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TMI Blog2011 (8) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... Act'), pertaining to the assessment year 2006-07. 2. The first dispute in this appeal relates to the issue regarding status of the assessee and the second issue relates to the disallowance of component of salary under section 5(2) of the Act. 3. The relevant facts are that during the relevant period the assessee was working as a Master of the ship with the Great Eastern Shipping Company Ltd. For the assessment year under appeal, the return of income was filed on 31.7.2006 declaring total income of Rs. 92,962/- wherein the status of the assessee was claimed as 'Non resident'. During the assessment proceedings, information was sought from the employer of the assessee by the Assessing Officer in order to verify the 'non-resident' status of the assessee. As per the information obtained from the employer of the assessee, the exact number of days of service of the assessee abroad was found to be 158 days, which according to the Assessing Officer, was less than the days specified in section 6(1) of the Act for being treated as a 'non-resident'. The assessee was thus required to justify the claim of non-resident status. In support of his claim, assessee furnished copies of Passport, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of wages earned for services rendered outside India by non-resident was not taxable in India. Reliance was also placed on the judgment reported in the case of British Gas India (P.) Ltd., In re [2006] 285 ITR 218/155 Taxman 326 (AAR - New Delhi). It was thus argued that the subject income in case of the assessee was not taxable income, since it was received for services rendered outside India. It was also submitted that having adopted the status of the assessee as 'non-resident', it was not fair on the part of the Assessing Officer to bring the income earned by the assessee outside India. 6. After considering the submissions of the assessee with reference to the material available on record and filed during the proceedings before him, the Commissioner of Income-tax (Appeals), proceeded to consider the issues, (a) what is the status the assessee under section 6 of the Act for the year under consideration, and (b) whether the salary income in question earned by the assessee during the year as a member of Crew of an Indian ship(s) is taxable in India. The Commissioner of Income-tax (Appeals) observed the tests provided in section 6(1) of the Act for determining the residenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived by him in India is taxable. In the case of the appellant, the contract of employment has been entered into in India and since all rights flowing from the contract are also enforceable in India, the salary has accrued or arisen to the appellant in India. Therefore, under the general principles, the income has accrued or arisen in India and the deeming provisions of section 9(1) can be resorted to only when the income is not normally to be considered as having accrued or arisen to the appellant in India. In this regard, reference can be made to the decision of the ITAT, Mumbai (TM) in the case reported in 81 ITD 203 wherein it is held that 'although assessee is a non-resident, the salary that accrues or arises to him India as the contract of employment was entered in India and the rights arising from such contract of employment are enforceable in India.' Therefore, in the case of the appellant, by virtue of contract of employment with the employer in India, it is not necessary to examine the question whether the salary is deemed to accrue or arise to the appellant by applying provisions of section 9 and the Explanation thereto. the reliance placed by the appellant on the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of the Hon'ble Karnataka High Court in the case of DIT (International Taxation) v. Prahlad Vijendra Rao [2011] 198 Taxman 551/10 taxmann.com 238 (Kar.) to point out that salary earned by the assessee during his stay outside India on account of work discharged on board of a ship which was outside the shores of India was not liable to be taxed in India. In sum and substance, the primary plea of the assessee is that the residential status in terms of section 6(1) of the Act is liable to be construed as a 'non-resident' during the previous year relevant to the year under consideration. 10. On the other hand, the learned Departmental Representative, appearing for the Revenue has primarily reiterated similar reasoning as taken by the Commissioner of Income-tax (Appeals) in order to defend the stand of the Revenue. The learned Departmental Representative specifically pointed out that the Commissioner of Income-tax (Appeals) has considered the status of the assessee as 'resident' in terms of section 6(1)(c) of the Act, because there was no material brought on record to show that the assessee was abroad for the prescribed period for the purposes of employment, during the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined in the Merchant Shipping Act 1958 (44 of 1958) or leaves India for purposes of employment outside India, the condition of 60 days or more in clause (c) of section 6(1) of the Act has to be read as 182 days or more. 13. The case set-up by the assessee to say that he is non-resident during the previous year relevant to the assessment year under consideration is that he is employed on a ship and has remained abroad for a period exceeding 182 days, i.e. for 201 days during the previous year relevant to the assessment year under consideration and, therefore, he qualifies to be a non-resident for the year under consideration. However, the Commissioner of Income-tax (Appeals) has made out a case that as per section 6(1)(c), the assessee has been in India for a period exceeding 365 days in the four years preceding the year under consideration and therefore, the assessee is required to establish that during the previous year relevant to the assessment year under consideration he has been in India for a period less than 182 days so as to qualify to be a non-resident. According to the Commissioner of Income-tax (Appeals), the assessee has not been able to establish that assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee to negate the aforesaid assertion of the Commissioner of Income-tax (Appeals). Under these circumstances, in our view, the assessee qualifies to be a resident in the previous year relevant to the assessment year under consideration on the basis of the tests mentioned in section 6(1)(c) read with Explanation (a) thereof. The decision of the Commissioner of Income-tax (Appeals) on this aspect is therefore affirmed. 14. As a consequence to our aforesaid decision, the Assessing Officer is directed to compute income of the assessee thereof in accordance with law. 15. Insofar as the plea raised by the assessee on the basis of the judgment of the Hon'ble Karnataka High Court in the case of Prahlad Vijendra Rao (supra) is concerned, the same in our view is clearly inapplicable to the facts of the present case. In the case before the Hon'ble High Court, the stay of the assessee outside India for the purposes of employment exceeded 225 days and the assessee was thus non-resident and in this background, the Hon'ble High Court affirmed the decision of the Tribunal that salary earned by the assessee for such period on account of work discharged on a ship abroad was not taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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