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TMI Blog1988 (3) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... the said assessee only. 2. Mr. Paul Weigel was an employee of DFIDCO, S.A. a non-resident company engaged by the Oil and Natural Gas Commission of India (ONGC) for carrying out drilling operations in the offshore waters of India with one of its rigs 'DF-95' and suitable expatriate personnel working on the rig. Mr. Paul Weigel was one of such persons working. His contract of service was duly approved by the Central Govt. of India for the purposes of sec. 10(6)(vii)(a) of the Income-tax Act, 1961 appearing in Chapter III and the relevant portion we like to bring the close focus and, therefore, reproduce below : "Incomes not included in total income. 10. In computing the total income of a previous year of any person any income falling within any of the following clauses shall not be included-- (6) In the case of an individual who is not a citizen ofIndia,-- (vii)(a) where such individual renders services as a technician in the employment (commencing from a date after the 31st day of March, 1971) of the Government or of a local authority or of any corporation set up under any special law or of any such institution or body established in India for carrying on scientific resear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(a), under sec. 80C and sec. 16(1) of the Act as mentioned in the assessment order. 5. Before the CIT (Appeals) it was asserted that though under section 4 of the Act, taxability was on the basis of the assessment year in respect of total income of the previous year, but section 5 of the Act provided that in the case of a non-resident assessee, the total income of any previous year consisted of income which was received : income which accrued or arose or was deemed to accrue or arise to him in India during the relevant previous year. It was further contended that under sec. 9(1)(ii) of the Act, salary income was deemed to accrue or arise inIndiaif the services were rendered inIndia, which was not the case here. 6. Various other arguments were also advanced before the learned first appellate authority, but the assessment was rejected and by referring to the Notification of 31-3-1983, he held that the same was effective from assessment year 1983-84 and, therefore, applicable in relation to the previous year 1-4-1982 to 31-3-1983 and was to rope for taxation entire salary earned in the said previous year. 7. Before proceeding further, we must refer to Article 297 of the Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Govt. may, by notification in the Official Gazette, extend with such restrictions and modifications as it thinks fit, any enactment for the time being in force, in India to the CS and the EEZ any enactment so extended shall have effect as if the CS and the EEZ is a part of the territory of India. 10. In exercise of the powers conferred by the said sections of the M.Z. Act, the Central Govt. issued a Notification No. 304(E), dated 31-3-1983 extending the IT Act to the CS and EEZ of India with effect from 1-4-1983, subject to the restriction and modification that the said Act shall apply only in respect of income derived from specified activities connected with prospecting, extraction or production of mineral oils in those areas or the rendering of services by an employee of any person engaged in the said activities. 11. From the above, it is clear that CS and EEZ are deemed to be part ofIndiaw.e.f.1-4-1983for the purpose of levy of income-tax on income from certain specified type of activities. The said areas did not become a part ofIndiafor levy of income-tax on other income or for any other purposes. 12. At this stage, it is necessary to reproduce the Notification No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that previous year, we must also presume that the notification had retrospective effect, a presumption which we are not prepared to make in the absence of any legislative authorisation. This is because it is an accepted principle of jurisprudence that every statute particularly the one imposing tax liability has prospective effect unless it is expressly or by necessary implication, made to have retrospective effect. 14. Further, delegated legislation such as Rules or Notifications cannot affect adversely the rights of a taxpayer with retrospective effect unless otherwise statute either expressly or by necessary intendment empowers to do so. As there was no provision in the MZ Act or IT Act empowering the Central Govt. to extend the Income-tax Act to the offshore areas retrospectively nor can any implication to that effect be inferred therefrom, the said notification took effect only from 1-4-1983 and the offshore areas could be regarded as part of India only w.e.f. that date and that too also for a limited purpose as detailed above. 15. The next crucial question, however, comes as to what were the precedents and how and when levy of income-tax was made retrospective in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ories. The Income-tax Act was extended by Parliamentary legislation to Part C States w.e.f. 1-4-1949 (assessment year 1949-50), Part B States w.e.f. 1-4-1950 (assessment year 1950-51) and the Union Territories of Dadra Nagar Haveli, Goa, Daman Diu and Pondicherry w.e.f. 1-4-1963 (assessment year 1963-64). But on each of these occasions, apart from extending the income-tax law to those areas w.e.f. the said dates, the definition of "taxable territories"/Indiawas specifically amplified to include those areas during the previous years relevant to the said assessment years. It is because of such amplified definition of taxable territories/India that the income arising in those areas (during the previous years 1948-49, 1949-50 and 1962-63 respectively) could be regarded as, arising in the taxable territories/India for the purpose of levy of income-tax for the Assessment years 1949-50, 1950-51 and 1963-64 respectively. But for such retrospective amendment in the definition of taxable territories/India, the income arising in the previous years 1948-49, 1949-50 and 1962-63 would not have become liable to tax just on the ground that the Income-tax Act was extended to those areas with ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April, 1950, the territory of India excluding the State of Jammu Kashmir and the Patiala and East Punjab States Union, and (d) as respects any period after the 12th day of April, 1950, theterritoryofIndiaexcluding the State of Jammu Kashmir : Provided that the taxable territories shall be deemed to include : (a) the merged territories-- (i) as respects any period after the 31st day of March, 1949, for any of the purposes of this Act ; and (ii) as respects any period included in the previous year, for the purpose of making any assessment for the year ending on the 31st day of March, 1950, or for any subsequent year ; and (b) the whole of theterritoryofIndiaexcluding the State of Jammu Kashmir : (i) as respects any period, for the purposes of secs. 4-A and 4-B ; (ii) as respects any period after the 31st day of March, 1950, for any of the purposes of this Act ; and (iii) as respects any period included in the previous year for the purpose of making any assessment of the year ending on the 31st day of March, 1951, or for any subsequent year." 21. It shall also be expedient if we reproduce the circular letter of the CBDT (Foreign Tax Division) dated26th Septem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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