Appeal details
Counselvise Citation
[2009] 114 COUNSELVISE.COM (IT) 8072 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 1 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-06-2009
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
D
Next Hearing Date
30-06-2009
Assessment Year
1998-1999
Appeal Filed On
29-05-2008
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `D: NEW DELHI BEFORE SHRI R.P. TOLANI, JM AND SHRI A.K. GORAD IA, AM I.T.A. NOS.2106 & 2107/DEL OF 2008 ASSESSMENT YEARS: 1998-99 & 1999-2000 DY. COMMR. OF INCOME-TAX, SH. KARAN B IHARI THAPAR, CIRCLE 48(1), NEW DELHI. VS 2A/2, PALAM MAR G, VASANT VIHAR, NEW DELHI. APPELLANT RESPONDENT APPELLANT BY: SHRI S. REHMAN RESPONDENT BY: SHRI S.M. BUCKSHEE ORDER PER R.P. TOLANI, JM: THESE ARE TWO REVENUES APPEAL. COMMON GROUNDS RAI SED ARE AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN: I) HOLDING THAT THE ASSESSEE IS A RESIDENT BUT NOT ORDINARILY RESIDENT AS AGAINST RESIDENT AND ORDINARY RESIDENT HELD BY THE AO FOR AY 1998-99. II) DELETING THE ADDITION OF RS.16,01,000/- BEING PENSION ACCRUED AND RECEIVED OUTSIDE INDIA FROM THE ASSESSEES LATE WIFES EMPLOYER. III) DELETING THE ADDITION OF RS.1,67,900/- BEING INTEREST ACCRUED AND RECEIVED OUTSIDE INDIA ON THE PENSION ACCOUNTS DEPOSITED IN LLOYDS BANKS JURSEY. 2 IV) DELETING THE ADDITION OF RS.3,77,379/- ON ACCOUNT OF GROSSING UP OF TDS ON PENSION ACCRUED AND RECEIVED OUTSIDE INDIA. V) DELETING THE ADDITION OF RS.7,50,568/- BEING UNEXPLAINED CREDITS IN THE BANK ACCOUNTS OF THE ASSESSEE WITH AMERICAN EXPRESS BANK LTD. 2. LEARNED DR HAS APPLIED FOR ADJOURNMENT. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ISSUE IS CLEARLY COVERED BY THE LEGISLATIVE AMENDMENT AND HONBLE SUPREME COURT JUDGMENT, THERE FORE, ADJOURNMENT MAY NOT BE GRANTED. 3. AFTER HEARING BOTH THE PARTIES, WE ARE NOT INCLI NED TO ACCEPT THE ADJOURNMENT APPLICATION. 4. LEARNED DR IN THAT CASE RELIES ON THE ORDER OF A O AND CONTENDS THAT CIT(A) HAS ERRED IN HOLDING THAT ASSESSEE IS A RESI DENT BUT NOT ORDINARILY RESIDENT WHEREAS AO HAD MADE OUT A CASE THAT THE AS SESSEE WAS A RESIDENT AND ORDINARILY RESIDENT. 5. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, CONTENDS THAT DUE TO DIFFERENCE IN INTERPRETATION UPTO ASSESSMENT YEA R 2003-04, THERE WAS SOME AMBIGUITY IN RESPECT OF STATUS RESIDENT BUT NO T ORDINARILY RESIDENT. HOWEVER, THE SAID AMBIGUITY HAS BEEN CORRECTED BY A MENDMENT IN SECTION 6(6) BY FINANCE ACT, 2003 W.E.F. 1.4.2004. THE PRE -AMENDED AND POST AMENDED SECTION 6(6) ARE AS UNDER: 3 SECTION 6(6) (PRE-AMENDED): A PERSON IS SAID TO NOT ORDINARILY RESIDENT IN INDIA IN ANY PREVIOUS YEAR IF SUCH PERSON IS (A) AN INDIVIDUAL WHO HAS NOT BEEN RESIDENT IN INDIA IN NINE OUT OF THE TEN PREVIOUS YEARS PRECEDING THAT YEAR, OR HAS NOT DURING THE SEVEN PREVIOUS YEARS PRECEDING THAT YEAR BEEN IN INDIA FOR A PERIOD OF, OR PERIODS AMOUNTING IN ALL TO, SEVEN HUNDRED AND THIRTY DAYS OR MORE; OR (B) A HINDU UNDIVIDED FAMILY WHOSE MANAGER HAS NOT BEEN RESIDENT IN INDIA IN NINE OUT OF THE TEN PREVIOUS YEARS PRECEDING THAT YEAR, OR HAS NOT DURING THE SEVEN PREVIOUS YEARS PRECEDING THAT YEAR BEEN IN INDIA FOR A PERIOD OF, OR PERIODS AMOUNTING IN ALL TO, SEVEN HUNDRED AND THIRTY DAYS OR MORE. SECTION 6(6) (POST-AMENDMENT): A PERSON IS SAID TO NOT ORDINARILY RESIDENT IN INDIA IN ANY PREVIOUS YEAR IF SUCH PERSON IS (A) AN INDIVIDUAL WHO HAS BEEN A NON-RESIDENT IN INDIA IN NINE OUT OF THE TEN PREVIOUS YEARS PRECEDING THAT YEAR, OR HAS DURING THE SEVEN PREVIOUS YEARS PRECEDING THAT YEAR BEEN IN INDIA FOR A PERIOD OF, OR PERIODS AMOUNTING IN ALL TO, SEVEN HUNDRED AND TWENTY-NINE DAYS OR LESS; OR (B) A HINDU UNDIVIDED FAMILY WHOSE MANAGER HAS BEEN A NON-RESIDENT IN INDIA IN NINE OUT OF THE TEN PREVIOUS YEARS PRECEDING THAT YEAR, OR HAS DURING THE SEVEN PREVIOUS YEARS PRECEDING THAT YEAR BEEN IN INDIA FOR A PERIOD OF, OR PERIODS AMOUNTING IN A LL TO, SEVEN HUNDRED AND TWENTY-NINE DAYS OR LESS. 4 ALL THESE FACTORS HAVE BEEN OBSERVED BY LUCKNOW BEN CH OF THE TRIBUNAL IN THE CASE OF ABHAY PRATAP SINGH SENGAR VS ITO, 108 I TD 8 HOLDING AS UNDER: 15. THOUGH IN THE NOTES ON CLAUSES IT HAS BEEN MENTIONED THAT THE PROPOSED AMENDMENT IS CLARIFICATORY IN NATURE, BUT THE AMENDMENT HAS BEEN MADE APPLICABLE IN RELATION TO THE ASSESSMENT YEAR 2004-05 AND SUBSEQUENT YEARS WHICH IS EVIDENT FROM FINANCE BILL, 2003 INTRODUCING THIS AMENDMENT (2003) 260 ITR 41 (ST). IT IS A SUBSTANTIVE PROVISION INASMUCH AS IT DETERMINES THE TAX LIABILITY OF A PERSON AND THEREFORE, IT CAN NOT BE SAID TO BE A PROCEDURAL SECTION. MOREOVER, THE DEFINITION OF RESIDENT IS ENTIRELY DIFFERENT FROM NON-RESIDENT. THEREFORE, ONCE IN THE SUBSTITUTED SECTION THE CONCEPT OF NON-RESIDENT HAS BEEN BROUGHT INTO IN PLACE OF RESIDENT, IT CANNOT BE SAI D THAT IT IS CLARIFICATORY IN NATURE. THE SCOPE OF T OTAL INCOME OF AN ASSESSEE IS DECIDED WITH REFERENCE TO RESIDENTIAL STATUS. CONSEQUENTLY, THE TAX EFFECT O F THE ASSESSEES TOTAL INCOME IS DECIDED WITH REFERENCE TO THE RESIDENTIAL STATUS. BY VIRTUE OF THIS SECTION THE ASSESSEE ACQUIRED A VESTED RIGHT IN THE FORM OF REDUCED TOTAL INCOME. IN REGARD TO STATUTES DEALING WITH SUBSTANTIVE RIGHTS, I MAY REFER TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF KESHAVAN MADHAVA MENON VS STATE OF BOMBAY, AIR 1951 SC 128 WHEREIN IT HAS BEEN HELD THAT A CARDINAL PRINCIPLE OF CONSTRUCTION OF STATUTES IS THAT EVERY STATUTE IS PRIMA FACIE PROSPECTIVE OPERATION. THIS RULE IS APPLICABLE WHERE THE OBJECT OF THE STATUTE IS TO AFFECT VESTED RIGHTS (E.G. IN THE PRESENT CASE BY AMENDMENT, A PERSON WHO HITHERTO WAS TO BE ASSESSED AS RESIDENT BUT NOT ORDINARILY RESIDENT WILL BE ASSESSED AS RESIDENT AND ORDINARILY 5 RESIDENT THEREBY INCREASING HIS SCOPE OF TOTAL INCOME AND CONSEQUENTLY TAX LIABILITY) OR TO IMPOSE NEW BURDENS OR TO IMPAIR EXISTING OBLIGATIONS. IN THE WORDS OF LORD BALNESBURG, PROVISIONS WHICH TOUCH A RIGHT IN EXISTENCE AT THE PASSING OF THE STATUTE ARE NOT TO BE APPLIED RETROSPECTIVELY IN THE ABSENCE OF EXPRESS ENACTMENT OR NECESSARY INTENDMENT. THEREFORE, MERELY BECAUSE IN NOTES ON CLAUSES IT HAS BEEN MENTIONED THAT IT IS CLARIFICATORY IN NATURE, IT CANNOT BE SA ID THAT THE SUBSTITUTED SECTION IS CLARIFICATORY IN NATURE. IN THE PRESENT CASE, SINCE IT IS NOT DISPU TED THAT THE ASSESSEE WAS NOT RESIDENT IN INDIA IN 9 OU T OF 10 YEARS PRECEDING THE ASSESSMENT YEAR IN QUESTION, THE ASSESSEE HAD RIGHTLY CLAIMED ITS STAT US AS OF RESIDENT AND NOT ORDINARILY RESIDENT IN ASSESSMENT YEAR 2003-04. THE INTERPRETATION GIVEN BY THE LD. CIT(A) BASED ON NOTES ON CLAUSES CANNOT BE ACCEPTED. 16. THE LD. CIT(A)S OBSERVATIONS THAT THE INTERPRETATION PLACED BY TRIBUNAL IN RAM SAGAR CHAUDHARIS CASE WILL CREATE ANOMALOUS POSITION IS PURELY BASED ON CONJECTURES INASMUCH AS THE BASIC CANNON OF TAXING STATUTES IS OF STRICT INTERPRETATI ON. IF THE LANGUAGE OF SECTION IS CLEAR AND UNAMBIGUOUS THEN THE SAME CANNOT BE INTERPRETED IN A MANNER SO AS TO SUBSCRIBE AN ALTOGETHER DIFFERENT MEANING TO THAT PIECE OF LEGISLATION. COURTS ARE NOT TO TAKE INTO CONSIDERATION THE CONSEQUENCES THAT WOULD FOLLOW. COURTS ARE NOT TO FILL IN THE GAPS IN LEGISLATION. A MATTER WHICH SHOULD HAVE BEEN, BUT HAS NOT BEEN PROVIDED FOR IN A STATUTE CANNOT BE SUPPLIED BY COURTS, AS TO DO SO WILL BE LEGISLATION AND NOT CONSTRUCTION. IN THE PRESENT CASE NOT MENTIONING OF NON RESIDENT IN SECTION 6(6)(A) IS A CASE OF CASUS OMISSUS WHICH HAS BEEN CORRECTED BY FINANCE ACT, 2003. I MAY FURTHER OBSERVE THAT AID TO NOTES ON CLAUSES CAN BE 6 HAD ONLY IN CASE OF SOME AMBIGUITY IN THE SECTION AND NOT OTHERWISE. SIMILAR VIEW HAS BEEN TAKEN BY HONBLE SUPREME COUR T IN THE CASE OF PRADIP J. MEHTA, 300 ITR 231 (SC) BY HOLDING THAT ONCE TWO INTERPRETATIONS ARE POSSIBLE, THE ONE BENEFICIAL TO ASSESSEE SHOULD BE ADOPTED BY OBSERVING AS UNDER: DURING THE COURSE OF HIS EMPLOYMENT THE ASSESSEE, WHO WAS A MARINE ENGINEER FOR A COMPANY IN HONG KONG, WAS POSTED TO WORK ON THE HIGH SEAS AND WAS PAID ABROAD FOR MANY YEARS. FOR THE ASSESSMENT YEAR 1982-83, AS HE WAS NOT RESIDENT IN INDIA FOR 9 OUT OF 10 YEARS, THE ASSESS EE CLAIMED THE STATUS OF NOT ORDINARILY RESIDENT AS DEFINED IN SECTION 6(6)(A) OF THE INCOME-TAX ACT, 1961, WHICH PROVIDES THAT IN THE CASE OF A PERSON NOT ORDINARILY RESIDENT INCOME WHICH ACCRUES OR ARISES TO HIM OUTSIDE INDIA SHALL NOT BE INCLUDED I N HIS TOTAL INCOME. THE ASSESSING OFFICER REFUSED TO GRANT THE ASSESSEE THAT STATUS ON THE GROUND THAT T HE ASSESSEE WAS A NON-RESIDENT IN INDIA FOR ONLY 3 YEARS DURING THE LAST 10 YEARS AND DURING THE PAST 7 YEARS HE HAD STAYED IN INDIA FOR MORE THAN 730 DAYS. THE ASSESSEES APPEAL WAS DISMISSED BY THE COMMISSIONER (APPEALS) AND THE APPELLATE TRIBUNAL. ON THE ASSESSEES APPLICATION THE TRIBUNAL REFERRED TO THE HIGH COURT, IN EFFECT, THE QUESTION OF LAW WHETHER THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE STATUS OF THE ASSESSEE FOR THE ASSESSMENT YEAR WAS NOT RESIDENT BUT NOT ORDINARILY RESIDENT AND THE HIGH COURT ANSWERED THE QUESTION AGAINST THE ASSESSEE. ON APPEAL TO TH E SUPREME COURT: 7 HELD, REVERSING THE DECISION OF THE HIGH COURT, THA T THE ASSESSEE WAS NOT ORDINARILY RESIDENT IN INDIA WITHIN THE MEANING OF SECTION 6(6)(A) AS HE WAS NOT RESIDENT FOR 9 OUT OF 10 YEARS. A PERSON WOULD BECOME AN ORDINARY RESIDENT ONLY (A) IF HE HAD BEEN RESIDING IN INDIA IN 9 OUT OF 10 PRECEDING YEARS; AND (B) HE HAD BEEN IN INDIA FOR AT LEAST 73 0 DAYS IN THE PREVIOUS SEVEN YEARS. C.N. TOWNSEND VS CIT (1974) 97 ITR 185 (PATNA); MANISHAI S. PATEL VS CIT (1953) 23 ITR 27 (BOM) AND P.B.I. BAVA VS CIT (1955) 27 ITR 463 (TRAV. AND COCH) APPROVED. WHEN TWO INTERPRETATIONS ARE POSSIBLE, THEN INVARIABLY THE COURT WOULD ADOPT THAT INTERPRETATIO N WHICH IS IN FAVOUR OF THE TAXPAYER AND AGAINST THE REVENUE. WHILE BRINGING AMENDMENT IN SECTION 6(6), THE DIFFE RENCE IN INTERPRETATIONS AND CONSEQUENT AMBIGUITY HAS BEEN REFERRED TO IN TH E OBJECT CLAUSE PROPOSING THE AMENDMENT, IN VIEW THEREOF, THE POSITION WAS NO T FREE FROM DOUBT. IN VIEW OF THESE JUDGMENTS, CIT(A) HAS RIGHTLY HELD TH E ASSESSEE TO BE RESIDENT AND NOT ORDINARY RESIDENT. HIS ORDERS WERE RELIED ON. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. AS THE FACTS EMERGE, IT HAS NOT BEEN DISPUT ED THAT PRIOR TO 1.4.2004, THERE EXISTED AMBIGUITY IN SECTION 6(6). THE LUCKN OW BENCH IN THE ABOVE REFERRED CASE HAS CONSIDERED ALL THESE ASPECTS AND ALLOWED SIMILAR CLAIM OF THE ASSESSEE. FOLLOWING THIS JUDGMENT OF HONBLE S UPREME COURT IN THE CASE OF PRADIP J. MEHTA (SUPRA), WE HOLD THAT CIT(A) HAS RIGHTLY CONSIDERED THE 8 STATUS OF THE ASSESSEE AS RESIDENT BUT NOT ORDINAR Y RESIDENT IN THE YEAR IN QUESTION, HIS ORDERS ARE UPHELD. 7. IN THE RESULT, REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2009. (A.K. GORADIA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH JUNE, 2009 VIJAY COPY TO: 1. APPELLANT 2. RESPONDENT. 3. CIT 4. CIT(A)-XXX, NEW DELHI. 5. DR ASSISTANT REGISTRAR
