1984 (12) TMI 84 - AT - Income Tax

Summary

Issues:
1. Interpretation of the term "non-resident" in Section 10(4A) of the Income Tax Act, 1961.
2. Determining whether the term "non-resident" refers to a "person resident outside India" as defined in the Foreign Exchange Regulation Act, 1973 or as per the definition in the Income Tax Act, 1961.
3. Analysis of the applicability of the exemption under Section 10(4A) to the assessee.

The judgment deals with three appeals by the assessee for the assessment years 1977-78, 1978-79, and 1979-80. The assessee, a resident but not ordinarily resident, had interest income in a Non-Resident (External) Account. The assessee claimed this income was not includible in total income under Section 10(4A) of the Income Tax Act, 1961. However, both the Income Tax Officer (ITO) and the Commissioner of Income Tax (Appeals) rejected this claim, stating the exemption was only for non-residents. The assessee appealed to the tribunal.

The main contention was the interpretation of the term "non-resident" in Section 10(4A). The assessee argued that "non-resident" should be understood as "a person resident outside India" as per the Foreign Exchange Regulation Act, 1973, not as defined in the Income Tax Act, 1961. The tribunal noted the definitions of "person resident outside India" and "person resident in India" in the Foreign Exchange Regulation Act, 1973, and the Income Tax Act, 1961.

The tribunal concluded that the term "non-resident" in Section 10(4A) refers to the definition in the Income Tax Act, 1961. They emphasized that the context did not require a different interpretation. The tribunal highlighted that the clause would not be rendered meaningless by using the definition in the Income Tax Act. The tribunal rejected the argument that the provision aimed to grant exemption to all persons defined as "person resident outside India" in the Foreign Exchange Regulation Act, 1973.

The tribunal noted that Section 10(4A) was later amended to explicitly refer to "person resident outside India" in the Foreign Exchange Regulation Act, 1973. However, for the relevant assessment years, the provision applied only to those meeting the definition of "non-resident" in the Income Tax Act, 1961. As the assessee did not qualify as a "non-resident" per the Income Tax Act, the tribunal upheld the CIT(A)'s decision to reject the exemption claim. Consequently, the appeals were dismissed.