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TMI Blog2017 (2) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... companies' regional office in New Delhi. Subsequently summons were issued under section 131 of the income tax act, requiring the appellant company to submit details of the total salary and perquisites paid to its expatriate employees were resident in India during the aforementioned financial year. Submission of the detailed was examined by the Ld. assessing officer. He held that the company has contravened the provisions of section 192 of the income tax act in deducting the tax at source into cases both falling in the financial year 2002-03. Therefore he passed order under section 201 (1) dated 03/05/2005 holding that assessee is in default for Rs. 2184160/- and interest under section 201(1A) at Rs. 746687/-was determined. According to the assessing officer that employees of the assessee were resident in India for financial year 2002-03. The only dispute is with respect to the residential status of these 2 employees of the assessee company and therefore short deductions and interest thereon was computed and total tax payable was determined at Rs. 2930847/-. Assessee being aggrieved with the order of the Ld. assessing officer preferred an appeal before the Ld. CIT(A) who vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be withheld in with respect to two Japanese nationals Mr. Koga and Mr. Yanai. According to the appellant, Mr. M Koga came to India on 28/08/1999 and his stay in India was for 218 days in FY 1999 - 2000, 365 days in FY 2000 -01, 365 days in 2001-02 and 365 days in FY 2002-03. Therefore, according to the assessee is total stay in India was for 1121 days and he is resident and not ordinarily resident for all these years. Similarly, in case of Mr. Y Yanai it was also claimed that he came to India on 28/09/2000 and his stay in India was in 99- 2000 for only 37 days, 365 days for all the 3 years FY 2000- 01 to FY 2002 - 03 and 45 days for FY 2003 - 04. Therefore, it was claimed that for the years in which he stayed for 365 days in India. He is resident and not ordinarily resident and for other years, he is non-resident. Hon'ble Supreme Court has dealt with an identical situation in the case of Pradeep J Mehta pro the J Mehta versus Commissioner of income tax in the 2008 AIR. S CW 3398 as under:- "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t an individual who has been resident in India for eight years out of ten preceding years should be treated as 'not ordinarily resident' in India, does not stand to reason and such contention flies 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 fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xable territories'. If the assessee had been in the 'taxable territories' for more than two years in the preceding seven years, then he does not satisfy the second condition 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns amount to saying that he must have been resident in nine out of ten years and he must have been here for substantial periods 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 ques ..... 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" if either of those conditions i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary 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 under: "While dealing with a taxing provision, the principle of "Strict I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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