JUDGMENT
S. H. Kapadia, C.J.
1. This group of appeals involve a common question of law and fact and therefore they are disposed of by this common judgment.
2. For the sake of clarity we hereby mention the facts in Income-tax Appeal No. 438 of 2001.
Facts :
3. Atwood Oceanics International Company was the representative assessee of its employee–Gene Little who was employed during the accounting year ending March 31, 1983, relevant to the assessment year 1983-84, on off shore drilling rig operating in Bombay High for oil exploration in the Continental Shelf of India for ONGC. The return of income was filed on April 17, 1986. Original assessment was done on April 19, 1986, under Section 143(3) of the Income-tax Act, 1961, on the total income of Rs. 1,34,729.
4. In the assessment proceedings, the assessee contended that the income of the employee was earned beyond 12 nautical miles of territorial waters during the year ending March 31, 1983, and was therefore not taxable in the assessment year 1983-84 and therefore no tax perquisite could be added to the income of the assessee. This argument was rejected by the Assessing Officer on the ground that the Government of India had issued a notification on March 31, 1983, by which the Income-tax Act, 1961, was made applicable to the continental shelf as also to the exclusive economic zone which went beyond 12 nautical miles. According to the Assessing Officer, the notification came into force with effect from April 1, 1983, and therefore the income of the employee earned during the previous year 1982-83 became taxable during the assessment year 1983-84. Being aggrieved by the order passed by the Assessing Officer, the matter was carried in appeal to the Commissioner of Income-tax (Appeals). The said appeal was allowed. Being aggrieved the Department carried the matter in appeal to the Tribunal, the appeal has been dismissed by the Tribunal, therefore, the Department has come by way of appeal under Section 260A of the Income-tax Act to this court.
Arguments :
5. Mr. Posti, learned standing counsel for the Union of India, contended that by the notification issued by the Government of India on March 31, 1983, under Section 6(6) and under Section 7(7) of the Territorial Waters, Continental Shelf and Exclusive Economic Zone Act, 1976, the Income-tax Act was made applicable to the exclusive economic zone with effect from April 1, 1983. He contended that by virtue of article 297 of the Constitution, the continental shelf was a part of India even before the above notification and therefore, the salary earned by the assessee (employee) before April 1, 1983, working on the rig located beyond 12 nautical miles was taxable during the assessment year 1983-84. He relied upon various judgments of the Supreme Court and the High Courts in support of his contention.
6. None appeared for the assessee-respondent though served.
Issues :
7. In this appeal we are required to answer two questions of law. They are as follows :
Questions :
“(1) Whether the Tribunal was right in holding that the continental shelf did not form part of India prior to April 1, 1983, for the purposes of the Income-tax Act, 1961 ?
(2) Whether the Tribunal was right in holding that salary earned by the employee for services rendered on the rig before April 1, 1983, in the off shore area outside the territorial waters of India was not chargeable to tax under the Income-tax Act, 1961, for the assessment year 1983-84 ?”
Our answers :
8. For the reasons given hereinafter we answer both the above questions in the affirmative, i.e., in favour of the assessee and against the Department.
Reasons :
9. In this appeal we are concerned regarding taxability of income earned by a foreign technician, employee, on the rigs located in the continental shelf and the economic zone but beyond territorial waters of India during the accounting year ending March 31, 1983. On March 31, 1983, the Government of India issued Notification No. G. S. R. 304(E) (see [1983] 142 ITR (St.) 11), under Section 6(6) and Section 7(7) of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 (hereinafter referred to for the sake of brevity as “the said Act, 1976”). By the said notification the provisions of the Income-tax Act were made applicable from April 1, 1983, to the continental sheif and exclusive economic zone. It is important to note that in this case we are concerned with the concept of taxable territory of India under the Income-tax Act, 1961. This is important as it is only by virtue of notification dated March 31, 1983, that the continental shelf and the exclusive economic zone became part of the taxable territory with effect from April 1, 1983. Therefore, the said tax could not have been levied on the income which accrued in the accounting year ending March 31, 1983, when the territory in which it accrued was not the taxable territory to which the Income-tax Act applied. To levy the tax, the income must accrue in the territory to which the Income-tax Act applies. In this case article 297 of the Constitution is not relevant. For the purposes of deciding this matter the only relevant issue is whether the income earned by a non-resident accrued in a taxable territory prior to April 1, 1983. On facts it is clear that the foreign technician had earned salary income before April 1, 1983, by working on the oil rigs, located beyond 12 nautical miles and therefore he was not taxable for the assessment year 1983-84. Our view is supported by the judgment of the Madras High Court in the case of CIT v. Ronald William Trikard [1995] 215 ITR 638 and also by the judgment of the Bombay High Court in the case of McDermott International Inc. (No. 1) v. Union of India [1988] 173 ITR 155. The various judgments of the Supreme Court cited by Mr. Posti on behalf of the Revenue have no application to the facts of the present case as in those judgments the facts related to the amendment of the Income-tax Act either by the Finance Act or by the Tax Law Amending Act which is not the case herein. In the present case, there is only a notification issued by the Central Government, that notification is issued not under the Income-tax Act but under the said Act, 1976.
10. For the aforestated reasons, we answer both the above questions in the affirmative, i.e., in favour of the assessee and against the Department.
11. Accordingly, all the above appeals are disposed of. No order as to costs.