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Issues:
Interpretation of the term 'non-resident' in clause (4A) of section 10 of the Income-tax Act. Determining whether the assessee qualifies as a 'person resident outside India' under the Foreign Exchange Regulation Act. Analysis of the applicability of exemption under clause (4A) of section 10 to the assessee. Impact of the Finance Act, 1982 amendment on the interpretation of the term 'non-resident' in clause (4A) of section 10. Interpretation of 'non-resident' in clause (4A) of section 10: The primary issue in this case is the interpretation of the term 'non-resident' in clause (4A) of section 10 of the Income-tax Act. The contention raised was whether 'non-resident' should be construed as per the definition in section 2(30) of the Income-tax Act or as 'a person resident outside India' as defined in the Foreign Exchange Regulation Act. The Tribunal concluded that 'non-resident' should be interpreted in line with the definition in section 2(30) of the Income-tax Act, rejecting the assessee's argument. Qualification as 'person resident outside India': The Tribunal examined whether the assessee qualifies as a 'person resident outside India' under the Foreign Exchange Regulation Act. The assessee argued that since he was not a 'person resident in India' as per the Act, he should be considered a 'person resident outside India.' However, the Tribunal found that the assessee did not meet the criteria of 'person resident outside India' as defined in the Act, thereby impacting the applicability of the exemption under clause (4A) of section 10. Applicability of exemption under clause (4A) of section 10: The Tribunal analyzed the provisions of clause (4A) of section 10 and the intention behind granting exemption for interest income from Non-resident (External) Accounts. It was determined that the exemption was intended for non-residents as per the definition in the Income-tax Act, and not for residents who do not qualify as non-residents under the Act. The Tribunal held that the assessee, being a resident but not ordinarily resident, was not entitled to the exemption under clause (4A) of section 10. Impact of Finance Act, 1982 amendment: The Tribunal highlighted the subsequent amendment to clause (4A) of section 10 by the Finance Act, 1982, which replaced 'non-resident' with 'person resident outside India.' This amendment clarified that the provision would apply to individuals falling within the definition of 'person resident outside India' under the Foreign Exchange Regulation Act. The Tribunal confirmed that the amendment altered the scope of the clause, making it applicable to a broader category of individuals compared to the original provision. In conclusion, the Tribunal dismissed the appeals, upholding the orders of the Commissioner (Appeals) and denying the assessee's claim for exemption under clause (4A) of section 10 of the Income-tax Act.
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