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TMI Blog2008 (4) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... for short "the Tribunal") that the status of the assessee for the assessment year 1982-83 was not that of "not ordinarily resident". The High Court also recorded that the Tribunal has not committed any error in interpreting the provisions of Section 6(6) of the Income Tax Act, 1961 (for short "1961 Act"). 3. Brief facts of the case culminating into filing of the present appeal, are as under: 4. The assessee was appointed as Marine Engineer by Wallem Shipping Management Ltd., Hong Kong on 5th October, 1976 and, during the course of his employment, he was posted to work on high seas and paid abroad for many years. The assessee while filing his return for the assessment year 1982-83 (for short "relevant year") claimed the status of "not ordinarily resident in India" as defined in Section 6(6)(a) of the 1961 Act and to exclude income accruing outside India under Section 5(1)(c) of the 1961 Act, which provides that in the case of a person not ordinarily resident in India within the meaning of sub-section (6) of Section 6, the income which accrues or arises to him outside India shall not be so included in his total income. 5. Relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India for a period of seven hundred thirty days or more during the last seven previous years." The Assessing Officer came to the conclusion that, during the last 9 previous years, the assessee was non-resident for only three years and during the last seven previous years, he had stayed in India for a period of 1,402 days. It was held that the status claimed by the assessee of 'not ordinarily resident' was not acceptable. 9. Assessee being aggrieved by the order of the Assessing Officer, filed an appeal before the CIT (Appeals), who, by his order dated 13th of August, 1985 while concurring with the view taken by the Assessing Officer, dismissed the appeal. Further appeal filed by the assessee before the Tribunal was also dismissed on 24th of July, 1987. 10. The assessee thereafter filed an Application before the Tribunal under Section 256(1) of the 1961 Act (as it existed at the relevant time) seeking following two questions of law to be referred to the jurisdictional High Court for its opinion: "(1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the status of the assessee for the year in quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the face of the clear provision of clause (a) of section 6(6) which contemplates the period of nine years out of ten preceding years of not being a resident in India before an individual could be said to be 'not ordinarily resident' in India, which position will entitle such person to claim exemption under section 5(1)(c) of the Act in respect of his foreign income. An individual who has not been resident in India, within the meaning of section 6(1), for less than nine out of ten preceding years does not satisfy that statutory criteria laid down for treating such individual as a person who can be said to be 'not ordinarily resident' in India, as defined by section 6(6). A resident of India who goes abroad and is not a resident in India for two years during the preceding period of ten years will therefore, not satisfy the said condition of not being a resident of India for nine out of ten years." 13. It may be mentioned here that the Assessee had cited the following judgments before the High Court to support his claim: (A) The decision of the Patna High Court in C.N. Townsend v. CIT (1974) 97 ITR 185 (Pat), for the proposition that, if any of the conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition laid down in Section 4B(a) and would, therefore, not be 'not ordinarily resident' in the taxable territories. In that case, the assessee was living in Africa for four years out of the preceding seven years and he was in the 'taxable territories' for about three years and the question was whether he was 'not ordinarily resident' in 'taxable territories' under the second part of Section 4B(a). It was held that, he did not satisfy the second condition. (D) The decision of the Travancore-Cochin High Court in P.B.I. Bava v. CIT (1955) 27 ITR 463 (Trav. & Coch), to point out that, in the context of section 4B(a) of the Indian Income Tax Act, 1922, the High Court had held that a person was not ordinarily resident in any year unless he satisfies both of the conditions of the said provision which make a person ordinarily resident, namely, (i) the condition that he must have been resident, in nine out of ten years preceding that year, and (ii) the condition that he must have been, here for periods of more than two years during the seven years preceding that year. It was held that a person is 'not ordinarily resident' in India in the previous ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriods in the preceding seven years." and the notes embodied in the Travancore Income Tax Rules: "An individual is ordinarily resident in Travancore if he has been resident as defined above in 9 out of 10 years preceding that year and has been in Travancore for periods amounting in all to more than 2 years during the 7 years preceding that year". held that: "The clause no doubt is a model of ambiguous and obscure drafting" as observed by Sir Jamshedji Kanga in his "Law and Practice of Income-tax" (p.362) but the basic outlines are clear enough to support the conclusion reached by the Appellate Assistant Commissioner of Income-tax, Trivandrum. His approach was right when he said : "In my opinion, the only direct way of deciding whether the appellant was 'not ordinarily resident' in the relevant years is to formulate and answer the direct question, 'Has the appellant been resident in Travancore in 9 out of such 10 years?' This question permits of only one answer and that answer is an emphatic 'No'. When such is the answer to the question, how can I help treating the appellant as 'not ordinarily resident'? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was felt necessary to keep the provisions of Section 4B of the 1922 Act in tact and, therefore, Section 6(6) had to be enacted in the 1961 Act. Referred to Chaturvedi & Pithisaria's Income Tax Law, Fifth Edition, Volume I, 1998 page 565. 22. Further, in the same book the departmental circular being C.I.T., W.B.'S Circular letter No. J/28320/4A/10/5/58-59, dated Calcutta, the 5th December, 1962, addressed to the Secretary, Indian Chamber of Commerce, Calcutta, has been cited, which states as under: "I am directed to refer to the correspondence resting with the Ministry of Finance (Department of Revenue) letter No. 4/22/61-IT(AT), dated 25th November, 1961, and to state that the Department's view has all along been that an individual is "not ordinarily resident" unless he satisfies both the conditions in section 4B(a), i.e., (i) he must have been a resident in nine out of ten preceding years; and (ii) he must have been in India for more than two years in the preceding seven years. Thus, a person will be "resident and ordinarily resident" if both these conditions are satisfied but he will be "resident but not ordinarily resident&quo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted by the Legislature. Rather, on the legislative anvil, it was felt necessary to keep Section 4B of 1922 Act in tact and, accordingly, Section 6(6), which corresponds to and is pari materia with Section 4B of 1922 Act, was enacted in 1961 Act. This shows the legislative will. It can be presumed that the legislature was in the know of the various judgments given by the different High Courts interpreting Section 4B but still the legislature chose to enact Section 6(6) in the 1961 Act, in its wisdom, the legislature felt necessary to keep the provisions of 4B of 1922 Act in tact. It shows that the legislature accepted the interpretation put by the various High Courts prior to enactment of 1961 Act. It is only in the year 2003 that the Legislature amended Section 6(6) of the 1961 Act, which came into effect from 1st April, 2004. 27. It is well settled that when two interpretations are possible, then invariably, the Court would adopt the interpretation which is in favour of the tax payer and against the Revenue. Reference may be made to the decision in Sneh Enterprises v. Commissioner of Customs, New Delhi [(2006) 7 SCC 714], of this Court wherein, inter alia, it was observed as u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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