1974 (4) TMI 7 - HC - Income Tax

Not Ordinarily Resident - Assessee satisfies one of the conditions in clause (a), (b) or (c) of section 6(1) and also falls within either of the conditions specified in section 6(6)(a) - (1) Whether, in the facts and circumstances of the case, the assessee s status was of resident or resident but not ordinarily resident ? Whether an individual who is disqualified to be treated as ordinarily resident under one of the conditions specified in sub-section (6)(a) of section 6 but is not disqualified under the other condition can be treated as ordinarily resident ? - I answer both the questions against the assessee and in favour of the department

Summary

Issues:
1. Determination of assessee's status as 'resident' or 'resident but not ordinarily resident' for the assessment year 1965-66.
2. Interpretation of conditions specified for becoming a resident or ordinarily resident under section 6(1) and 6(6)(a) of the Income-tax Act, 1961.

Analysis:
The judgment by the High Court of Patna involved the determination of the assessee's status for the assessment year 1965-66 as either 'resident' or 'resident but not ordinarily resident'. The assessee had been in India for a significant period from January 1961 to March 1965. Initially, the Income Tax Officer classified the assessee as a "non-resident," but on appeal, the Appellate Assistant Commissioner corrected this to 'resident but not ordinarily resident.' The assessee contended that he should be classified as 'resident' and 'ordinarily resident.' However, the Tribunal held that all conditions under the new section 6(6) needed to be satisfied for a person to be considered 'resident and ordinarily resident.' Each condition was individually necessary but not individually sufficient to establish 'ordinarily resident' status.

The Tribunal's decision was based on the interpretation of section 6(1) and 6(6)(a) of the Income-tax Act, 1961. Section 6(1) outlines the criteria for an individual to be considered a 'resident' in India, which includes being in India for a specified number of days or having a dwelling place in India. On the other hand, section 6(6)(a) defines a person as 'not ordinarily resident' in India if they have not been a resident in India for a certain number of years preceding the assessment year or have not been in India for a specified number of days in the previous years. The judgment clarified that an individual could be a 'resident' but 'not ordinarily resident' if they met the conditions under section 6(1) but failed to comply with the requirements of section 6(6)(a).

The judgment emphasized that to be considered 'ordinarily resident,' an individual must not fall within the conditions specified in section 6(6)(a) of the Act. The court concluded that since the assessee did not meet the conditions outlined in section 6(6)(a) due to not being a resident in India for nine out of the ten previous years, he could not be classified as 'ordinarily resident.' Therefore, the assessee's status was determined as 'resident' but 'not ordinarily resident' for the assessment year in question.

Furthermore, the judgment addressed the ambiguity in the second question framed by the Tribunal regarding the qualification of an individual as 'ordinarily resident' under one condition but not the other under section 6(6)(a). The court clarified that if an individual is disqualified under one condition of section 6(6)(a), they cannot be considered 'ordinarily resident,' regardless of meeting the other condition. Both judges concurred on answering the questions against the assessee and in favor of the department, directing each party to bear their own costs of the reference.