CHANDRAKANT J. PATEL V. ADDITIONAL COMMISSIONER OF INCOME TAX (ASSESSMENT)

TAXAP/535/2007

AI Insights

The case involves Chandrakant J. Patel, the appellant, who contested the decision of the Income Tax Appellate Tribunal, Ahmedabad, which had favored the revenue's appeal against the assessee's residential status for tax purposes. The primary legal question was whether the Tribunal was correct in law to treat the assessee as an 'ordinary resident' rather than 'not ordinarily resident'. The High Court, referencing a Supreme Court decision, found that the Tribunal's interpretation was incorrect and ruled in favor of the assessee, aligning with the principles that favor the taxpayer in cases of ambiguous statutory interpretation.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 693935 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 24-12-2014
• Assessment Year: misc
• Other Referred Cases: Pradip J. Mehta v. Commissioner of Income-Tax, Sneh Enterprises v. Commissioner of Customs, New Delhi, K.P. Varghese v. ITO, UCO Bank v. CIT, W.B., Collector of Central Excise Vadodra v. Dhiren Chemical Industries
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K M PARIKH
• Assessee Lawyers: SWATI SOPARKAR
• Keywords: Income Tax; Not Ordinarily Resident; Residential status; Ordinary Resident
• Section: 143(3)

Judgement Text

"O/TAXAP/535/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 535 of 2007 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER =========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ CHANDRAKANT J. PATEL....Appellant(s) Versus ADDITIONAL COMMISSIONER OF INCOME TAX (ASSESSMENT)....Opponent(s) ================================================================ Appearance: MRS SWATI SOPARKAR, ADVOCATE for the Appellant(s) No. 1 MR KM PARIKH, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 24/12/2014 ORAL JUDGMENT Page 1 of 6 O/TAXAP/535/2007 JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. By way of this appeal, the appellant- assessee has challenged the order dated 31.01.2006 passed by the Income Tax Appellate Tribunal, Ahmedabad [ for short “the Tribunal”] in ITA No.178/Ahd/2001, whereby the appeal filed by the revenue was allowed by the Tribunal. 2. The facts, in brief, are that the assessee had filed its return for the Assessment Year 1993-94 on 17.01.2000, declared nil income. The return was processed and thereafter, the Assessing Officer passed order under Section 143(3) of the Income Tax Act. Against the order of the Assessing Office, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). The CIT(A) vide order dated 19.10.2000 allowed the appeal of the assessee. Being aggrieved and dissatisfied with the order of the CIT(A), the revenue filed an appeal before the Tribunal. The Tribunal vide impugned order dated 31.01.2006 allowed the said appeal. 3. While admitting this appeal on 26.06.2007, the Court had formulated the following substantial question of law:- “whether in the facts and circumstances of the case the Income Tax Appellate Page 2 of 6 O/TAXAP/535/2007 JUDGMENT Tribunal was right in law in treating the assesee as ordinary resident and not as “not ordinarily resident” while deciding his residential status ?” 4. Learned advocate for the appellant- assessee has submitted that the questions of law involved in this appeal is already concluded by the Apex Court in the case of Pradip J. Mehta v. Commissioner of Income-Tax, reported in [2008] 300 ITR 231. 5. Learned advocate for the respondent- revenue is not in a position to distinguish the proposition of law laid down in the decision relied upon by learned advocate for the appellant-assessee. 6. We have heard learned advocates appearing for both the parties and perused the material on record. We have also perused the decision relied upon by the learned advocate for the appellant-assessee and find that the question of law involved in this appeal is already concluded by the Apex Court in favour of the assessee and against the revenue. Paragraph Nos. 29 to 32 of the above decision read as under:- 29. It is well settled that when two interpretations are possible, then Page 3 of 6 O/TAXAP/535/2007 JUDGMENT invariably, the Court would adopt the interpretation which is in favour of the tax payer and against the Revenue. Reference may be made to the decision in Sneh Enterprises v. Commissioner of Customs, New Delhi [(2006) 7 SCC 714], of this Court wherein, inter alia, it was observed as under: \"While dealing with a taxing provision, the principle of \"Strict Interpretation\" should be applied. The Court shall not interpret the statutory provision in such a manner which would create an additional fiscal burden on a person. It would never be done by invoking the provisions of another Act, which are not attracted. It is also trite that while two interpretations are possible, the Court ordinarily would interpret the provisions in favour of a tax-payer and against the Revenue.\" 30. This Court in a catena of decisions, has held that the circulars issued by the Department are binding on the Department. See: K.P. Varghese v. ITO [(1981) 4 SCC 173], UCO Bank v. CIT, W.B. [(1999) 4 SCC 599], Collector of Central Excise Vadodra v. Dhiren Chemical Industries [(2002) 2 SCC 127], etc. In all these cases it has been held that the circulars issued under the Income Tax Act or Central Excise Act are binding on the Department. It may be noted that in the circulars issued by the Commissioner of West Bengal, reference has been made to the correspondence resting with the Ministry of Finance (Department of Revenue) letter No. 4/22/61-IT(AT), dated 25th November, 1961, wherein it is stated Page 4 of 6 O/TAXAP/535/2007 JUDGMENT that the department's view has all along been that an individual is \"not ordinarily resident\" unless he satisfies both the conditions in Section 4B(a), i.e., (i) he must have been a resident in nine out of ten preceding years; and (ii) he must have been in India for more than two years in the preceding seven years. In the present case, the Circular issued by the Board in which the opinion of the Central Government the Ministry of Finance (Department of Revenue) letter No. 4/22/61-IT(AT), dated 25th November, 1961 has been noted, the interpretation similar to the one put by the various High Courts on Section 4B has been accepted to be the correct position. 31. In these circumstances, 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. 32. Accordingly, this appeal is accepted. The order passed by the High Court and the Authorities below are set aside. It is held that the High Court in the impugned judgment has erred in its interpretation of Section 6(6) of the Act and the view taken by Patna High Court, Bombay High Court and Travancore- Cochin High Court has laid down the correct law. The two questions of law referred to above are answered in favour of the assessee and against the revenue. No costs. 7. Since the issue involved in this appeal is already concluded by the above decision, no Page 5 of 6 O/TAXAP/535/2007 JUDGMENT elaborate reasons are required to be assigned by this Court. In that view of the matter, we are of the considered opinion that the present appeal deserves to be allowed and the same is accordingly allowed. The question of law raised in these appeals is answered in favour of the assessee and against the revenue. Accordingly, we hold that the Tribunal was not right in treating the assesee as ordinary resident and not as “not ordinarily resident” while deciding his residential status. (K.S.JHAVERI, J.) (K.J.THAKER, J) pawan Page 6 of 6 "