1970 (8) TMI 18 - HC - Income Tax

Whether Shrimati Sharda Ajmani (wife of a non-resident member of staff of embassy) should be taxed as a resident of the taxable territories

Summary

Issues:
Whether Shrimati Sharda Ajmani should be taxed as a resident of the taxable territories for the assessment years 1960-61 and 1961-62?

Detailed Analysis:

The case involves the assessment of Smt. Sharda Ajmani as a resident of the taxable territories for the years 1960-61 and 1961-62. Smt. Sharda Ajmani, the wife of a diplomat working in Baghdad, was a partner in a firm in Amritsar and had some interest income. The dispute arose when the Income-tax Officer and the Appellate Assistant Commissioner assessed her as a non-resident, contrary to her claim that diplomatic personnel and their family members should be considered residents for taxation purposes. The Tribunal, however, ruled in favor of the assessee, based on principles from international law, considering embassy staff as residents of the taxable territories during their term of office. The Tribunal's decision was challenged in the High Court.

The High Court disagreed with the Tribunal's decision, emphasizing that specific provisions in the Income-tax Act dictate the assessment of residency status. The Court highlighted Section 4A of the Act, which defines residency in the taxable territories based on various criteria such as physical presence or maintaining a dwelling place. Since Smt. Sharda Ajmani did not meet the conditions outlined in Section 4A, she could not be considered a resident for taxation purposes. Additionally, the Court referenced Explanation 2A to Section 4(1) and Section 17(1A), which specifically address the taxation of non-resident Indian citizens receiving income for services rendered outside the taxable territories, further supporting the conclusion that Smt. Sharda Ajmani was not a resident in the taxable territories during the relevant assessment years.

The Court highlighted that the provisions related to the taxation of non-resident Indian citizens do not extend to family members of Government servants, emphasizing that the statutory framework does not support the assessee's claim to be taxed as a resident. Therefore, the Court ruled that Smt. Sharda Ajmani was not a resident in the taxable territories for the assessment years 1960-61 and 1961-62, and she could not be taxed on that basis. The judgment concluded by answering the reference question in the negative and made no order as to costs.