COMMISSIONER OF INCOME TAX Vs. RONALD WILLIAM TRIKARD

JUDGEMENT

(1.) ALL these tax cases relate to the assessment year 1983-84. The assessee are foreigners and non-residents employed by Sedco International S. A., a non-resident company. Sedco International was engaged in the drilling of oil wells along and off the shores of India on contract with the Oil and Natural Gas Commission. The said contract was entered into on November 5, 1981, and it expired on January 22, 1985. The terms of the contract, inter alia, provided that the area of operation was to be the seas above the continental shelf of India. The assessees carried on their employment on the oil rig. The rig itself was operated on the seas above the continental shelf. According to the Assessing Officer, in view of the Explanation to section 9(1)(ii) of the Income-tax Act, 1961, read with the Government of India's Notification G.S.R. No. 304(E) (see [1983] 142 ITR (St.) 11), File No. 5147/F. No. 133(79)/82 TPL, dated March 31, 1983, issued under the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976, the salary received by the assessee for the serviced rendered in India became liable to tax under the Income-tax Act, 1961. The assessee filed their respective returns and paid tax on self-assessments. Thereafter, on the basis of the various opinions, the assessee filed revised returns on November 5, 1983, with "Nil" taxable income on the ground that the notification under the Territorial Waters, Continental Shelf and Exclusive Economic Zones Act was applicable only from the assessment year 1984-85 relevant to the previous year 1983-84. In other words, the assessee contended that the notification dated March 31, 1983, applies only prospectively and not retrospectively. The assessees' contention that the notification referred to earlier applies only from the assessment year 1984-85 onwards was not accepted by the Income-tax Officer, since according to him, the notification came into force with effect from April 1, 1983, and the provisions of the Income-tax Act, 1961, would apply to the continental shelf and exclusive economic zone in relation to the assessment year 1983-84 and subsequent years. Accordingly, the assessments in respect of all the assessee herein were completed by including the salary income.

(2.) AGGRIEVED, the assessee filed appeals before the Commissioner of Income-tax (Appeals). In the appeals before the Commissioner of Income-tax (Appeals), the assessee' representative contended that the notification issued by the Government of India on March 31, 1983, by which the Income-tax Act was extended to the continental shelf and economic zone is not retrospective. It was submitted that at the time when the assessees were earning the income there was no liability for the assessee to pay the tax as the notification was non-existent. It was, therefore, contended that the notification will have only prospective effect. The Commissioner of Income-tax (Appeals) accepted the contention of the assessees that they were working in a drilling ship registered in Panama, that the place of employment will be outside the taxable territory but for the notification extending the Income-tax Act to India's exclusive economic zone, that a notification cannot have retrospective application unless it is specifically stated in the said notification and that in the present case there is nothing to show that the notification was issued with retrospective effect. The Commissioner of Income-tax (Appeals) further held that during the year 1983-84, the assessees are not coming within the definition of "assessee" as their place of employment was located outside India. Consequently, in the case of all the assessee, the assessments were cancelled and the appeals filed by the assessees were allowed and the Inspecting Assistant Commissioner was directed to modify the order accordingly and refund the excess tax, if any, collected to the assessees.

(3.) UNDER this article, all lands, minerals and other things of value underlying the ocean within the territorial waters or the continental shelf or the exclusive economic zone of India vest in the union. Although the Constitution does not itself define the terms "territorial waters", "continental shelf" and "exclusive economic zone", clause (3) of article 297 states that their limits shall be such as may be specified by Parliament. In 1976, Parliament implemented the amendments introduced to the Constitution of India in the years 1973 and 1976 by passing the Act known as the Territorial Water, Continental shelf, Exclusive economic Zone and Other Maritime Zones Act, 1976 (Act 80 of 1976), relating to territorial waters the continental shelf, the exclusive economic zone and maritime zones.