9911796707
TMI Blog2009 (1) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... EHAR, J. - The instant order will dispose of Income Tax Reference Nos. 43 to 48 of 1991. The controversy in each of the cases being identical, a common order is being passed to dispose of all the six references. It is not a matter of dispute that the assessees in all the six references are individuals being non-residents in terms of Section 6 of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). In so far as the factual matrix is concerned, all the assessees had subscribed to two sets of debentures issued by M/s Oswal Agro Mills Limited. The first set of debentures was issued on 2.7.1984; whereas the second set of debentures was issued on 23.6.1986. The assessees had paid for these debentures through convertible foreign exchange by remittances from abroad. As such, the assets in the hands of the assessees were in the nature of foreign exchange assets as defined in Section 115C of the Act. The controversy in the present references pertains to the interest income derived by the assessees from the aforesaid debentures. The claim of the assessees is that the aforesaid income derived as interest from debentures should be assessed on receipt basis, and not on accrual basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the instant references have been made to this Court. The question of law referred to this Court is being extracted hereunder:- "Whether in the facts and circumstances of the case, the Income-tax Appellate Tribunal was right to hold that income from interest on debentures which was a "foreign exchange asset" was assessable on accrual basis and not on receipt basis.?" 6. We have considered the submissions advanced by the learned counsel for the rival parties. In fact, the entire controversy revolves around the interpretation of Section 5 (2) of the Act. Section 5 (2) of the Act is being extracted here as under:- "5.Scope of total income- ......(2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person, or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1- Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y reading Explanation 2 (recorded under Section 5 (2) of the Act), which clarifies that the income of a person, who is a non-resident, once subjected to determine the liability of tax on accrual basis, shall not again be added to the income of the assessee as and when the same is received by him at a later juncture, in a subsequent financial (assessment year). In other words, the provision leaves no room for any doubt or ambiguity, that if an effective and final conclusion can be drawn, on the issue of accrual of income to a non-resident, the actual date of receipt is inconsequential. In view of the above, we are satisfied that the income of a non-resident has to be included in the previous year on accrual basis, i.e. as and when such income arises (or is deemed to have arisen) to the assessee, in a specific definite and crystalized measure. 10. The debentures purchased by the assessees from M/s Oswal Agro Mills Limited bore interest receivable by the assessees on the 1 st day of July of every year as well as on the 31 st December of every year. In the aforesaid view of the undisputed factual position, the interest income from the debentures purchased by the assessees must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and that, when M/s Oswal Agro Mills Limited eventually released the interest component of the debentures to the assessees, it had made income-tax deductions therefrom. It is the contention of the learned counsel for the petitioners that the assessees cannot be made liable to pay tax twice over for the same income. 13. It is not possible for us to accept the submission advanced by the learned counsel for the petitioners based on Section 195 (1) of the Act. The assessment towards income-tax is an issue separate and distinct from the actual payment of tax. It is for the purposes of determining the year of assessment to which the income of a non-resident is to be added, that the mandate of Section 5 (2) of the Act makes a specific provision, requiring income which has accrued (or which arises) to a non-resident, to be treated as income for the previous year in which such income has accrued (or has arisen), and as such, reference to Section 195 (1) of the Act at the hands of the learned counsel for the petitioners is wholly irrelevant. Secondly, Explanation 2 under Section 5 (2) of the Act removes all ambiguity from the issue under reference. Even if it is accepted that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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