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Second Income-tax Officer Vs. Dr. Mrs. Archana P. AcharyA. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Nagpur
Decided On
Reported in(1986)17ITD398(Nag.)
AppellantSecond Income-tax Officer
RespondentDr. Mrs. Archana P. AcharyA.
Excerpt:
.....was justified in holding, that the assessee was resident but not ordinarily resident during the previous year as against the itos decision, that she was a resident and also ordinarily resident during the previous year. though the appeal was posted for hearing a number of times, none appeared on behalf of the assessee. hence, we do not see, that any purpose would be served by adjourning the appeal. we, therefore, dispose of the appeal as under after taking into account the submissions made on behalf of the department at the time of hearing.2. the assessee claimed in the return filed for the year under consideration, that she was resident but not ordinarily resident during the previous year for this assessment year and, therefore, the salary earned by her in iran was not assessable to.....
Judgment:
Per Shri G. R. Raghavan, Accountant Member - In this appeal by the revenue, the issue posed for our consideration is, whether the AAC was justified in holding, that the assessee was resident but not ordinarily resident during the previous year as against the ITOs decision, that she was a resident and also ordinarily resident during the previous year. Though the appeal was posted for hearing a number of times, none appeared on behalf of the assessee. Hence, we do not see, that any purpose would be served by adjourning the appeal. We, therefore, dispose of the appeal as under after taking into account the submissions made on behalf of the department at the time of hearing.

2. The assessee claimed in the return filed for the year under consideration, that she was resident but not ordinarily resident during the previous year for this assessment year and, therefore, the salary earned by her in Iran was not assessable to tax. A little digression at this stage is necessary to explain the scope of the total income under section 5 of the Income-tax act, 1961, (the Act). In the case of person, who is resident and also ordinarily resident, all income from whatever source derived which, (a) is received or deemed to be received in India in such year or on behalf of such person, or (b) accrues or arises or is deemed to accrue or arise to him in India during such year, or (c) accrues or arises to him outside India during such year, is assessable.

It should, therefore, be noticed, that in the case of a person who is resident and ordinarily resident, income accruing or arising to him outside India during such year is also taxable and, therefore, if the assessee should be treated as a resident and ordinarily resident, her income from salary in Iran would also be includible in her total income for this year. By means of a proviso to section 5(1), it is laid down in the Act, that in the case of a person not ordinarily resident in India within the meaning of clause (6) of section 6 of the Act, income which accrues or arises to him outside India, shall not be so included unless it is derived from a business controlled in or a profession set up in India. The assessees claim was, that she was not ordinarily resident in India during the previous year and, therefore, her income from salary in Iran was not assessable as part of her total income for the year under consideration.

3. The ITO did not accept this claim and held, that she was resident and also ordinarily resident in India during the previous year for the year under consideration as she fell squarely within the mischief or either of the two conditions set out in section 6(6) (a). He, therefore, included the salary income earned in Iran in the total income of the assessee.

4. Aggrieved with the same, an appeal was preferred to the AAC who in his impugned order, allowed the claim of the assessee to be treated as resident but not ordinarily resident for the year under consideration.

The argument advanced before the AAC in this behalf was that the assessee, to be treated as ordinarily resident should satisfy two conditions laid down in section 6(6) (a), namely (i) she should have been resident in India in 9 out of 10 previous years preceding the previous year in question, and (ii) she should have been in India for a period or periods amounting in all to 730 days or more during the 7 previous years preceding that pervious year. It was submitted, that the assessee did not satisfy the first requirement in this behalf and as both the requirements were cumulatively to be satisfied, the assessee would not fall within the ambit of the definition of ordinarily resident as per section 6(6) (a). Reliance for this interpretation of section 6(6) (a), was placed on the Boards Circular Letter No.J/28320/4A/10/5/58-59, dated 5-12-1962 reproduced in Chaturvedi and Pithisarials Income-tax Law, Third edn., Vol. 1, page 309. Accepting this argument, without any discussion of the details of the basis on which his conclusion has been formulated, the AAC allowed the appeal of the assessee and directed the ITO to treat the assessee as resident but not ordinarily resident and, therefore, exclude the salary income earned in Iran from the total income.

5. Aggrieved with the same, the department has filed this appeal before us. After hearing the factual submissions made by the senior departmental representative in this behalf, we are of the opinion, that the assessee was resident and ordinarily resident during the previous year relevant to the assessment year under consideration and, therefore, the AAC was not justified in directing the ITO to treat her as resident but not ordinarily resident. Our conclusion in this behalf has been arrived at after considering the following facts and submissions.

6. the previous year for the year under consideration is period of 12 months from 1-4-1977 to 31-3-1978. The assessee who is a medical practitioner, left India for Iran on 3-9-1975 and she returned to India on 13-9-1977 during the previous year for the assessment year under consideration. She was, therefore, in India during the previous year for a period amounting to 200 days, i.e., more than 182 days as required under section 6(1) (a). Under section 6, an individual is resident in India for any assessment year, if he fulfils any one of the following three tests, which tests are alternative and not cumulative : (i) if he is in India in the accounting year relevant to the assessment year for a period amounting in all to 182 days or more, or (ii) he maintains or causes to be maintained for him dwelling place in India for periods amounting in all to 182 days or more in the accounting year, and has been in India for 30 days or more in that year, or (iii) having within the four years preceding the accounting year been in India for a period or periods amounting in all to 365 days or more, he is in India for a period or periods amounting in all to 60 days or more in that year.

7. As mentioned earlier, these tests are alternative and not cumulative. It is, however, found, that the assessee satisfied all the above three tests. As regards the first test, she returned to India on 13-9-1977 and, therefore, she was in India during the relevant accounting year for a period amounting in all to 200 days and, therefore, exceeded the requirement of 182 days. Even as regards the second test, she qualifies to be treated as resident as she maintained a dwelling house as mentioned in the assessment order for more than 182 days during the previous year and also she was physically present in India for 30 days or more. Even by the third test, she qualifies to be treated as a resident. Therefore, there is no doubt, that the assessee has to be taken as a resident during the previous year for the assessment year under consideration.

8. The next question is whether she can be treated as resident and also ordinarily resident in the previous year relevant to the assessment year under consideration. Under section 6(6) (a), an individual will be not ordinarily resident if he satisfies either of the two following conditions, namely, (i) he has not been resident in India in 9 out of 10 previous years preceding the relevant accounting year [first part of sub-clause (a) of section 6(6)], or (ii) he has not during the 7 previous years preceding the relevant accounting year been in India for a period or periods amounting in all to 730 days or more [second part of clause (a) of section 6(6)]. Thus, in order that an individual may be treated as ordinarily resident in India in any previous year, he must not come within the mischief of either of the two conditions aforesaid - C. N. Townsend v. CIT [1974] 97 ITR 185 (Pat.). For the purpose of the above tests, the residential status of the assessee for the previous year relevant to the assessment year in question will have first to be ascertained in the usual manner, by the application or the three tests for a resident, being those mentioned in sub-clauses (a), (b) and (c) of section 6(1). We have already found, that by the applying the tests prescribed in clauses (a), (b), and (c) of section 6(1) the assessee is found to be a resident during the previous year relevant to the assessment year in question. In the present case, applying the test contained in the first part of section 6(6) (a), the assessee has to show, that in 9 out of 10 previous years preceding the previous year in question, she has not been resident in India to qualify for the status of not ordinarily resident. By resident is meant resident in the technical sense as defined in the Act. In the present case, 10 previous years immediately preceding the previous years in question are the years 1-4-1976 to 31-3-1977, 1-4-1975 to 31-3-1976, 1-4-1974 to 31-3-1975, 1-4-1973 to 31-3-1974, 1-4-1972 to 31-3-1973, 1-4-1971 to 31-3-1972, 1-4-1970 to 31-3-1971, 1-4-1969 to 31-3-1970, 1-4-1968 to 31-3-1969, and 1-4-1967 to 31-3-1968. Out of 10 previous years preceding the previous years in question, the assessee was non-resident during 1-4-1975 to 31-3-1976 as she left India on 3-9-1975 and returned back only on 13-3-1977. However, during the previous year from 1-4-1975 to 31-3-1976, she was a resident in India in a technical sense as under section 6(1) (c) she was in India for a period amounting in all to 365 days or more during the four years preceding that previous year and was in India for period of more than 60 days during that previous year. During the period 1-4-1967 to 31-3-1975 comprising of 8 previous years, the assessee was resident and ordinarily resident.

As mentioned earlier, she was also a resident during the previous year 1-4-1975 to 31-3-1976 as per section 6(1) (c). In view of this, the requirement in the first part of section 6(6) (a) that the individual should have been a resident in India in 9 out of 10 previous years preceding that year, for being treated as ordinarily resident, is satisfied. An alternative requirement, namely, that the individual should have been in India for a period or periods amounting in all to 730 days or more during the 7 previous years preceding that year is also satisfied in this case inasmuch as, the assessee was physically resident in India during all the previous years comprised in the period commencing from 1-4-1970 to 31-3-1976. The Board in its circular referred to earlier has required that both the conditions should be satisfied for an individuals to be treated as a resident and ordinarily a resident. In the present case, the assessee was resident in India in 9 to 10 previous year preceding the previous years in question and she was also during the 7 previous year preceding the accounting year was physically present in India for a period of more than 730 days.

Therefore, both the conditions required for the treatment of an individual as ordinarily resident, are satisfied in this case.

Therefore, we have to hold, that the assessee was resident and ordinarily resident during the previous year relevant to the assessment year under consideration and, consequently, the income accruing or arising outside India is taxable as part of the total income of the assessee. We, therefore, allow the appeal filed by the department and restore the assessment made by the ITO.


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