2015 (2) TMI 775 - HC - Income Tax

Entitlement to the concessional rate of tax under Section 115H - ITAT allowed the claim - assessee has not satisfied the procedural and substantive requirements under Chapter XII A of the Income Tax Act - Held that - As relying on assessee's own case 2012 (4) TMI 205 - MADRAS HIGH COURT there is no dispute regarding the interest earned on the various deposits in the Bank, which is specified under Section 115 E of the Act and the assessee is subject to 20% of taxation. So, the argument of the Revenue that requirement of filing of the declaration does not arise since that is not the condition for getting the benefit. Therefore, the Tribunal correctly held that the assessee had no obligation to file any declaration under Section 115 H or 115 E of the Act. Therefore, the Tribunal had correctly held that the assessee was not obligated to file any such declaration until the assessment year 2002-03. In respect of the nature of investment, the Tribunal also come to a conclusion that the subsequent redesignation of the NRE accounts into NRNR accounts have been made only from out of the convertible Foreign Exchange lying to the credit of the assessee in his various accounts which had been opened with the inflow of the original Foreign exchange transferred to India as approved by the Reserve Bank of India. Factually, the Tribunal found that the assessee, at the time of filing the returns, was a Non-Resident Indian and hence, the assessee would be entitled to file returns under section 115E of the Act. That apart, in the wake of the provisions of section 115E that he is a Non-Resident Indian and the income derived is from the investment in a bank, the claim of the assessee could be considered only under section 115E of the Act. Though the assessee had filed returns claiming benefit under section 115E read with section 115H of the Act, keeping in mind the factual scenario, the Tribunal had correctly held that the assessee is a Non-Resident Indian and merely because there is a wrong description in the returns that he is a Resident, it would not alter the status of the assessee that he is a Non-Resident Indian for the assessment years in question - Decided in favour of asssessee.

Summary

Issues:
1. Entitlement to concessional rate of tax under Section 115H without satisfying procedural and substantive requirements under Chapter XII A of the Income Tax Act.
2. Eligibility under Section 54F in respect of property held in the name of the wife.

Entitlement to Concessional Rate of Tax under Section 115H:
The case involved the appellant, who filed a return of income for the assessment year 1998-99, claiming the concessional rate of 20% under Section 115-E read with Section 115-H of the Income Tax Act. During scrutiny assessment, the Assessing Officer clubbed the income of the appellant's wife and father-in-law, following the assessment for the year 1993-94. The Commissioner of Income Tax (Appeals) upheld the addition of the wife's income but deleted the father-in-law's income. Upon further appeal, the Income Tax Appellate Tribunal allowed the appeal in favor of the appellant, which led to the Revenue approaching the High Court. The Court examined whether the appellant satisfied the procedural and substantive requirements under Chapter XII A of the Income Tax Act for claiming the concessional rate of tax. It was noted that the appellant, a Non-Resident Indian, had made a wrong declaration regarding his status as a Resident, but the Tribunal correctly held that the appellant was entitled to file returns under Section 115E of the Act, considering his status as a Non-Resident Indian. The Court referred to a previous decision in favor of the appellant for assessment years 1994-95 to 1996-97 and ruled in favor of the appellant, dismissing the appeal by the Revenue.

Eligibility under Section 54F for Property Held in Wife's Name:
The second issue raised in the appeal was whether the appellant was eligible under Section 54F concerning the purchase of property held in his wife's name. However, both parties agreed that this question was wrongly framed, as it was not the issue before the Tribunal. Consequently, the Court did not delve into this issue, stating that it did not require consideration. As a result, the Court focused solely on the first substantial question of law related to the appellant's entitlement to the concessional rate of tax under Section 115H, as discussed in detail above. The Court's decision in favor of the appellant on this issue led to the dismissal of the appeal by the Revenue.

In conclusion, the High Court of Madras, in a judgment delivered by R. Sudhakar, J., addressed the issues of the appellant's entitlement to the concessional rate of tax under Section 115H and eligibility under Section 54F for property held in the wife's name. The Court ruled in favor of the appellant on the first issue, based on the appellant's status as a Non-Resident Indian, as established in previous decisions. The Court did not address the second issue, as it was not the subject of consideration before the Tribunal. Consequently, the appeal by the Revenue was dismissed, with no costs awarded.