Residential status under tax law: "not ordinarily resident" applies when either statutory condition for ordinary residence is not met.

Section 6(6)(a) of the Income-tax Act, 1961 was construed in line with the earlier 1922 Act provision and the settled taxpayer-favourable approach to ambiguous taxing statutes. The Court held that the definition of "not ordinarily resident" operates conjunctively for ordinary residence: an assessee remains "not ordinarily resident" if either statutory condition is not satisfied, namely not being resident in India in nine of the ten preceding previous years or not being in India for 730 days or more in the seven preceding previous years. On that interpretation, the assessee was entitled to "not ordinarily resident" status, and the contrary view of the High Court and authorities below was incorrect.

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Issues: Whether an individual claiming the status of "not ordinarily resident" under section 6(6)(a) of the Income-tax Act, 1961 must satisfy both statutory conditions, namely that he was not resident in India in nine out of the ten preceding previous years and that he was not in India for 730 days or more in the seven preceding previous years.

Analysis: Section 6(6)(a) was treated as pari materia with section 4B(a) of the Income-tax Act, 1922. The provision was read in the context of the legislative history, prior High Court decisions, and the departmental circulars consistently stating that an assessee becomes "resident but not ordinarily resident" if either of the two conditions is not fulfilled. The construction adopted by the Court also reflected the settled principle that, where two interpretations of a taxing provision are possible, the one favourable to the taxpayer should be preferred. On that reading, the statutory definition of "not ordinarily resident" requires satisfaction of both conditions for ordinary residence, and failure of either condition keeps the assessee within the category of "not ordinarily resident".

Conclusion: The assessee was entitled to the status of "not ordinarily resident", and the contrary view taken by the High Court and the authorities below was incorrect.

Ratio Decidendi: In construing a taxing provision defining residential status, if two conditions are formulated conjunctively for ordinary residence, a person is "not ordinarily resident" when either condition is not satisfied, and the interpretation favourable to the taxpayer must be adopted where the provision is reasonably capable of more than one meaning.

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