JUDGMENT
Prakash Krishna, J.
1. The Income-tax Appellate Tribunal, New Delhi has referred the following two questions of law under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for opinion to this court:
1. Whether the Tribunal was right in law in holding that the notification issued on March 31,1983, which extended the applicability of the Income-tax Act to the continental shelf of India was applicable for the accounting period commencing from April 1, 1983 ?
2. Whether the Tribunal was right in law in holding that the notification of extension of the Income-tax Act to the Continental Shelf not being applicable for the assessment year 1983-84, the salary paid to the assessee for the lay-off period outside India was not chargeable under Section 9(1)(ii) of the Income-tax Act, 1961 ?
2. Briefly stated the facts giving rise to the present reference are as under:
3. The reference relates to the assessment years 1982-83 and 1983-84.
4. The respondent-assessee is an employee of M/s. Atwood Oceanics International, S. A., a non-resident company, which entered into a contract with Oil and Natural Gas Commission, a Government of India undertaking, in connection with extraction of oil, gas, etc., from the oil rigs in the Bombay High Seas. The contract of employment of the assessee with the aforesaid non-resident company provided that the employee shall after working for 28 days in the oil rig get lay off period of 28 days. The salary was to be paid to such employees by the Indian company namely O.N.G.C. for the days they worked in the oil rig and also for the days they were given lay off.
5. Before the Assessing Officer a contention was raised on behalf of the assessee that since no service was rendered by the assessee in India, no income-tax liability could be fastened on him. It was further submitted that the extension of the Income-tax Act to the continental shelf of India was made from April 1, 1983, by means of a notification dated March 30, 1983. The intention of the notification was that the extension of the Income-tax Act to the continental shelf would apply in respect of the accounting period starting from April 1,1983. On this basis, it was submitted that the services that were rendered in oil rigs in the Bombay High Seas could not be said to be services rendered in India. However, this contention was not accepted by the Assessing Officer who was of the opinion that in view of the notification dated March 30, 1983, by which the Income-tax Act was extended to the continental shelf of India with effect from April 1, 1983, implies that the income earned by an assessee in the continental shelf for the accounting period relevant to the assessment year 1983-84 would be subject to the Act. The matter went to the Tribunal in second appeal at the instance of the assessee. The Tribunal following its earlier orders in respect of similarly situated assessees set aside the assessment order on the finding that the notification of the Government of India dated March 31, 1983, issued under Section 6(6) read with Section 7(7) of the Territorial Zones Act, 1976, will apply only to such incomes earned on or after April 1, 1983.
6. Heard learned standing counsel for the Revenue. Nobody has appeared on behalf of the respondent-assessee.
7. Learned standing counsel for the Department submitted that in view of the notification dated March 30, 1983, extending the applicability of the said Act to the continental shelf will cover the income earned during the previous year relevant to the assessment year 1983-84.
8. We have carefully considered the aforesaid submission of learned Counsel for the Department. It is appropriate to reproduce the Notification No. GSR 304(E), dated March 31, 1983(Gazette of India, Entry No. 117 dated March 31, 1983, Part II, Section 3(i) : (see [1983] 142 ITR (St.) 11):
In exercise of the powers conferred by Clause (a) of Sub-section (6) of Section 6, and Clause (a) of Sub-section (7) of Section 7, the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976), the Central Government hereby extends the Income-tax Act, 1961 (43 of 1961), to the continental shelf of India and the exclusive economic zone of India with effect from the first day of April, 1983 subject to the restriction and modification that the said Act shall apply only in respect of income derived by every person from all or any of the following activities, namely:
(a) the prospecting for or extraction or production of mineral oils in the Continental Shelf of India or the exclusive economic zone of India ;
(b) the provision of any services or facilities or supply of any ship, air-craft machinery or plant (whether by way of sale or hire) in connection with any activities referred to in Clause (a) ;
(c) the rendering of services as an employee of any person engaged in any of the activities referred to in Clause (a) or Clause (b).
Explanation.-For the purpose of this notification ‘mineral oil’ includes petroleum and natural gas.
9. We find that the aforesaid notification has been the subject-matter of consideration by different High Courts. In McDermott International Inc. (No. 1) v. Union of India , the Bombay High Court has held as follows (headnote):
… that when it was sought to tax income arising in the previous year relevant to the assessment year from which the Income-tax Act was made applicable, an express provision had to be made to cover income accruing in the previous year. In the absence of such an express provision, income accruing in an accounting year in which the Income-tax Act was not applicable, could not be brought to tax simply because from the relevant assessment year, the Income-tax Act was made applicable. The relevant assessment year for the period was April 1, 1983, to March 31, 1984, when the Income-tax Act was applicable. But, income-tax is actually levied on income which accrued during the previous accounting year which is April 1,1982, to March 31, 1983. As the territory in which income arose was beyond 12 nautical miles, the Income-tax Act was not applicable to such income during the accounting year. Income-tax, therefore, could not be levied on income which accrued during the period when the territory in which it accrued was not governed by the Income-tax Act, 1961.
10. The aforesaid judgment has been followed by the Division Bench of the Madras High Court in CIT v. Ronald William Trikard and it has been held as follows (headnote):
… that the Tribunal was right in holding that the Continental Shelf and exclusive economic zone were not part of India prior to the notification of the Government of India 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, in view of the provisions of Section 6(6) and Section 7(7) of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976, and consequently, the salary income earned by the assessee prior to April 1, 1983, was not charge-able to tax under the Income-tax Act, 1961, in the assessment year 1983-84.
11. Learned standing counsel could not persuade us to take a contrary view and we find no good reason to dissent from the aforesaid judgment of the Madras High Court.
12. Respectfully following the aforesaid two judgments we are of the opinion that the Tribunal was right in holding that the notification of extension of the Income-tax Act to the continental shelf was not applicable for the assessment year 1983-84 and the salary paid to the assessee for the lay off period outside India was not chargeable under Section 9(1)(ii) of the Act.
13. We answer both the questions referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue. There shall be no order as to costs.
