Income Tax Appellate Tribunal - Kolkata
Justice Anandamoy Bhattacharjee vs Income-Tax Officer on 15 November, 1985
Equivalent citations: [1986]81ITD181(KOL)
ORDER
S.K. Jain, Judicial Member
1. The assessee, the Hon'ble Mr. Justice A.M. Bhattacharjee, was the Judge of the Sikkim High Court during the accounting period from 1-4-1979 to 31-3-1980 relevant to the assessment year 1980-81 and he is still Judge of the said High Court. He has a residential house in Siliguri in the District of Darjeeling, West Bengal. Besides income of Rs. 1,000 from other sources and that of Rs. 1,452 from house property his income from salary as per return filed by him in the sum of Rs. 43,500 has been assessed to income-tax by the ITO, Special Ward, Siliguri. He in the original return showed his status as 'resident' and 'ordinarily resident'. However, a second return was filed by him in which he claimed his status as 'non-resident'. His objection has been that his income from salary as a Judge of the Sikkim High Court was not taxable. His objection concurrently failed before the ITO and in appeal before the AAC. Hence, this second appeal.
2. Arguments of the learned counsel for the assessee in support of the objection taken by him are as under :
(1) Sikkim was acceded to India with effect from 26-4-1975 as a result of which Article 371F was inserted in the Constitution by the Constitution (36th Amendment) Act, 1975. Clause (n) of the said article reads as under :
(n) the President may, by public notification, extend with such restrictions or modifications as he thinks fit to the State of Sikkim any enactment which is in force in a State in India at the date of notification ;
The Income-tax Act, 1961 ('the Act') in terms of the said Clause has not been extended to the State of Sikkim and, as such, the Act is not applicable to Sikkim.
(2) The word 'India' used in Section 1 of the Act and so also at other places in the Act does not,.therefore, include Sikkim. Thus, Sikkim is though part of India with effect from 26-4-1975 for other purposes but is not part of India for the purpose of the Act.
(3) Such interpretation is further reinforced by Clause (25A) of Section 2 of the Act. Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu and Pondicherry did not form part of India in 1961 when the Act came into force and, therefore, the Act was expressly extended to those territories by the Taxation Laws (Extension to Union Territories) Regulation, 1963 with effect from 1-4-1963. No such extension was made to the State of Sikkim.
(4) The assessee had though a residential house at Siliguri in the State of West Bengal in India, but he did not stay outside Sikkim for any period amounting in all to 90 days or more in any year since April 1977 and, as such, he was not 'resident' within the meaning of Section 6 of the Act. Income earned by him in Sikkim was, therefore, not taxable.
(5) Income received by him in Sikkim cannot be taken as income deemed to accrue or arise in India within the meaning of Section 9 of the Act. The only plausible provision applicable to the assessee is Clause (iii) of Section 9(1) which reads as under :
(iii) income chargeable under the head 'Salaries' payable by the Government to a citizen of India for services outside India ;
The assessee is, no doubt, citizen of India and he has been paid by the Government for services outside India but the said income is not charge-able under the head 'Salaries'. For this purpose reference is made to Section 15 of the Act, relevant portion of which is as under :
The following income shall be chargeable to income-tax under the head 'Salaries'-
(a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not ;
Judge of the High Court is a constitutional functionary and he has no employer. Salary or remuneration by whatever name it may be called, cannot be made taxable without existence of employer-employee relationship. Remuneration received by him, therefore, is not chargeable under the head 'Salaries'. For the proposition that the Judge of the High Court has no employer and there is no relationship of master and servant vis-a-vis remuneration paid to him, the following judgments of the Hon'ble Supreme Court have been relied upon :
Union of India v. Sankalchand Himatlal Sheth AIR 1977 SC 2328 at p. 2377, Union of India v. Gopal Chanda Misra ATR 1978 SC 694 at p. 710 and Hargovind Pant v. Dr. Raghukul Tilak AIR 1979 SC 1109.
3. The appeal is vehemently opposed by the learned departmental representative. According to him, Sikkim must be taken as part of India with effect from 26-4-1975 even for the purpose of the Act. 'India' appearing in Section 1 and at other places of the Act is deemed to include Sikkim with effect from 26-4-1975, since, according to Article 1 of the Constitution, the territory of India shall comprise-
(a) the territories of the States ;
(b) the Union territories specified in the First Schedule of the Constitution ; and
(c) such other territories as may be acquired.
In support, the learned departmental representative has further drawn our attention to the Eighth Schedule of the Act in which list of backward areas has been given for the purpose of Section 80HH of the Act and whole of the State of Sikkim has been included in the list of the backward areas with effect from 1-4-1976. It is further argued by him that Clause (25A) of Section 2 is of no assistance to interpret that'India'does not include Sikkim for the purpose of this Act. The said Clause was required to be inserted with a purpose, namely, application of Section 6 to the said Union territories in respect of any period. Thus, according to him, the assessee cannot claim the status of non-resident. Alternatively, it is contended by him that salary of the Judge of the High Court is chargeable to income-tax under the head 'Salaries'. He drew our attention to Article 221 of the Constitution which mentions that there shall be paid to the Judges of each High Court such salaries as are specified in the Second Schedule to the Constitution. The Second Schedule further mentions that there shall be paid to the Judges of the High Courts, in respect of time spent on actual services salaries at the following rates per mensem, that is to say Chief Justice-Rs. 4,000, any other Judge- Rs. 3,500. Further reference has been made by him to 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 which read as under :
Section 22D of the High Court Judges (Conditions of Service) Act:
Exemptionfrom liability to pay income-tax on certain perquisites or allowance received by a judge.-Notwithstanding anything contained in the Income-tax Act, 1961 (43 of 1961),-
(a) the value of rent-free official residence provided to a judge under Sub-section (1) of Section 22A ; or
(b) (b) the allowance paid to him under Sub-section (2) of that section, shall not be included in the computation of his income chargeable under the head 'Salaries' under Section 15 of the Income-tax Act, 1961.
Section 23D of the Supreme Court Judges (Conditions of Services) Act:
Exemption from liability to pay income-tax on certain perquisites received by a Judge.-Notwithstanding anything contained in the Income-tax Act, 1961 (43 of 1961), the value of rent-free official residence provided to a Judge under Sub-section (1) of Section 23 shall not be included in the computation of his income chargeable under the head 'Salaries' under Section 15 of the Income-tax Act, 1961.
From these provisions, it is the learned departments representative argument, quite plain that income of the Judge of the Supreme Court and the High Courts is chargeable under the head 'Salaries' under Section 15. observations of the Hon'ble Supreme Court in the aforesaid three cases cited by the learned counsel for the assessee, te learned departmental representative contended, were made in different context and it cannot be said that there was no relationship of employer and employee between the Judges of the High Court and the State, though the Judge of the High Court is a constitutional functionary and is a high constitutional dignitary.
4. It is admitted by both the parties that the Act has not been extended to Sikkim, Despite our strenuous efforts, we also could not find any such notification under Article 371F of the Constitution extending the Act to Sikkim. Sikkim, no doubt, ws admitted into Indian Union as the 22nd State in the First Schedule but thereby all the laws applicable to the Indian territory were not automatically extended to Sikkim. On the other hand, there is a special provision in Clause (k) of Article 371F that all laws in force immediately before the appointed day in the territories comprising State of Sikkim or any part thereof shall continue to be in force therein until amended or repealed by a competent Legislature or other competent authority. There is still a clear provision in Clause (n) of Article 371F that the President may by public notification, extend with such restrictions or modifications as he thinks fit to the State of Sikkim any enactment which is in force in a State in India at the date of the notification. Thus, the word 'India' used in the Act cannot be construed to comprise the State of Sikkim therein. It is to be noticed that the Union territories of Dadra and Nagar Haveli were admitted into Indian Union on 11-8-1961 and Goa, Daman and Diu on 20-12-1961 and Pondicherry on 16-8-1962 and the Act was extended thereto with effect from 1-4-1963 and for the purpose of Section 6, the said territories were taken as part of India in respect of any period. There was no such extension of the Act to the State of Sikkim. The learned counsel for the assessee rightly contended that inclusion of the whole of the State of Sikkim as backward area in the Eighth Schedule does not make the Act applicable thereto, since any part of land to which the Act is not applicable can be included in the backward area for the obvious purpose of development of that area.
5. We, therefore, hold that the assessee, though is a citizen of India, should be taken as non-resident for the purpose of the Act since as is evident from his affidavit, which we believe, he did not stay outside Sikkim for any period or periods amounting in all to 90 days or more in any year since April 1977.
6. However, he cannot claim exemption from tax on his salary. Salary drawn by him as the Judge of the High Court of Sikkim, as will be discussed presently, is income chargeable under the head 'Salaries' payable by the Government to the citizen of India for service outside India and, as such, the said income is deemed to accrue to him in India within the meaning of Section 9. Our attention has been drawn by the learned counsel for the assessee to these observations of the Hon'ble Mr. Justice Krishna Iyer in Sankalchand Himatlal Sheth's case (supra) :
... So it is that we must emphatically state a Judge is not a Government servant but a constitutional functionary. He stands in a different category. He cannot be equated with other 'services' although for convenience certain rules applicable to the latter may, within limits, apply to the former....(p. 2377) We may further add that in the same case, the Hon'ble Mr. Justice Bhagwati (as then he was) observed 'a High Court Judge has no employer, he occupies a high constitutional office which is coordinate with the executive and the Legislature'.
But these observations should not be taken to mean that a Judge of the High Court is as independent as a sovereign ; he, in the words of the Hon'ble Mr. Justice Bhagwati, is as much part of the State as the executive Government. The observation that a High Court Judge has no employer has been obviously made by the Hon'ble Mr. Justice Bhagwati in the context that he is independent and supreme within his allotted sphere. The observation has to be taken in the light of the earlier observation 'plainly and unquestionably, therefore, a High Court Judge is not subordinate either to the Executive or to the Legislature ... He has a constitutional function to discharge.' In the context of these observations alone, it should be taken that a High Court Judge has no employer but such observation should not be stretched too far to construe that he is an independent person like a sovereign and the salary received by him is not a salary. It should not be forgotten that no constitutional functionay is above the Constitution. The Constitution lays down qualifications of a person for appointment of a Judge of the High Court and the authority for such appointment. The Judge of the High Court is bound by the Constitution and the laws. He cannot act according to his own wishes and whims. He has to take an oath that he shall bear true faith and allegiance to the Constitution of India as by law established and he shall uphold the sovereignty and integrity of India and that he shall perform the duties of his office duly and faithfully and to the best of his ability and knowledge and he shall uphold the Constitution and the laws. His tenure of service is also determined by the Constitution. It is not that once appointed as Judge of the High Court he cannot be removed from his office. There is a procedure prescribed for his removal from the office. Like other Government servants, he is entitled to pension and other benefits. True it is that, as observed by the Hon'ble Mr. Justice Krishna Iyer, 'he cannot be equated with other services' ; but thereby it cannot be said that the salary he receives is not a salary for his employment. He is in fact servant of the State and not of the State Government or the Central Government or the President of India. This has been made quite clear by the Hon'ble Mr. Justice Krishna Iyer in the same paragraph 93 of his judgment in the following words :
...To make the Government-not the State-the employer of a superior Court Judge is to unwrite the Constitution....(p. 2377)
7. The observation of the Hon'ble Mr. Justice Fazal Ali in the case of Gopal Chandra Misra (supra) in paragraph 80 of the judgment 'that there is no relationship between the master and servant, employer and employee between the President and the Judge of the High Court', adverted to by the learned counsel for the assessee should not be construed to mean that a High Court Judge is not an employee at all. There is no quarrel with the proposition that there is no relationship of master and servant, employer and employee between the President and the Judge of the High Court but it cannot be said that the Judge of the High Court is not employee of the State. A Judge of the High Court is high dignitary and a constitutional functionary and, therefore, the word 'servant' is seldom used for him but thereby the reality cannot be denied. The Hon'ble Mr. Justice Fazal Ali in the same paragraph 80 of the judgment reproduced the observation of Mr. Justice Krishna Iyer which included the sentence-'to make the Government-not the State-the employer of a superior Court Judge is to unwrite the Constitution.' Stress is thereby given that the State and not the Government is the employer of the Judge of the High Court.
8. Coming to the case of Hargovind Pant (supra) relied upon by the learned counsel for the assessee, we find that it is equally without help to the assessee. It also lays down that the office of Governor of a State is not an employment under the Government of India. The Hon'ble High Court was concerned with the only question as to whether the appointment of Shri Raghukul who was member of the Rajasthan Public Service Commission, as Governor of Rajasthan was valid, since, according to Article 319 of the Constitution, on ceasing to hold office, a member of a State Public Service Commission is not eligible for any other employment either under the Government of India or under the Government of a State. The Hon'ble High Court held in that case that the appointment of Shri Raghukul as Governor of State of Rajasthan was not invalid, since it was not an employment under the Government of India. But thereby it should not be taken that a Governor was not in employment of the Union of India.
9. Furthermore, Section 23D of the Supreme Court Judges (Conditions of Service) Act and Section 22D of the High Court Judges (Conditions of Service) Act make it abundantly clear that salary of a High Court Judge is his income chargeable under the head 'Salaries' under Section 15 of the Income-tax Act.
10. The general tests to be applied for finding out if there is employer and employee relationship are these :
(a) the master's power of selection of the servant ;
(b) the payment of wages or other remuneration ;
(c) the master's right to control the method of doing work ; and
(d) the master's right of suspension or dismissal, (vide judgment of the Hon'ble Supreme Court in the case of Piyarelal Adishwar Lal v. CIT [1960] 40 ITR 17.
All these tests hold good in the case of employment of a Judge of the High Court. The Constitution begins with the preamble, 'We, the People of India, having solemnly resolved to constitute India into a Sovereign, Socialist, Secular, Democratic Republic'. It mentions qualification of a person to be appointed as judge of the High Court and the power to appoint has been invested with the President. The terms and conditions of service, namely, his tenure of appointment, salary, pension and other benefits have also been defined. The Constitution has laid down rules for discharge of his duties and so also a procedure has been laid down for removal from his office. Thus, he is obviously an employee of the State and in no sense of the term he can claim as self-employed without exercise of any control over his work. Because of the nature of his work he has been made independent and supreme within the sphere of his duties inasmuch as that he is paid out of the consolidated fund without any voting but at the same time he has to take an oath that he shall uphold the Constitution and the laws.
11. We do not agree with the contention of the learned counsel for the assessee that the word 'salary' appearing in Article 221 and in the Second Schedule is used in popular sense and in fact the remuneration paid to the Judge of the High Court is not salary.
12. We, therefore, hold that the income of the assessee should be assessed as non-resident it is deemed to accrue in India within the meaning of Section 9.
13. In the result, the appeal is dismissed.