Taxability of salary on an Indian-registered ship outside territorial waters was affirmed under income-tax principles.

Salary earned by an Indian citizen while serving on a ship registered in India outside the territorial waters of India was treated as taxable in India. The analysis read section 2(25A) of the Income-tax Act as implying that an Indian ship is assimilated to Indian territory for this purpose, and drew support from the Citizenship Act and general principles of territorial jurisdiction in international law. The availability of exemption under section 80RRA was considered consistent with the view that the income would otherwise be taxable in India. Section 4 of the Indian Penal Code was not accepted as controlling the tax question.

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Issues: Whether salary earned by an Indian citizen while serving on a ship registered in India outside the territorial waters of India was taxable in India.

Analysis: The relevant provisions of the Income-tax Act were read to determine whether a ship registered in India forms part of India for the purposes of salary income. The definition of India in section 2(25A) was treated as indicating that an Indian ship is assimilated to Indian territory by implication. Support was also drawn from the Citizenship Act and from general principles of territorial jurisdiction in international law treating a ship bearing the national flag as a floating extension of State territory. The availability of exemption under section 80RRA was treated as reinforcing the view that the income would otherwise be taxable in India. The argument based on section 4 of the Indian Penal Code was not accepted as controlling the tax issue.

Conclusion: Salary earned on an Indian-registered ship outside territorial waters was held to be income taxable in India, and the assessee's contention failed.

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