Case Law Details
RELEVANT PARAGRAPH
15.2 On a careful reading of section 6(1) along with the circular cited above we are of the considered opinion that where the individual is resident in the previous year, but was not a resident in India in 9 out of 10 previous years preceding the year or was in India for a total period of 730 days or more in seven previous years then his residential status will be that of resident but not ordinarily resident. A similar view was considered by the H-Bench of this Tribunal in the case of Shri Jayram Rajgopal Poduval vs ACIT. Cir.272) in ITA No.7072/Mum/ 2004 for the assessment year 2001-02 vide order dated 18th January, 2008 We reproduce the following paragraphs of this order for.ready reference;
“8. At this juncture it would be apt to note down the material part of clause (6). Section 6 prior to its substitution by the finance Act, 2003, w.e.f. 01.04.2004 which is as under-
“(6) A person is said to be “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”
It is equally important to consider Section 6(1) which runs as follows: –
“6. For the purposes of this Act,-
(1) An individual is said to be resident in India in any previous year, if he –
(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or
(b) [omitted w.e.f. 01 04 1983)
(c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.”
On a careful and conjoined reading of the above sub sections, it becomes clear that an individual is resident in India in any previous year if he satisfies the conditions of Section 6(1). Thus if an individual is in India for a total period of 182 days or more in the previous year, he would be treated as Resident in India. If, however, conditions as per either of the two clauses, i.e. (a) or (c) of Section 6(1) are not satisfied, i.e. the individual is neither in India for a total period of 182 days or more or in previous year nor he had been in India for a total period of 60 days or more in previous year together with 365 days or more in 4 years preceding that year, he will acquire the status of non-resident. The essence of Section 6(6) is that where the individuaJ is resident in the precious year, but was not resident in India in 9 out of 10 previous years preceding that year or was not in India for total period of 730 days or more in seven years preceding that year, then his residential status will become RNOR. Thus in order to acquire the status of RNOR, it is sine qua non that on the other hand he should firstly be resident in that year and thus should fulfill either of the conditions of Section 6(6). That is, he should meet either of the conditions of Section 6(1), say, be in India for 182 days or more in the previous year and thereafter either of the conditions enshrined in Section 6(6) be fulfilled, say, be in India for 182 days or more in the previous year and thereafter either of the conditions enshrined in Section 6(6) be fulfilled, say, he should not be the resident in India in 9 out of 10 previous years preceding that year.
9. Adverting to the facts of the case as borne out from the assessment order we note that the assessee was residing in India from 01.04.1995 to 31.03.2001 and during that period he was out of India only for 6 days, i.e. from 8lh June 1997 to 14th June 1997. The proposition which therefore emerges is that in the previous year (i.e. from 01.04.2000 to 31.03.2001) he was in India for 365 days, thereby successfully satisfying the test of Section 6(1) and was also not resident in two years, i.e. Assessment Years 1994-95 and 1995-96 in 10 years preceding the previous year (i.e. 01.04.1990 to 31.03.2000) thereby fulfilling the criteria as per section 6(6), being not resident in India in 9 out of 10 previous years preceding that year.
10. Now we will focus on the view point canvassed by the learned CIT(A) in the penultimate para of the impugned order that in order to claim residential status of RNOR both the conditions set out in Section 6(6)(a) be cumulatively fulfilled, that is the assessee should not be resident in India in 9 out of 10 previous years preceding that year and also should not be in India for 730 days or more in 7 years preceding that year. From the factual position noted supra, we note that the assessee is satisfying the first condition of Section 6(6)(a) and not the second.
11. Here we are reminded of the well settled literal rule of interpretation as per which the language of the section should be construed as it exists. The intention of the legislature is to be gathered from the words used and should not be needlessly inferred, it has been held by the Hon’ble Supreme court in numerous judgment including the case of Federation of Andhra Pradesh Chambers of Commerce & Industries & Ors. Etc. Etc. vs State of Andhra Pradesh & Ors. Etc. Etc. (2001) 165 ITR (SC) 672; (2001) 247 ITR 36 (SC) that taxing statute has to be strictly construed and nothing can be read in it. Similar view has been taken in the case of Padmasundara Rao (Deed) & Ors vs State of Tamil Nadu & Ors. (2002) 176 CTR (SC) 104; (2002) 255 ITR 147 (SC) in which it was held that “while interpreting a statute legislative intention must be found in the words used by the legislature” . Similar view has been reiterated in the case of CAIT vs Plantation Corporation of Kerala Ltd (2000) 164 CTR (SC) 502; (2001) 247 ITR 155 (SC) providing that “So long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislature intent becomes impermissible” .
12. Coming back to the language of Section 6(6)(a) we find that the word ‘or’ has been used between the lines ” who has not been resident in India in nine out of ten previous years preceding that year” and “has not during the seven years preceding that year been in India for a period of, or periods amounting in all to: seven hundred and thirty days or more”. It is beyond our comprehension as to how the learned CIT(A) could substitute the word ‘and’ for the word ‘or’ used in the section. The intendment of the legislature is manifest that either of the two conditions of Section 6(6)(a) and not both be complied with for acquiring the residential status of RNOR. As in the facts and circumstances of the present case, the assessee has satisfied the first condition and not the second, we are of the considered opinion that the learned CIT(A) erred, in holding that the residential status of the assessee was ROR
13. Now we will refer to the legal position arising out of the judicial precedents on the issue; which seems to be no more res integra in view of the judgment of the Hon’ble Apex Court in the case of CIT and Another vs Morgenstern Werner (2003) 259 ITR 486 (SC) in which the judgment of the Hon’ble Allahabad High Court in Moregenstern Werner vs CIT (1998) 233 ITR 531 (All) was affirmed. The facts of the case as recorded by the Hon’ble High court are that the petitioner worked with the Kraft Work Union (Siemens), Germany and drawing his salary of DM 3882 per month in Germany. BHEL sought the services of a technical liaison officer. The Ministry of Industries, government of India informed the BHEL about the approval of the government for engaging his services in that case for a period of 1.5 years in India on terms of payment of daily allowance or Rs.500/- per day in India. On the basis of the said approval the petitioner came to India for rendering the service to BHEL on deputation basis. The petitioner in that case by way of revision application under Section 264 claimed that the salary was not received in India and hence he was not liable to pay any tax in India. When the controversy reached the High court, it held in para 6 as under:-
“Considering the aforesaid provisions of law, I find that a person is “not ordinarily resident” in India if in nine out of the ten preceding years he had stayed outside India. Admittedly, it is nobody’s case that the petitioner had stayed in India during the preceding nine years. In that view of the matter, I have no doubt in my mind that the petition is “not ordinarily resident” in India and will be governed by the proviso to s. 5(1 )(c) of the Act.”
The Hon’ble supreme court affirmed the view of the Hn’ble High Court holding that the assessee was a person “not ordinarily resident” in India as the High court found that the assessee had not stayed in India during the preceding 9 years and hence he was “not ordinarily resident in India”. From the above judgment of the Hon’ble Supreme court it becomes crystal clear that the opinion of the learned first appellate authority for fulfilling both the conditions of Section 6(6) simultaneously is no more correct. When one of these two conditions as laid down in Section 6(6)(a) is fulfilled, the status of resident gets converted into RNOR. All the judgments and orders inconsistent with the view of the Hon’ble summit Court stand impliedly overruled. We. therefore, hold that as the assessee had not been resident in India in 9 out of 10 previous years . preceding that year, his claim for status of RNOR cannot be negatived.
14. Before parting with this appeal and to provide completeness to this order we would like to mention that Section 6(6) has been substituted by the finance Act, 2003 w.e.f. 01.04.2004. In the present appeal we are concerned with the pre-amendment era as the assessment year involved is 2001-02. The substituted subsection (6) of section 6 is prospective as has been laid down by the Lucknow Bench of the Tribunal in the case of Abhay Pratap Singh Sengar vs ITO (2007) 108 ITD 8 (Lucknow) and hence can have no retrospective application to the year in question.
15. To sum up, we hold that the residential status of the assessee is “resident but not ordinarily resident” and the claim of exemption under Section 10(15)(iv)(fa) for interest amounting to Rs. 1,97,450/- is as per law. The consequential charging of interest under Section 234B would also be brought to naught. We, therefore, set aside the impugned order and accept the assessee’s contention.”
We respectfully follow the decision of the co-ordinate bench on this issue.
Monthly Pensions are being received from Government Health Services of United Kingdom( known as N H S), by Indian doctors (after attaining an age of 60) who are resident and ordinarily residents,in India for the services rendered during 1970 to 1980. Please clarify whether they are taxable in India.
No tax is being deducted in U K on that income