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TMI Blog1987 (5) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ome time after shifting his residence to Gangtok, Sikkim, the petitioner wrote from Gangtok four letters to the aforesaid Income-tax Officer, I-Ward. The letters are dated June 9, 1980, September 12/14, 1980, November 3, 1980, and February 16, 1981 (annexure "B" to the petition). The contents of the letters may be briefly summarised as follows : (i) that the petitioner had joined as Advocate-General of Sikkim on March, 1980, and was residing in Gangtok, Sikkim, since then ; (ii) that the Income-tax Act, 1961, has not been extended to Sikkim ; (iii) that, in Sikkim, the Sikkim income-tax law continues to be in force and income-tax was being deducted at source from his retainer by the Government of Sikkim, according to the Sikkim income-tax law ; (iv) that he was not liable to pay income-tax under the Income-tax Act, 1961, on his income earned in Sikkim, so long as he continues to reside in Sikkim ; (v) in his letter dated September 12/14, 1980, he made the following request to the Income-tax Commissioner in paragraph (iv) of the letter : ". . . I shall be highly obliged if you let me know if I am liable to pay income-tax under the Indian Income-tax Act under the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned in Sikkim was accepted. The petitioner complains that though Rs. 3,592 refundable to him was duly refunded to the petitioner, the sum of Rs.1,268 refundable to him has been illegally withheld by respondent No. 1. The petitioner resigned from the post of Advocate-General of Sikkim with effect from April 1, 1983 and came back to Calcutta. His last financial year in Sikkim was April 1, 1982 to March 31, 1983 (assessment year 1983-84). He filed his income-tax return for the assessment year 1983-84 in due time and also paid advance tax of Rs. 2,000 on his income from bank interest in Calcutta and notional income from vacant house property in Calcutta. As in the two earlier years, he claimed exemption in respect of his income in Sikkim which he stated as Rs. 1 lakh (approximately) in the relevant financial year April 1, 1982 to March 31, 1983. He described his status as "resident of Sikkim" as he did in his earlier income-tax returns. The order of assessment and notice of demand dated February 20, 1986, in respect of the assessment year 1983-84 are the subject-matter of challenge in this writ petition. Mr. A. C. Maitra, senior counsel for the respondents, challenged the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act, 1961, it appears from the records that the demand for Rs. 81,376 was arrived at as follows Rs. Income-tax ... 58,968 Interest under section 217 ... 22,408 ------------- 81,376 ------------- Mr. S. Pal, appearing on behalf of the petitioner, submits that (a) during the financial year 1982-83, the petitioner was a resident of Sikkim and as such a non-resident for the purposes of the Income-tax Act, 1961, (b) that Rs. 1,00,000 (rupees one lakh) taxed by respondent No. 1 as professional income consisted of two parts : (i) his retainer fee of Rs. 2,500 per month, i.e., Rs. 30,000 per annum received from the Government of Sikkim in Sikkim, and (ii) professional fees of Rs. 70,000 received by him from the Government of Sikkim in Sikkim. On the basis of the abovementioned assertions, Mr. S. Pal submits that respondent No. 1 had no jurisdiction to demand tax on the aforesaid amount of Rs. 1 lakh (rupees one lakh). I shall first consider whether a resident of Sikkim is a non-resident for the purposes of the Income-tax Act, 1961. In order to decide this question, it is necessary to state briefly a few facts about Sikkim. Prior to becoming the 22nd Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances, I hold that a resident of Sikkim is a non-resident for the purposes of the Income-tax Act, 1961. It also appears from the writ petition and the affidavit-in-reply that the petitioner in his income-tax returns for the assessment years 1981-82 and 1982-83 had described his status as a "resident of Sikkim" and his retainer and professional income in Sikkim were not taxed though shown in the income-tax returns. It is thus apparent that the Income-tax Department was aware that residents of Sikkim have to be treated as non-residents for the purposes of the Income-tax Act, in accordance with the above letters/circulars of the Ministry of Finance, Government of India. Annexure "C" to the affidavit-in-reply also shows that residents and Government servants of Sikkim are not taxed under the Income-tax Act, 1961, obviously because they are treated as non-residents. In his income-tax return for the assessment year 1983-84, the petitioner described his status as "resident of Sikkim". He showed his income in Calcutta from bank interest and notional income from vacant house property in Calcutta. He also showed his income in Sikkim (retainer and fees received from the Government o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition). (b) Letter dated September 12/14, 1980, from the petitioner to the Income-tax Officer, I-Ward (annexure 'B', at page 28 of the petition). (c) Letter dated November 3, 1980, from the petitioner to the Income-tax Officer, I-Ward (annexure 'B', at page 30 of the petition). (d) Letter dated February 16, 1981, from the petitioner to the Income-tax Officer, I-Ward (annexure 'B', at page 32 of the petition). (e) Letter dated September 5, 1984, from the petitioner to the Income-tax Officer, I-Ward (annexure 'D', to the petition, at page 35, see paragraph 8 of the letter). (f) Letter dated February 9, 1985, from the petitioner to the Income-tax, Officer, I-Ward (annexure 'E', to the petition, at page 40. Paragraphs 2, 3(a) of the letter). (g) Notice of demand under section 156 for the assessment year 1980-81 dated October 23, 1981 (annexure 'K', at page 29 of the affidavit-in-reply), which shows that, in the records of the Income-tax Department, the petitioner's place of residence was Development Area, Gangtok, Sikkim. (h) Notices of demand under section 156 for the assessment years 1981-82 and 1982-83 dated October 23, 1981, and September 17, 1982 (annexures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , for work done for the Government of Sikkim as Advocate-General of Sikkim" signed by the Chief Accounts Officer, Home Department, Government of Sikkim, Gangtok. 1, accordingly, hold that Rs. 1,00,000 was earned by the petitioner in Sikkim and as such could not be taxed by respondent No. 1. In the course of arguments, Mr. Maitra submitted that the petitioner's retainer of Rs. 30,000 per annum could be taxed under section 9(1)(iii) of the Income-tax Act, 1961. I am unable to accept this submission. The petitioner's retainer cannot be taxed under section 9(1)(iii) of the Income-tax Act, 1961, for the following reasons.: (a) The Income-tax Act, 196l, having not been extended to Sikkim, the Government of Sikkim is not governed by the provisions of the said Act and the word "Government" in section 9(1)(iii) cannot include the Government of Sikkim. (b) Tax was deducted by the Sikkim Government at source from the retainer of the petitioner under the provisions of the Sikkim Income-tax Manual which is a law in force in Sikkim under article 371F(k) of the Constitution and as such is an Indian law on taxation on income. To tax his retainer again under section 9(1)(iii) of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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