2013 (5) TMI 606 - AT - Income Tax

Residential status - foreign going vessel - Receipt of salary treated by assessee as exempt u/s. 10(6)(vii) - CIT(A) deleted the addition made by AO - whether 130 days when assessee was in Indian vessel but it was outside Indian territorial water and also was in foreign vessel in foreign territorial water, the assessee will be treated as Non-Resident in such situation? - Held that - In the present case the facts are clear that assessee for 100 days was in foreign vessel in other territorial water and for 130 days he was outside the Indian territorial water i.e. he was outside Indian territory for 230 days and the requirement of section 6 for being outside India for 182 days, he become non-resident . Accordingly order of CIT(A) confirmed and the appeal of revenue is dismissed.

Summary

Issues:
1. Condonation of delay in filing appeal by revenue.
2. Addition made by AO on account of receipt of salary treated as exempt u/s. 10(6)(vii) of the Act.

Condonation of Delay:
The appeal by revenue was time-barred by 8 days, and a condonation petition was filed. The Ld. counsel for the assessee did not contest the reasons given by revenue in its condonation petition, leading to the condonation of the delay and admission of the appeal.

Addition of Salary as Exempt Income:
The main issue revolved around the addition made by the Assessing Officer (AO) on account of the receipt of salary treated as exempt u/s. 10(6)(vii) of the Income-tax Act, 1961. The CIT(A) had deleted the addition, prompting the revenue to appeal. The dispute arose from the assessee's claim of non-resident status based on the number of days spent outside Indian territorial waters. The AO treated the assessee as a resident, disagreeing with the claim. However, the CIT(A) considered the CBDT Circular no. 586 dated 28.11.1999 and the decision of the Hon'ble Madras High Court in CIT Vs. ICL Shipping Ltd. (2009) to support the assessee's non-resident status.

Analysis and Decision:
The Appellate Tribunal analyzed the relevant provisions of the Income-tax Act, particularly section 2(25A) defining "India" to include territorial waters and other maritime zones. The Tribunal also considered Circular no. 586 and the decision of the Madras High Court, emphasizing the conditions for non-resident status based on days spent outside Indian territorial waters. Referring to previous judgments, including CIT v. Indo Oceanic Shipping Co. Ltd. and CIT v. Avtar Singh Wadhwan, the Tribunal affirmed that Indian ships operating beyond Indian territorial waters do not fall within the definition of 'India' under section 2(25A).

Conclusion:
Based on the clear facts that the assessee spent significant days outside Indian territorial waters and satisfied the conditions for non-resident status under section 6 of the Act, the Tribunal upheld the CIT(A)'s decision. Consequently, the appeal by revenue was dismissed, affirming the non-resident status of the assessee and the exemption of the salary income under section 10(6)(vii) of the Act.

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