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2009 DIGILAW 509 (KAR)

Commissioner of Income Tax v. J. G. Lovoie

2009-07-14

ARAVIND KUMAR, D.V.SHYLENDRA KUMAR

body2009
JUDGMENT D.V. Shylendra Kumar, J.— This appeal by the Revenue under Section 260A of the IT Act, 1961 (for short 'the Act') is directed against the order passed by the Tribunal in ITA No. 117/Bang/1997, dt. 31st July, 2003 at the instance of the respondent-assessee. 2. The question of law for examination of which question, this appeal had been admitted is as under: Whether the Tribunal was correct in holding that the assessee is entitled to exemption under Section 10(6)(viia)(II) of the Act for the asst. yr. 1994-95 in respect of a sum of Rs. 11,74,069 which was received by the assessee during the assessment year and correctly treated as part of his total income by the AO and brought to tax ? 3. The Revenue is aggrieved by the reversal of the order passed by the assessment order and as affirmed by the Tribunal extending the benefit of the provisions of Section 10(6)(viia)(II) of the Act which read during the relevant assessment year as under: Section 10(6)(viia) : Where such individual renders services as a technician in the employment of the Government or of a local authority or of any corporation set up under any special law or of any such institution or body established in India for carrying on scientific research as is approved for the purpose of this sub-clause by the prescribed authority or in any business carried on in India and the individual was not resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India, the remuneration for such services due to or received by him, which is chargeable under the head 'Salaries', to the extent mentioned below, namely: (I) .... (II) where such services commence from a date after the 31st day of March, 1988 but before the 1st day of April, 1993, and tax on his income chargeable under the head 'Salaries' is paid to the Central Government by the employer (which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in Section 200 of the Companies Act, 1956 (1 of 1956) the tax so paid by the employer for a period not exceeding forty-eight months commencing from the date of his arrival in India. (sic) and concluded that a sum of Rs. (sic) and concluded that a sum of Rs. 11,74,069 which had been remitted by the employer of the assessee as TDS and remitted on behalf of the assessee it's employee as an amount which qualifies for the benefit of this provision. 4. The assessee is an individual and the assessment year in question is asst. yr. 1994-95. The assessee had been assessed in the status of 'not ordinarily resident' for the assessment year in question. 5. It appears the assessee had in his returns for the assessment year in question claimed the benefit of exemption in terms of Section 10(6)(viia) of the Act in respect of the amount mentioned above as an amount qualifying for exemption as the assessee had entered into India on 12th Sept., 1990 in the status of a 'non-resident' and in terms of the provisions of the beneficial exemption provision, the assessee was entitled to claim exemption in respect of the amount remitted by the employer towards the tax liability of the assessee and on behalf of the assessee as tax paid on behalf of the assessee on the premise that the assessee having entered India on 12th Sept., 1990 and the relevant assessment year being 1991-92 in terms of the provision of the beneficial section is entitled for claiming exemption for maximum period of 48 months from the date of the entry and for the four relevant assessment years and at any rate, for the asst. yr. 1994-95 the assessee was entitled to claim such benefit. 6. The assessing authority being of the view that the assessee was not entitled for such benefit for the reason that on the date of entry i.e., on 12th Sept., 1990 it was not as though the assessee was entering India for the first time, but the assessee was an entrant to the country even during the year 1988 and had stayed in India for some length of time and until and unless the assessee was a 'non-resident' for the four preceding years corresponding to the assessment year in which the benefit is claimed, the assessee does not initially qualify for the exemption provision and therefore, denied the benefit to the assessee. 7. In his appeal to the CIT(A), the assessee could not make much headway as the CIT(A) agreed with the view taken by the AO and dismissed the appeal. 8. 7. In his appeal to the CIT(A), the assessee could not make much headway as the CIT(A) agreed with the view taken by the AO and dismissed the appeal. 8. It is thereafter the assessee further appealed to the Tribunal and has met with success. 9. The Tribunal in terms of the order impugned in this appeal, opined that the relevant date which has to be reckoned for the purpose of the assessee's claim for exemption is not 7th March, 1993 a date on which it appears the assessee had gone out of India and had re-entered but the initial entry on 12th Sept., 1990 with reference to which the assessee was claiming benefit of Section 10(6)(viia) of the Act. 10. In this view of the matter, the Tribunal opined that the assessee did qualify initially when he entered India on 12th Sept., 1990 and also noticed that in none of the last four preceding years the assessee was a resident in India. 11. Accordingly, the Tribunal allowed the appeal and granted the benefit, of exemption to the assessee which resulted in the return filed by the assessee being proper and correct. Consequentially, the penalty proceedings also fell to ground. 12. It is because of this order of the Tribunal, the present appeal. 13. We have heard Sri M.V. Seshachala, learned standing counsel appearing for the appellants and Sri K.P. Kumar, learned senior counsel appearing for the respondent-assessee. 14. Submission of Sri M.V. Seshachala, learned standing counsel appearing for the appellants is that the requirement of the section for qualifying or seeking exemption is that in the initial year when the benefit is claimed, the assessee should not only be a 'non-resident' in India but also that during the preceding four assessment years relevant to the date of entry, he should not be a resident' also and as the assessee was claiming the benefit for the asst. yr. 1994-95 and during the previous year relevant for this assessment year and to be precise on 7th March, 1993 the assessee who had gone out of India re-entered the country and that should be reckoned to be the date of his entry to the country and if so the assessee does not qualify for the exemption as in the last four preceding assessment years, the assessee becomes 'notary resident' and was not a 'non-resident' and therefore, is disentitled for exemption. 15. 15. On the other hand, Sri K.P. Kumar, learned senior counsel appearing for the respondent-assessee, by drawing attention to the provisions of the section, submits that the requirement of section is that the assessee should not be a 'resident' in all the four preceding years preceding the assessment year in which the initial benefit is claimed; that an assessee qualifies for the benefit of the provision if in any of the preceding four years the assessee was not a resident and the year in question when the benefit is claimed again the assessee is not a resident and it is not necessary that the assessee should not have been resident in all the four years. 16. However, Sri K.P. Kumar, learned senior counsel clarifies that insofar as the present assessee is concerned, the assessee was not a resident in all the four financial years immediately preceding the financial year in which he arrived in India and at the best he was 'not ordinarily resident' and never acquired the status of resident. 17. We have bestowed our attention to the submissions made at the Bar, perused the order of the Tribunal and record. 18. The dispute as may be noticed from the order of the Tribunal essentially arises because the assessee wanted to reckon the date of his entry as 12th Sept., 1990 and with reference to that date claimed the benefit of the exemption in terms of the statutory provision and for a period of four assessment years, whereas the Revenue, particularly, the AO was of the view that for the purpose of the assessment year in question, the date of entry on 7th March, 1993 should be reckoned and not the earlier date of 12th Sept., 1990 as claimed by the assessee. 19. On the question as to which date should be reckoned is an aspect which is best left to the assessee as it is the assessee who puts forth a claim seeking the benefit of an exemption provision. 19. On the question as to which date should be reckoned is an aspect which is best left to the assessee as it is the assessee who puts forth a claim seeking the benefit of an exemption provision. But when once he claims the benefit to be reckoned from a particular date, the requirements in terms of the statutory provision are (1) that the assessee should qualify for the year of entry in terms of the assessee being not a resident in the year in which he is entering and (2) is a person who was not resident in all the four preceding financial years immediately preceding the financial year of his entry. That means if the assessee thought he is not a resident in the year of entry, was a resident in any of the preceding four financial years, he cannot claim the benefit of the provision. 20. In the present case, we notice that even in terms of the assessment orders if the date 12th Sept., 1990 which was the date which was claimed by the assessee as the date of entry is reckoned in the four preceding financial years, the assessee had the status of a non-resident for four years and therefore, the question on the issue is that the assessee was definitely not a 'resident' in any of the preceding four financial years. When the assessee, claims the benefit of the provision based on his entry on 12th Sept., 1990, the other limiting factor which operates on the assessee is to be found in the latter part of the provision which says the benefit can be claimed only upto next forty-eight months or cannot be extended for a period not exceeding forty-eight months commencing from the date of his arrival in India. It is for the assessee to claim the benefit from a given date so long as the exemption provision is available and the assessee otherwise qualifies for the initial exemption. Thereafter, the assessee can continuously claim the benefit for the following forty-eight months irrespective of his status which can change. 21. In the present case, the assessee claimed the benefit with reference to the date of entry on 12th Sept., 1990 the assessment year is 1991-92. Then for the four assessment years commencing from 1991-92 which ends in 1994-95 the assessee is entitled for the benefit in terms of the statutory provision. 21. In the present case, the assessee claimed the benefit with reference to the date of entry on 12th Sept., 1990 the assessment year is 1991-92. Then for the four assessment years commencing from 1991-92 which ends in 1994-95 the assessee is entitled for the benefit in terms of the statutory provision. That is what the assessee claims and that it is immaterial as to what happens subsequently as to whether the assessee continuously remains in India and acquires status of resident or goes back and re-enters and consequently there is a change in his status. 22. In the light of this legal position, we are of the view that the question of the AO and the first appellate authority treating the assessee's re-entry on 7th March, 1993 is of no significance as the assessee himself has claimed the benefit from 12th Sept., 1990 which thereafter limits his status running for a period of forty-eight months and ends in the fourth year. If the assessee were to be given the benefit starting from 1993 it has to be noticed that the assessee will be entitled for another four years and this is not in fact what the assessee himself wanted and therefore, there is no question of such benefit offered by the AO or the appellate authority. 23. We are of the view that the Tribunal has correctly decided the question in issue and answered the question posed for our determination in the affirmative and in favour of the assessee and against the Revenue. 24. Accordingly, this appeal is dismissed.