinarily resident," adding global income to taxation.

2. The Commissioner of Income Tax (Appeals) (CIT(A)) later reversed AO's decision, holding the respondent-assessee as "Resident and not ordinarily resident," leading to deletion of additions.

3. Revenue appealed against CIT(A)'s decision, but the Tribunal upheld the deletion of additions, prompting the current appeal.

4. The issue revolved around the interpretation of Section 6(6) of the Income Tax Act, pre and post-amendment. The pre-amended section was subject to ambiguity, as clarified by a previous ruling, which led to a change in the interpretation post-amendment in 2004.

5. The Court examined the retrospective effect of the amendment, determining it as substantive rather than clarificatory, impacting the tax liability of the assessee. Citing relevant case law and principles of statutory interpretation, the Court held that the amendment could not be applied retrospectively.

6. Considering the ambiguity in Section 6(6) pre-amendment, the Court concluded that the respondent-assessee's status as "Resident but not ordinarily resident" was correct for the relevant assessment years, thus upholding the decisions of the lower authorities.

7. Consequently, the Court dismissed the appeals, affirming the deletion of additions based on the respondent-assessee's residential status and the application of the pre-amended section in their case.