Case Note & Summary
The case involved an appeal by the assessee against the High Court of Gujarat's decision regarding his residency status for tax purposes under the Income Tax Act, 1961. The assessee, a Marine Engineer employed abroad, claimed the status of 'not ordinarily resident' for the assessment year 1982-83, arguing that he met the criteria set forth in Section 6(6)(a) of the Act. The Assessing Officer denied this status, asserting that the assessee had been a resident in India for more than 730 days over the past seven years and had not been a non-resident for nine out of the preceding ten years. The CIT (Appeals) and the Tribunal upheld this decision. The High Court, upon referral, agreed with the lower authorities, leading to the current appeal. The Supreme Court analyzed the statutory provisions and previous judgments, concluding that the High Court misinterpreted the criteria for being 'not ordinarily resident.' The Court emphasized that the correct interpretation requires an individual to not be a resident in nine out of ten years and to have stayed in India for less than 730 days in the last seven years. The appeal was accepted, overturning the previous decisions and affirming the assessee's status as 'not ordinarily resident' (Paras 1-30).
Headnote
A) Income Tax - Residency Status - Interpretation of 'Not Ordinarily Resident' - Income Tax Act, 1961, Section 6(6) - The court clarified that an individual is 'not ordinarily resident' if they have not been resident in India for nine out of ten preceding years and have not stayed in India for 730 days in the last seven years. The High Court's interpretation was found erroneous, and the appeal was accepted, favoring the assessee's claim (Paras 30).
Issue of Consideration
Whether the assessee was correctly classified as 'not ordinarily resident' under the Income Tax Act, 1961.
Final Decision
The Supreme Court accepted the appeal, set aside the High Court's order, and held that the appellant was 'not ordinarily resident' under Section 6(6) of the Income Tax Act, 1961. The two questions referred were answered in favor of the appellant and against the revenue.
Law Points
- Income Tax
- residency status
- interpretation of tax laws
- statutory criteria for residency
