Non-resident status in Sikkim and taxable judicial salary: Income-tax Act applicability and deemed accrual in India.

Sikkim residency did not by itself extend the Income-tax Act, 1961 to the State because Article 371F preserved existing laws until a valid extension notification was issued; on the facts, the assessee did not satisfy the statutory period for resident status and was treated as a non-resident. Judicial salary, however, was regarded as income under the head "Salaries" because the constitutional and service-law provisions for High Court Judges assumed taxability under section 15, and the absence of a conventional master-servant label did not defeat that characterisation. As the services were rendered outside India, the salary was also deemed to accrue in India under section 9.

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Issues: (i) whether the assessee was to be treated as a non-resident for the purposes of the Income-tax Act, 1961, despite his residence and office in Sikkim; (ii) whether the salary received as a Judge of the Sikkim High Court was chargeable to tax as income under the head "Salaries" and deemed to accrue in India.

Issue (i): whether the assessee was to be treated as a non-resident for the purposes of the Income-tax Act, 1961, despite his residence and office in Sikkim.

Analysis: Article 371F of the Constitution of India preserved pre-existing laws in Sikkim until amended or repealed and empowered extension of Indian enactments by notification. The Income-tax Act, 1961 had not been extended to Sikkim by any such notification. The mere inclusion of Sikkim in the First Schedule or in a backward-area list did not extend the Act to that State. On the facts found, the assessee had not stayed outside Sikkim for the statutory period required to make him resident under section 6.

Conclusion: The assessee was to be treated as a non-resident under the Act.

Issue (ii): whether the salary received as a Judge of the Sikkim High Court was chargeable to tax as income under the head "Salaries" and deemed to accrue in India.

Analysis: Salary paid to High Court Judges is constitutionally provided for under Article 221 of the Constitution of India, and the exemption provisions in section 22D of the High Court Judges (Conditions of Service) Act, 1954 and section 23D of the Supreme Court Judges (Conditions of Service) Act, 1958 proceed on the footing that such receipts are salary chargeable under section 15 of the Income-tax Act, 1961. The absence of a master-servant description in constitutional office did not negate the existence of an employment relationship for income-tax purposes. Since the services were rendered outside India, the receipt fell within section 9 as income deemed to accrue in India.

Conclusion: The salary was chargeable under the head "Salaries" and was deemed to accrue in India.

Final Conclusion: The assessee's status was accepted as non-resident, but his judicial salary remained taxable under the Act; the taxability of the salary claim therefore failed overall.

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