2008 (1) TMI 390 - HC - Income Tax

Non-resident concessional rate of tax - The assessee as a doctor was a non-resident and thereafter he returned to India and he brought his earnings earned abroad and invested the same in a bank and was getting interest from such investment as NRI. He was also getting the benefit, namely, the concessional rate of income tax at 21 per cent. under section 115E of the Income-tax Act, thereafter, he filed a declaration to change his status from NRI to resident. The assessee after filing such declaration claimed certain reliefs under section 115H of the Income-tax Act held that - , in view of the provisions of section 115H of the Income-tax Act, we are of the opinion that the Tribunal was justified in allowing the appeal of the Revenue and setting aside the order passed by the Commissioner of Income-tax (Appeals). - , is not entitled to contend that the amount invested by him in fixed deposit still has to be considered as an asset brought from abroad benefit not allowed

Summary

Issues:
1. Entitlement to benefit under section 115H of the Income-tax Act for a resident individual who previously was a non-resident.

Analysis:
The case involved an appeal by an assessee challenging the order of the Income-tax Appellate Tribunal regarding the entitlement to benefits under section 115H of the Income-tax Act. The assessee, initially a non-resident doctor who returned to India and invested earnings from abroad in a bank, was receiving interest as a Non-Resident Indian (NRI) and enjoying concessional tax rates. Subsequently, the assessee declared a change in status to a resident and claimed reliefs under section 115H, which were initially rejected by the Assessing Officer but allowed by the Commissioner of Income-tax (Appeals). The Revenue then appealed to the Tribunal, which ruled against the assessee, stating that the declaration filed precluded the assessee from claiming deductions under Chapter VI-A of the Income-tax Act.

Upon examination of the provisions of section 115H, the High Court observed that the assessee had converted foreign exchange into Indian rupees and was earning interest on the investment made in the bank. The Court noted that the assessee, by filing the required declaration upon becoming a resident, could not argue that the fixed deposit amount should still be considered as an asset brought from abroad. Consequently, the Court upheld the Tribunal's decision, emphasizing that the assessee was not entitled to the benefits under section 115H due to the conversion of foreign assets into Indian currency.

In conclusion, the High Court dismissed the appeal, ruling in favor of the Revenue and against the assessee. The Court found no merit in the arguments presented by the assessee's counsel regarding the entitlement to benefits under section 115H of the Income-tax Act post the conversion of foreign assets into Indian currency. The Court's decision was based on the clear provisions of the law and the actions taken by the assessee in converting foreign exchange into Indian rupees, thereby affirming the Tribunal's decision and denying the requested relief to the assessee.