COMMISSIONER OF INCOME TAX Vs. D N MEHTA

JUDGEMENT

(1.) IN this case, at the instance of the Revenue, the following questions have been referred to us for our opinion :

(2.) THE facts leading to this reference are as follows : We are concerned with the asst. yr. 1964-65. On 16th Feb., 1953, the assessee wrote to the ITO, Porbandar, that he was settled permanently in Uganda since 1950. Under S. 17(1) of the Indian IT Act, 1922, he being a non-resident, has exercised the option of being assessed in respect of his total income on the basis of total world income. Upto the asst. yr. 1958-59, the assessee was assessed in the status of non-resident and tax was charged on his total income with reference to the rates applicable to his total world income in pursuance of this option. For 1959-60 the status of the assessee was accepted as "resident but not ordinarily resident" and the same status continued upto the asst. yr. 1964-65, which is the year under reference. According to the ITO, the option, once exercised by the assessee on 16th Feb., 1953, under S. 17(1) of the Act of 1922, was still binding on the assessee for all the years including the year 1964-65 and he sought to assess the assessee in respect of his total income at the rate applicable to the total world income. For the years 1962-63 and 1963-64 the matter went upto the Tribunal and the Tribunal held that the declaration made by the assessee on 16th Feb., 1953, was not operative for the years 1962-63 and 1963-64. THE Tribunal observed that for the years 1959- 60, 1960-61 and 1961-62 the assessee was not resident but he was "not ordinarily resident" and the declaration made by the assessee in his capacity as non-resident was not operative when he was being assessed in the status of "resident but not ordinarily resident". THE Tribunal, therefore, held that the declaration made by the assessee was not in force for the years 1962-63 and 1963- 64. Again w.e.f. 1st April, 1962, the IT Act, 1961, had come into force superseding the Indian IT Act of 1922. THE Tribunal noted that the declaration made under S. 17(1) of the old Act could not be operative under the new Act as the corresponding provisions of S. 113(3) were not identical with the provisions of S. 17(1) of the old Act. In that view of the Tribunal on this ground the assessee's declaration did not survive. For the year 1964-65 the ITO held that the declaration was made under S. 113 of the IT Act, 1961, by virtue of the provisions of S. 292(2)(h) of the Act of 1961 and according to the ITO the assessee was bound by the said declaration. THE AAC, relying upon the Tribunal's decision for the years 1962-63 and 1963-64, allowed the assessee's appeal for the year 1964-65 so far as this point was concerned. THE Revenue went in appeal against the decision of the AAC and the Tribunal held that there was no reason to differ from the earlier decision of the Tribunal and relying on that earlier decision, the Revenue's appeal was dismissed by the Tribunal. THEreafter, at the instance of the Revenue, the three questions hereinabove set out have been referred to us for our opinion.

(3.) THE second proviso to S. 17(1) provided for the extension of time for making the declaration if sufficient cause as set out therein was shown to the ITO. Sub-s. (1A) dealt with the question of salaries from government for rendering service in the taxable territories. Thus, under the first proviso to S. 17(1), if an option was exercised by the assessee concerned, then instead of paying income-tax on his total income, that is, on his total income in India at the maximum rate plus super-tax either at nineteen percent or super-tax which would be payable on his total income if it were the total income of a person resident in the taxable territories, whichever was greater, the option enabled such a person who was non-resident in India to have his tax payable on his income in India determined with reference to his total world income and thereupon the rate which was applicable would be the rate applicable to his total world income. As a result of the exercise of the option, persons with smaller incomes were enabled to get the benefit of paying tax at the lesser rate, that is, at a rate lesser than the maximum rate, and they had also the benefit in respect of payment of super-tax. But it must be borne in mind that it was only an option under S. 17(1) that was exercisable by a person who was not resident in India. Under the Act of 1922 there were only two categories, namely, a person resident in India as defined in S. 4A, or a person not ordinarily resident in India as defined in S. 4B, but there was no definition of "non-resident" or a person "not resident in India".