High Court rules for assessee in tax case, declaring "resident but not ordinarily resident."

The High Court ruled in favor of the assessee against the revenue. It held that the assessment for the year 1962-63 was pending when the declaration under section 113 was filed, allowing the assessee to exercise the option. The status of the assessee was determined as "resident but not ordinarily resident," impacting the tax computation. The Tribunal's decisions were overturned, and the Commissioner was directed to bear the costs of the reference to the assessee.

---

---

Issues Involved:
1. Whether the Tribunal was justified in holding that the assessment for the assessment year 1962-63 was not pending when the assessee filed the application under section 113.
2. Whether the Tribunal was correct in holding that the Income-tax Officer was justified in not allowing the assessee to exercise the option under section 113 for the assessment year 1962-63.
3. Whether the Tribunal was correct in holding that the status of the assessee was "resident but not ordinarily resident."

Issue 1: Pending Assessment

The Tribunal held that the assessment for the year 1962-63 was completed before the assessee filed the application under section 113 on November 11, 1966. However, the High Court concluded that the assessment was indeed pending on the date of the application. The Court referred to the Supreme Court's interpretation in S. Sankappa v. Income-tax Officer, which held that rectification proceedings are part of the assessment process. The High Court found that the rectification application made on March 23, 1968, and the subsequent rectification order passed on June 17, 1968, indicated that the assessment was still pending. Therefore, the High Court held that the assessment for the year 1962-63 was pending on November 11, 1966, when the declaration under section 113 was filed.

Issue 2: Exercise of Option Under Section 113

The Tribunal held that since the assessment for the year 1962-63 was completed before the application under section 113 was made, the Income-tax Officer was justified in not allowing the assessee to exercise the option. The High Court disagreed, holding that the assessment was pending on the date of the declaration. The Court emphasized that the declaration under section 113, sub-section (5), should have been considered, as the assessment was not finalized. The liberal interpretation of the term "pending" was applied to avoid anomalies and absurdities, ensuring that the assessee's declaration under section 113 was valid for the year 1962-63.

Issue 3: Status of the Assessee

The Tribunal concluded that the assessee's status was "resident but not ordinarily resident." The High Court did not directly address this issue in detail but implied that the declaration under section 113 should be considered, which would affect the tax payable by the assessee. Since the declaration was held valid, the tax should be computed as if the assessee was a resident, in line with section 113, sub-section (4).

Conclusion:

The High Court answered all three questions in favor of the assessee and against the revenue. The Tribunal's conclusions were overturned, and it was held that the assessment for the year 1962-63 was pending when the declaration was made, thus allowing the assessee to exercise the option under section 113. The status of the assessee was determined to be "resident but not ordinarily resident," and the tax should be computed accordingly. The Commissioner was ordered to pay the costs of the reference to the assessee.

---