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TMI Blog2003 (1) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, the Tribunal is correct in holding that the computation of the tax liability denying the rebate under section 88 was by way of a prima facie adjustment, which could not be made under section 143(1)(a) of the Act ?" The brief facts necessary are as follows: The respondent-assessee is a non-resident Indian. The assessment year concerned is 1994-95. The only income of the assessee is income from investments made in India. In the return filed by the assessee for the year 1994-95, he made a claim for rebate under section 88 of the Act on PPF of Rs. 40,000 and MEP of Rs. 10,000. The said return was processed by the Assessing Officer under section 143(1)(a) of the Act and an intimation (annexure A) was issued to the assessee. In the said intimation the Assessing Officer made a prima facie adjustment by disallowing the rebate claimed under section 88 of the Act. In appeal by the assessee, the Deputy Commissioner of Income-tax (Appeals), Trivandrum, allowed the claim and directed the Assessing Officer to allow the rebate on PPF and MEP claimed in the return. This was confirmed by the Tribunal in appeal by the Department. The question that arises for consideration in this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment or from capital gains, tax has to be paid on such income at the rate of 20 per cent., whereas in the case of a non-resident Indian who is having other income also the expression "chargeable" used shows that the other income has to be computed in accordance with the general provisions. In short the submission of senior counsel is that in the computation of the total income of a non-resident Indian, who is having income only from investment, his total income the entire investment income has to be assessed at the rate of 20 per cent. without any deduction or rebate whatsoever. Sri P. Balachandran, learned counsel for the respondent-assessee, submits that section 115D occurring in Chapter XII-A providing for computation of total income of a non-resident who is having income only from investment is very clear and no internal or external aid is required for understanding the scope of the said section. Counsel submitted that section 115D(1) clearly provides that no deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act in computing the investment income of a non-resident Indian and that under clause (a) of sub-section (2) in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment income of a non-resident Indian. (2) Where in the case of an assessee, being a non-resident Indian,- (a) the gross total income consists only of investment income or income by way of long-term capital gains or both, no deduction shall be allowed to the assessee under Chapter VI-A and nothing contained in the provisions of the second proviso to section 48 shall apply to income chargeable under the head 'Capital gains' ; (b) the gross total income includes any income referred to in clause (a), the gross total income shall be reduced by the amount of such income and the deductions under Chapter VI-A shall be allowed as if the gross total income as so reduced were the gross total income of the assessee." Section 115E reads as follows: "115E. Tax on investment income and long-term capital gains. -(1) Where the total income of an assessee, being a non-resident Indian, consists only of investment income or income by way of long-term capital gains or both, the tax payable by him on his total income shall be the amount of income-tax calculated on such total income at the rate of twenty per cent. of such income." Section 115-I reads as follows: "115-I. Chapter not to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of this section, an assessee, being- (a) an individual, or (b) a Hindu undivided family, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to twenty per cent. of the aggregate of the sums referred to in sub-section (2) : Provided that in the case of an individual, whose income, derived from the exercise of his profession as an author, playwright, artist, musician, actor or sportsman (including an athlete), is twenty-five per cent. or more of his total income, the provisions of this sub-section shall have effect as if for the words 'twenty per cent.', the words 'twenty five per cent.' had been substituted." Section 80T of the Act as it stood prior to April 1, 1988, reads as follows: "80T. Deduction in respect of long term capital gains in the case of assessees other than companies. - Where the gross total income of an assessee not being a company inc1udes any income chargeable under the head 'Capital gains' relating to capital assets other than short-term capital assets (such income being, her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed under the head "Income from other sources", occurring in sections 56 to 59 of the Act. However, the Legislature has made a special provision in regard to the assessment of the said income of a non-resident Indian in a new Chapter XII-A introduced with effect from June 1, 1983, by the Finance Act, 1983, for the benefit of non-resident Indians. The object of introducing the said section as could be seen from the note appended to this Chapter in A. N. Aiyar's Indian Tax Laws, 1983, would show that it was with a view to encouraging the flow of foreign exchange remittances to India and investment in India by non-resident Indian citizens and foreign nationals of Indian origin. It is a special provision dealing with incomes of such non-residents from investments in certain specified assets. Here, it is also relevant to note that an option is given to an assessee, who is covered by the provisions of sections 115D and 115E to avail of the normal provisions regarding the computation of income under the Act in section 115-I. It is specifically stated therein that a non-resident Indian may elect not to be governed by the provisions of this Chapter for any assessment year by furnishin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which are entitled to be deducted are specified in section 57. Various other provisions with regard to the general deductions are provided in Chapter VI-A and Chapter VIII, etc., which are applicable to all assessees covered by the provisions of section 14 of the Act. Probably it is in view of the fact that apart from the deductions which are provided under section 57 of the Act various other deductions provided under Chapters VI and VIII, etc., are also there, the Legislature might have thought of making dichotomy and made two provisions, one in regard to non-availability of the deduction in respect of expenditure and allowances which are provided in section 57 and the other in regard to the general deductions available under the provisions of Chapter VI-A and Chapter VIII, etc. If we understand the scheme in that manner there is no difficulty in understanding the scope of the provisions of section 115D(1) and clause (a) of sub-section (2) thereof. Here, admittedly, the assessee has not claimed the benefit of section 57 of the Act in the computation of income from investment under the head "Income from other sources". The assessee has only claimed the rebate provided under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction shall be allowed to the assessee under Chapter VI-A. The relevant portion of section 80T which we have already extracted earlier specifically provided for deductions in the computation of long-term capital gains occurring in Chapter VI-A of the Act. By virtue of clause (a) of sub-section (2) in a case where the gross total income consists only of long-term capital gains, the deduction provided under section 80T was not available. However, it must be noted that section 80T had been omitted from Chapter VI-A with effect from April 1, 1988, by the Finance Act, 1987 and the relief provided therein was introduced in sub-section (2) of section 48 providing for computation of capital gains simultaneously. Even after the omission of section 80T from Chapter VI-A non-resident assessees whose total income included capital gains started claiming the benefit of section 48(2) of the Act. The Legislature found that in view of the omission of section 80T from Chapter VI-A assessees are getting an unintended benefit and the same has to be plugged by making an amendment to clause (a) of sub-section (2) of section 115D of the Act. Accordingly, the Legislature amended the said provision by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms specified in sub-section (2). Section 88 introduced with effect from April 1, 1991, after omitting section 80C, on the other hand, is not a deduction in the computation of the total income of the assessee. It is only a deduction in the form of a rebate from the income-tax chargeable on the total income as computed before allowing deduction under this Chapter. It is an amount equal to 20 per cent. of the aggregate of the sums referred to in sub-section (2). Subsection (2) of section 88 clearly provides for the rebate in respect of PPF and MEP. It is relevant to note in this context that section 115D is a special provision for computation of total income of non-residents. It must be further noted that section 115D(1) only says that no deduction in respect of any expenditure or allowance shall be allowed under any of the provisions of this Act in computing investment income of a non-resident Indian. Clauses (a) and (b) of sub-section (2) of section 115D deal with the separate treatment of investment income/income by way of long-term capital gains of a non-resident Indian. The ban under clause (a) is regarding the deduction under subsection (2) of section 48 or under Chapter VI-A. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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