LexPRADIP J. MEHTA versus COMMNR. OF INCOME-TAX, AHMEDABAD
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..... j [2008] 6 S.C.R. 383 PRADIP J. MEHTA v. COMMNR. OF INCOME-TAX, AHMEDABAD (Civil Appeal No. 4291 of 2002) APRIL 11, 2008 [ASHOK BHAN AND DALVEER BHANDARI, JJ.] A B Income Tax Act, 1961 - ss. 6 (6) (a) and 5 (1) (c) - Assessee claiming status of "not ordinarily resident in India" - For the purpose of exclusion of income occurring outside India c - Revenue authorities denying the status on the ground that two conditions of s. 6 (6) (a) were not fulfilled - Order of the Revenue confirmed by the Appellate Authorities and High Court - On appeal, held: The assessee was entitled to the status of 'not ordinarily resident in India - In order to determine 0 such status, the proper way to approach is to decide whether the assessee falls within definition of 'resident' and if the answer is 'no' he would be treated as 'not ordinarily resident'- When two interpretations are possible, the interpretation in favour of the assessee, would be adopted- Interpretation of Statutes. E Judicial propriety- High Court passing the judgment without recording its agreement or dissent on the cited judgments passed by other High courts ~ Held: Judgment of other High Courts, not binding on a High Court, have only pursuasive value - However, judiCial decorum, propriety and F discipline requires that they should be taken note of and dissented especially where the court is taking contra view - Precedent. Words and Phrases - ' resident', 'ordinarily resident' and 'not ordinarily resident' - Meaning of, in the context of s. 6 of G Income tax Act, 1961. Appellant-assessee, while filing his return for the relevant assessment year, claimed the status of 'not ordinarily resident in India' as defined in Section 6 (6) (a) 383 H 384 SUPREME COURT REPORTS (2008] 6 S.C.R. A of Income Tax Act, 1961 and thereby excluding his income occurring outside India, u/s 5 (1) (c) of the Act. Assessing Officer refused to grant such status on the ground that the assessee did not fulfil the requirement provided u/s 6 (6) (a) as he was a non-resident in India for only 3 years B during the last 10 years and during the 7 preceding years his stay in India was for more than 730 days; and that in order to claim such status, the assessee was required to fulfil either of the two conditions viz. (1) not be resident in India in 9 out of 10 years. or (2) not have stayed in India C for a period of 730 days or more during the last seven previous years. The view of the Assessing Officer was confirmed in appeal by CIT (Appeals) as well as by Income tax Appellate Tribunal. On reference, High Court upheld the order of Tribunal answering the reference in favour of 0 the Revenue. The judgments passed by various High Courts, were cited by the assessee, but the High Court passed the judgment without either agreeing or disagreeing with the cited judgments. Hence the present appeal. E Allowing the appeal, the Court HELD: 1.1 The High Court in the impugned judgment has erred in its interpretation of Section 6(6) of Income Tax Act, '1961 and the *Patna High Court, **Bombay High Court and ***Travancore-Cochin High Courts have laid F down the correct law. A person will become an ordinarily resident only if (a) he has been residing in nine out of ten preceding years; and (b) he has been in India for at least 730 days in the previous seven years. The only direct way of deciding whether the appellant was 'not ordinarily G resident' in the relevant years is to formulate and answer the direct question, 'Has the person been resident in 9 out of such 10 years?' When the answer to the question is 'No', the appellant is to be treated as 'not ordinarily resident. A person will be "resident and ordinarily resident" H if both the conditions are satisfied but he will be "resident PRADIP J. MEHTA v. COMMNR. OF INCOME-TAX, 385 AHMEDABAD but not ordinarily resident" if either of those conditions is A not satisfied." [Paras 17, 22, 29 and 30] [395-F, G; 396-A; 397-F, G; 400-E, F, G] . . *C.N. Towrisend.v. CIT 1974 (97) ITR 185 (Pat); **Manibhai S. Patel v . . CIT 1953 (23) ITR. 27 (Boin); ***PB/ Bava v. CIT 1955 (27) ITR 463 (Trav. And Coch) - approved 8 In re Advance Ruling A No. P-5 of 1995 1997 (223) ITR 379 (AAR) - referred to. Income Tax Law by Chaturvedi and Pithisaria's Fifth Edition, Volume I, 1998 page 565 - referred to. C 1.2 Despite the recommendation of Law Commission of India, legislature felt it necessary t
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